A latent defect is defined as a fault that existed but was not discovered before the sale took place. This is a flaw that was not spotted during the initial and superficial inspection process.
Meaning of latent defect
A latent defect is known as a hidden defect that is normally not discovered during a general inspection. The imperfection, failure, or malfunction can be either in material, workmanship, or a product.
It is a common issue that most buyers face once they start living in the property. Be observant if you are purchasing something because the seller is not required to help you in finding defects.
Understanding latent defect
Latent defect means a shortcoming that is not discovered at the appropriate time. It is used in different sectors and fields like insurance, construction, software, and real estate. Whether the seller was aware of the flaw or blemish cannot be proved because he can claim his ignorance quite easily.
This is why it has become vital to include a clause in your contract, referring to the latent defect. This will help you to gain the upper hand in a situation that can go either way at a later point.
There are several instances where a clause relating to latent defect has proved a boon for the buyer and saved him from the clutches of the seller.
Latent defect remedies for the buyer
- A buyer will have to give concrete evidence that the defect existed before the sales deal was signed and it has not occurred after he has taken residence in the property
- If the buyer has not placed a clause related to a latent defect in his contract or if he does not have latent defect insurance he will not be liable for any repairing costs
- If the buyer can prove that the flaw is dangerous and poses a risk, he can ask for a price reduction or return the property
- The important thing about a latent defect is that all the rules are applicable within the first year of the sale
Latent defect remedies for the seller
- The seller is not duty-bound to report any damages of faults or defects until and unless it can cause some serious harm
- It is the buyer who should find the faults and act before signing the deal
- If the buyer has evidence that the seller knew about the defects the court can order him to compensate the buyer for repairing work
- If the defects are of immense proportion, the seller can ask the court to be excluded from the liability of the payment
Latent defect in real estate
In real estate, it is described as a defect found in the property that was not found during the preliminary inspection and was discovered after signing the deal.
The concept of a latent defect in real estate includes factors like-
- A latent defect in real estate deal includes plumbing issues like faulty pipes, depression on the floor, or a leak in the roof.
- Ideally, an inspection is carried out during a property deal, and if there are defects, then the deal will have to incorporate changes accordingly. If the seller is not ready to make them the deal falls through.
- The faults and flaws are big enough that they can be detected easily. Sometimes though they do not make their presence felt and are later on termed as latent defects
- As the damage is discovered after signing the deal, the buyer cannot hold the seller accountable for the latent defect. Although the buyer can claim that the seller had prior knowledge of the defects, it becomes impossible to sue and prove it in the court of law due to lack of evidence
- If a clause is introduced in the contract prior to the deal, the buyer can claim compensation for the defect and have it repaired to his satisfaction.
- When a buyer includes the clause of a latent defect in construction contract he can hold him responsible and thus secure the required amount to repair the defect like cracks on the ceiling, flooring, and walls that were not noticed earlier on. It is important to be diligent and make repairs as soon as possible because they can widen further and can cause more damage later on.
- A leak in roofs, wiring issues, plumbing, water leakage are some issues that generally start popping up once you shift base and start living in the place.
Example of a latent defect in real estate
Shyam has recently purchased a house at one crore rupees. He sent an employee Ram to go through the house and inspect it thoroughly for any flaws. Except for one or two minor ones, Ram could not find faults with the house and reported them.
The deal was signed, and after a few weeks, a new team was sent to the house for estimation about the new renovations. There was a carpet on the floor, and when it was wrapped up, you could see cracks in the flooring. When they removed the wardrobe from the wall, you could see cracks over there.
Shyam could not do anything about it as he had not included the clause related to a latent defect in his contract. He had to bear the cost of repairing himself as the seller refused to compensate him for the flaws.
Latent defect in industrial products
In industrial products, latent defect is known as a latent material defect, and the concept can be explained with the help of the following facts-
- The latent defect occurs when a hidden flaw or defect in material or item exists but is not found until it has been purchased and perhaps used
- The buyer can make a claim that the seller knew about the flaw
- If it is discovered during the warranty period you can get a replacement product, and if not then the seller is not liable for the defect nor will he pay after the date has expired
- The seller is not in any way obliged for the compensation money or replaced product unless it contains ingredients that can prove harmful pr dangerous to the buyer.
Latent defect insurance
Latent defect insurance is a means of recovering the price that you will need for repairing the defects. The concept includes facts like
- The latent defect insurance is created to help the buyer if he finds any fault in working, design, and manufacturing of a product
- It covers the amount of repairing unnoticed damages on the property. It is applicable only when there is a serious chance of greater damage because of that flaw
- The latent defect insurance extends up to a particular sum after which you cannot claim for compensation
- The insurer appoints a surveyor to inspect the defects and to supervise the repairing. He gives a certificate of completion
- You can claim insurance only for the first twelve years of the life of a property
- The latent defect insurance is reliable and offers a helping hand in the time of need.
Alternatively, check out the Marketing91 Academy, which provides you access to 10+ marketing courses and 100s of Case studies.