What do you do if you discover latent defects?

You just acquired a new property that you intend to renovate over the upcoming weeks. You begin the work by dismantling the basement walls and notice mold, rotten materials, and water infiltration. You think these constitute latent defects. What do you do?

This article outlines the steps to follow when latent defects are discovered in a building:

1. Immediately stop the work and take pictures of the defects/damage that you have noticed. Do not carry out corrective work until further notice: it is important to allow the seller to see the property as it was upon your discovery of the defects/damage, except in the case of emergency, meaning a situation that implies a risk of the property’s loss or immediate decay/withering.
2. Immediately notify the seller of the defect in writing and the damage you discovered: the law requires a written notification. You must give the seller a reasonable period of time/delay to come and see the defects and damages of which he was notified in order to give him the opportunity to determine whether they constitute latent defects covered by the legal warranty of quality and repair them himself, at a lower cost.
3. Give the seller a reasonable period/delay to come and see the defects on-site and/or correct them. Do not impose unnecessarily unreasonable deadlines on the seller for accessing your property to come and see/appraise the defects of which you have notified him.
4. After notifying the seller, do not proceed with the corrective work before allowing the seller to come and see the defects on-site and have them appraised by his expert: otherwise you risk compromising your recourse for latent defects against the seller.  
5. Contact an expert in order to determine the cause of the damage/the nature of the defect(s): seek an expert’s opinion, preferably in the form of a written report, on the nature of the defects and the damage they have caused. Ask your expert to indicate what corrective work is strictly necessary in order to correct the defects and the damage they have caused. Additionally, ask him to provide you with his opinion on the applicable rate of depreciation according to the age of the component affected by the defect and its operating life (as the legal warranty of quality is not a warranty for the value of the property brand new, the reduction of the sale price to which the buyer is entitled under the legal warranty of quality is not automatically equal to the cost of the corrective work required: the value added by the replacement of an older component with a new one, for example a French drain, must be taken into account, hence the need to determine the applicable depreciation rate, if any).     
6. Obtain a quote from a contractor in order to estimate the cost of the corrective work required to correct the defects. This work must not have the effect of improving the property: this work must be limited to what is strictly required to correct the defects and the damage caused by these defects. A claim for latent defects cannot be used to obtain a reimbursement for work that had the effect of improving the building.
7. In the event that there is no imminent or possible agreement with the seller following your initial notification, then send him a demand letter by which you formally demand that he proceed, at his cost, with the corrective work required for correcting the defects, or else that he pay you an amount equivalent to the cost of the corrective work required, taking the applicable depreciation into account. You must give the seller a reasonable period of time to act accordingly. Failure to put the seller in default before carrying out the work or having the work carried out can be fatal for your legal action. Caution: the obligation to notify the seller of the defect and the obligation to put the seller in default are two distinct obligations with distinct objectives. 
8. Provide the seller with all information/specifications or documents that he reasonably requires to allow him to complete his analysis of your claim: collaborate with the seller at this stage. We recommend that you work collaboratively and transparently with the seller in order to enable him to analyze the merits of your claim, which he has the right to do. In particular, provide the seller with your expert’s report, the quotes and estimates you obtained, and your pre-purchase inspection report. Sooner or later, you will have to provide the seller with these documents: we, therefore, recommend you do so as soon as possible. You will not settle your case faster by hiding information from the seller. 
9. You will need to notify the seller of any new defect or aggravation of the defect, which involves granting him a new reasonable time period in order to allow him to come and see the new defect or the aggravated defect and obtain any expert’s opinion that he considers to be necessary in the circumstances.
10. If the seller fails to comply with your demand letter, denies liability, refuses or fails to carry out the corrective work required, or if he refuses to compensate you for the cost of carrying out such work, you may then proceed with the corrective work, but only after a reasonable period of time has elapsed since he received your demand letter. Always make sure that the seller received your demand letter and keep the proof of said receipt. Before you proceed with the corrective work, however, we recommend that you first consult a lawyer.
11. If you are unable to reach an agreement with your seller, you may then institute legal proceedings against your seller. However, a lawyer’s services are essential to properly evaluate the merits of your case and your chances of success, as well as the true economic value of your claim. Remember that a legal recourse for latent defects must be taken in the three years following the defect’s discovery, after which time no such lawsuit will be possible. 
12. If it is impossible to reach an agreement with the seller, you may then institute legal proceedings against him: at this stage, a lawyer’s services are essential to properly evaluate the merits of your case and your chances of success as well as the true economic value of your claim. Remember that a legal recourse for latent defects must be taken in the three years following the defect’s discovery, after which time no such lawsuit will be possible.

In conclusion, remember that roughly 90% of disputes for which legal proceedings have been instituted are settled amicably. One option for prompting a settlement in such cases is for the parties involved to participate in a judicial mediation session, commonly known as a settlement conference. 

While the rules in matters of latent defects may appear simple, they are numerous and complex. There are also many potential pitfalls, towards which many people are reflexively led. In the event that you discover what you believe are latent defects, we recommend that you immediately consult a lawyer before taking any action whatsoever.