Latent Defects: What They Are And How You Can Protect Yourself From Them
Over the past few decades, Washington’s real estate case law has undergone serious and complicated changes. These changes disproportionally favor the party selling their home rather than the buyer of the property.
The paramount case that initiated the decades-long decline in buyer protection was the 1988 decision in Puget Sound Services v. Dalarna Management. The courts decided that it was the buyer’s duty to inquire about any defects they or their home inspector found. In the Dalarna case, the buyer’s inspector noted water stains and loose tiles, but the buyer did not investigate further. After moving into the property, the damage was far worse than the buyer anticipated. Though the case made it to the Court of Appeals of Washington State, the decision reached by the Court remained: the impetus is on the buyer to inquire further after noticing readily discernable defects. As such, the foundation for caveat emptor (literally: buyer beware) had been set.
Then, in 1994, the Washington State Legislature passed a “Seller Disclosure” statute. In essence, the statute was an attempt to create a counter balance due to the outcome of the Dalarna case. Sellers then were obligated to provide prospective buyers with “Form 17”. Form 17 mandates that the seller disclose any defects in both the physical condition of the property, as well as any issues tied to the title of the home.
Unfortunately, Form 17 only requires the seller to document known issues rather than search for any problems. The Form is standard and in plain English, asking if there are problems with the roof, foundation, electrical wiring, and so on. Yet the only answers the seller must give are “yes” there is a problem, “no” there is not a problem, or “unsure” if they are unaware whether a problem exists.
This dilemma came to a head when, in 2007, Alejandre v. Bull made its way to the Washington Supreme Court. The buyer’s inspector in this case noted that he was unable to properly check the drainfield because of problems with the baffles. The buyer did not investigate further, and soon after taking up residency, the system failed. The buyer then sued the seller as the seller knowingly tried to hide the problem with the drainfield by lying on Form 17 and disclosing only that there were problems with the baffles. The buyer lost the case because the purchase and sale agreement had “allocated the risk of economic loss” to the buyer via the inspection contingency. This was the first time where the seller had lied on Form 17, yet faced no repercussions.
Furthermore, in the 2013 case Dougles v. Visser heard by the Court of Appeals of the State of Washington, sellers Terry and Diane Visser concealed pervasive rot that was destroying the house from Form 17 and the buyers. The Court found in favor of the sellers, stating that “the inquires made by [the homebuyers] into the condition of the house…were not sufficient to satisfy their duties to beware, inspect and question.”
Purchasing a home is difficult enough as it is without having to cut through walls or dig up floorboard to check for concealed damage. This all leads to the forthcoming breakdown of latent defects, what they are, and how you can protect yourself from such issues as noted above.
First, latent defects are those that are not patently obvious through a regular home inspection. According to the National Association of Certified Home Inspectors, the ten most common latent defects are: foundation drainage trouble, electrical defects, roof problems (drainage, leads, or rot), heating combustion problems, improperly done owner repairs, structural damage, plumbing problems, infiltration by water or air, inadequate ventilation of attic and crawlspace, and construction defects.
Now that you know the history behind Washington’s evolving case law, here are ways you can protect yourself from becoming a victim of latent defects:
- Insist that the seller represent and document to the buyer that the property has no material defects known to the seller and withheld from the buyer.
- Hire an attorney to review all documents before closing. Provide adequate time for the attorney to review the documents before closing should additional warranties and representations be requested from the seller.
- Incorporate any representations made by the seller in the Form 17 Disclosure Statement into the Real Estate Purchase and Sale Agreement.
- Finally, Washington’s seller misrepresentation laws are complicated – either an attorney or your Realtor agent will be your best resource during the home buying process.
If you’re currently in the market for a home in or around Seattle but perhaps were unaware of the nuances and financial burdens latent defects can cause, contact us. We would love to help you better understand the complexities of the process and ultimately find you your dream home.