What do you do if you receive a claim for latent defects?


July 16, 2018 Real Estate and Construction

Have you sold an immovable a few years ago and your buyer just notified you of a problem that he considers a latent defect? This article outlines the steps to follow upon receiving a claim for latent defects from one’s buyer.

  • Firstly, be sure to acknowledge receipt of your buyer’s notice/demand letter: at this stage, even if you do not believe you are responsible, do not deny your liability or tell your buyer that you are in no way responsible for what he has claimed. Such a denial of liability at this stage could allow your buyer to carry out the corrective work immediately without further notice and possibility deny you the opportunity to perform your own assessment and experts’ analyses.
  • Ask your buyer to leave the premises as is and not to carry out any corrective work until further notice, during which time you can go and assess/have the necessary expert(s) analyze the defects of which your buyer notified you.
  • Go and assess the defects of which you were notified on site: ask your buyer when he discovered the defects and what led to their discovery. This information will be relevant for your next steps.
  • Ask your buyer to provide you with his pre-purchase inspection report that he obtained before acquiring your property, if he has one.
  • Ask your buyer to provide you with any expert reports that he has in his possession related to the defects of which you were notified, as well as any quote or invoice related to the corrective work required for correcting said defects.
  • Ask your buyer to confirm whether he has carried out/is carrying out corrective work related to the defects, and ask him tell you which ones and to provide you with the invoices and proofs of payment.
  • Ask your buyer if he has made a claim to his home insurers related to the damage caused by the defects discovered.
  • Obtain a competent expert’s analysis of the defects of which you were notified. Specifically, ask the expert to carry out all the assessments necessary for determining (i) the nature of the defects in question, (ii) the damage caused by said defects, (iii) the corrective work required, strictly limited to what is necessary for correcting said defects, and (iv) the applicable depreciation. Ask your expert to provide you with a written report. Ensure that your expert has experience in providing analyses in forensic matters and that he is able to testify before a court if it becomes necessary. We recommend that you retain an expert even if you have not yet obtained all the documents and information mentioned above that you requested from your buyer.
  • Consult a lawyer specializing in recourses for latent defects without delay: each case is unique, and a lawyer will be able to help you determine whether your buyers’ claim is justified, as well as the means by which you could contest said claim, or assist you in the context of discussions aimed at settling the matter amicably.
  • Check with your lawyer as to whether there are grounds for you to submit a claim to your civil liability insurer stemming from the claim you received: in certain situations, a buyer’s claim for latent defects against his seller can be covered in whole or in part by the latter’s civil liability insurer, for “consequential” damages, meaning the damage resulting from the defects in question, all subject to the specific provisions and exclusions of the insurance policy in question. It is, therefore, important to analyze one’s liability insurance policy in light of the buyer’s claim in order to see if some or all of it would be covered. Your lawyer will be able to help you at this stage.
  • If you believe that the defect existed when you acquired the property that you then sold to your buyer, notify your seller of the problem quickly and without delay, as well as any previous sellers, all to safeguard your rights to call any of them in warranty, as applicable, and even possibly, if appropriate, the contractor/builder who built/participated in the construction of the immovable in question. Your lawyer will be able to advise you on the possibility and suitability of calling these parties in warranty in your case.  

First and foremost, it is crucial to thoroughly analyze your buyer’s claim in order to determine whether the defects of which you were notified are covered by the legal warranty of quality, and if so, to determine the economic value of his claim. Then, further to your thorough analysis, you will be able to establish your position as well as your game plan for what is to come.

In the event that you receive a claim for latent defects, a lawyer will help you make sense of the situation: in all cases, consult a lawyer without delay upon receiving a notice/demand letter for latent defects from your buyer.

This bulletin provides general comments on recent developments in the law. It does not constitute and should not viewed as legal advice. No legal action should be taken on the basis of the information contained herein.

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