Latent vs Patent Defects in Ontario: What Buyers and Sellers Must Disclose

Ontario real estate runs on two legal concepts most buyers and sellers have never heard until something goes wrong: latent defects and patent defects. The difference between them decides whether you can sue a seller for $40,000 in mold remediation discovered six months after closing, or whether the law deems you should have spotted the problem yourself. This guide explains both concepts in plain English, what Ontario sellers are legally required to disclose, the landmark case law every realtor cites, and the practical steps that protect both buyers and sellers from disputes after closing.

What is the difference between latent and patent defects?

A patent defect is a property issue visible to the naked eye during an ordinary inspection — cracked drywall, broken windows, missing shingles, warped flooring. A latent defect is hidden — buried behind walls, under floors, inside systems, or only triggered by specific conditions (heavy rain, freezing temperatures). The legal difference matters because Ontario’s disclosure rules treat them very differently.

What is a patent defect?

A patent defect is anything a reasonable person — or a qualified home inspector — would notice during a standard viewing. Common examples in GTA homes:

• Visible cracks in drywall, ceilings, or foundation walls
• Broken or fogged window panes
• Water stains on ceilings or walls
• Missing or curling roof shingles visible from the ground
• Worn carpet, scratched hardwood, damaged tile
• Peeling paint, missing trim, broken fixtures
• Old appliances near end of life
• Visible rust on furnace or water heater
• Cracked driveway, sloped patio, sagging fence

For patent defects, Ontario law applies the doctrine of caveat emptor (“buyer beware”). The seller has no obligation to point them out. If you toured the property, hired an inspector, and still missed the obvious — you bought the property with those defects and have no legal recourse. The price you paid was assumed to reflect what was visible.

What is a latent defect?

A latent defect is hidden — it cannot be discovered through ordinary inspection. Common examples:

• Mold growth inside walls or under flooring
• Water damage behind drywall from a slow leak
• Faulty wiring concealed behind finished surfaces
• Foundation cracks hidden behind finished basement walls
• Asbestos in insulation, vermiculite, or floor tiles
• Lead pipes or paint sealed under newer materials
• Underground oil tanks (common in older Ontario homes)
• Sub-slab radon gas accumulation
• Knob-and-tube wiring hidden behind drywall
• Termite or carpenter ant damage behind cabinetry
• Defective heating or HVAC systems that fail only in extreme weather
• Improperly fixed structural issues from prior damage

These can cost $10,000 to $80,000+ to remediate. Discovering mold behind a basement wall three months after closing can mean tearing out drywall, treating the cause, replacing damaged framing, and re-finishing — often $25,000 minimum. That’s why Ontario law imposes a duty on sellers to disclose latent defects they know about, when those defects meet a specific legal test.

What must Ontario sellers disclose about a property?

Ontario sellers are not required to disclose every defect they know about. The law sets a higher bar. A seller must disclose a latent defect when all of the following are true:

1. The seller knows about the defect (or recklessly disregarded it)
2. The defect is not discoverable by a reasonable inspection
3. The defect materially affects the property’s value or safety
4. The defect renders the home dangerous or potentially uninhabitable — OR the seller takes active steps to conceal it

The leading Ontario authority is McGrath v. MacLean (1979, Ontario Court of Appeal), which established that a seller who knowingly conceals a latent defect that makes the property dangerous or uninhabitable can be sued for damages even after closing.

Later cases like Sevidal v. Chopra (1987) expanded the doctrine — a seller knew about radioactive soil contamination, failed to disclose, and was held liable. Krawchuk v. Scherbak (2011 ONCA) extended the duty to real estate agents who knew or should have known about material defects.

What sellers should disclose if known — even if not strictly required:

• Past water damage, flooding, or basement seepage
• Past mold remediation
• Past insurance claims on the property
• Knob-and-tube or aluminum wiring
• Asbestos materials known or suspected
• Underground oil tanks (active or decommissioned)
• Past structural repairs (cracked beam, settled foundation)
• Stigmatized property issues (death, criminal activity on premises — currently a grey area in Ontario law)

Disclosing voluntarily protects sellers from post-closing lawsuits. Non-disclosure that’s later discovered can be devastating — a buyer who proves all four elements of McGrath can recover full damages plus legal costs.

The 4-part legal test: when is a latent defect actionable?

Not every hidden problem creates a lawsuit. To recover damages after closing, an Ontario buyer must prove all four elements:

The hardest element to prove is usually #1 (knowledge). Buyers often rely on circumstantial evidence — repair invoices, neighbour testimony, prior insurance claims — to show the seller must have known.

What is the Seller Property Information Statement (SPIS)?

The Seller Property Information Statement (SPIS) — OREA Form 220 — is a voluntary disclosure form Ontario sellers can complete that lists known issues with the property. It covers everything from water damage and structural problems to past insurance claims and zoning issues.

The SPIS is not legally required in Ontario. However:

• If a seller completes the SPIS, they’re legally accountable for accuracy
• False answers create liability for fraudulent misrepresentation
• “I don’t know” is acceptable when truthful but invites buyer skepticism
• Many GTA listing agents discourage SPIS use because of this liability — though buyers may insist

Whether to complete a SPIS is a strategic decision sellers should make with their lawyer and realtor. In my experience, a thorough and honest SPIS often shortens negotiations and reduces post-closing disputes — but only when the seller genuinely has clean information to share.

Caveat emptor: what does “buyer beware” actually cover?

Caveat emptor is the default position in Ontario residential real estate. It means buyers are responsible for inspecting and assessing the condition of any property they purchase. The seller is generally not obligated to volunteer information about visible problems.

Caveat emptor does apply to:

• All patent defects (visible issues)
• Latent defects the seller didn’t know about
• Latent defects that don’t render the home unsafe or uninhabitable
• Aesthetic preferences (paint colour, layout, neighbourhood feel)

Caveat emptor does NOT apply when:

• The seller actively conceals a known defect
• The seller makes a false statement about the property
• The seller knew about a dangerous or uninhabitable latent defect and didn’t disclose
• The seller is in a fiduciary or professional relationship with the buyer

What if you discover a defect AFTER closing?

Steps to take if a serious defect surfaces after you’ve taken possession:

1. Document everything immediately. Photos, videos, dates, witnesses. Get a professional assessment from a qualified engineer, mold remediator, electrician, or building inspector.
2. Don’t make repairs yet. Preserve evidence of the original condition. Repairs done before legal action weaken your case.
3. Contact your real estate lawyer. They’ll review whether the 4-part test is met and recommend whether to pursue the seller.
4. Check title insurance. Some title insurance policies cover specific latent defects like septic system failures or unrecorded easements — but most physical defects (mold, foundation, wiring) are not covered.
5. Investigate the seller’s knowledge. Subpoena repair records, insurance claims, contractor invoices. Knowledge is usually the hardest element to prove without paper trails.
6. Watch the limitation period. Under Ontario’s Limitations Act, 2002, you generally have 2 years from discovering the defect to commence a lawsuit. Miss this and your claim is barred forever.

Does title insurance cover hidden defects?

Title insurance is often misunderstood. It covers title issues (ownership, encroachments, zoning violations, unrecorded liens, fraud) — not physical condition issues like mold or wiring. However, certain enhanced title insurance policies in Ontario now include limited coverage for specific defects:

• Septic system failures (typically up to a capped amount)
• Forced removal of structures built without permits
• Existing zoning violations
• Some unrecorded municipal work orders
• Identity theft and title fraud post-closing

What title insurance does not typically cover:

• Mold, asbestos, lead paint
• Faulty wiring or plumbing
• Foundation problems
• HVAC failures
• Roof leaks
• Pest infestations

For physical defects, your remedies are limited to the seller (if disclosure rules were breached), the home inspector (if they negligently missed something visible), or your own insurance.

Practical advice for buyers

• Always hire a qualified home inspector — $450–$750 is the best protection money you’ll spend. Look for someone certified by CAHPI (Canadian Association of Home and Property Inspectors) or InterNACHI.
• Add specialty inspections when warranted. Mold testing ($300–$600), thermal imaging for hidden moisture ($300–$500), sewer scope ($250–$400), oil tank scan for older homes ($200), termite inspection ($200).
• Request and read the SPIS if the seller has completed one. Note any “Unknown” or “Yes” answers and ask follow-up questions.
• Ask for repair invoices and insurance claim history. A seller who refuses raises a flag.
• Walk through twice — first day with the inspector, second day on your own without distraction. Bring a notebook.
• Check for paint mismatches, oddly placed furniture, or strong air fresheners — common cover-ups for water stains or odours.
• Keep all records. If problems surface later, preserved evidence is everything.

Practical advice for sellers

• Disclose known latent defects voluntarily. Non-disclosure exposes you to lawsuits years later that almost always cost more than the original repair would have.
• Document everything you’ve ever fixed. Keep receipts, invoices, permits, contractor reports. This both proves diligence and documents the fix.
• Don’t actively conceal anything. Painting over mold, hiding foundation cracks behind drywall, or installing carpet over water-damaged subfloor turns ordinary defects into fraud.
• Be careful what you say. Casual conversations with the buyer or their agent during showings can be used as evidence later. Let your realtor handle all factual representations.
• Discuss SPIS strategy with your lawyer. Whether to complete one depends on the property’s history and your appetite for disclosure liability.
• Carry seller’s title insurance if your lawyer recommends it — covers gaps and post-closing fraud risks.

The bottom line

The latent vs patent defect distinction is one of the most consequential — and least understood — areas of Ontario real estate law. Buyers who don’t grasp it skip critical inspections and have no recourse later. Sellers who don’t grasp it expose themselves to lawsuits that can hit years after closing.

The protection on both sides is the same: thorough inspections, honest disclosure where required, careful documentation, and an experienced realtor and lawyer guiding the transaction. In 12+ years of GTA practice, the deals that go smoothly are the ones where everyone treats the defect-disclosure framework with respect from day one.

Buying or selling in the Greater Toronto Area and want to be sure your transaction is properly protected from disclosure pitfalls? I’d love to walk you through your specific property and situation. Schedule a free 15-minute call: Contact Tej Thakor, or text +1 (647) 684-1731 on WhatsApp.

Related reading: Title Search in Ontario + the OREA Requisition Date Explained · Status Certificate Ontario: Condo Buyer + Seller Guide · Top 10 Real Estate Mistakes Ontario Buyers + Sellers Make · What Is a Good Credit Score in Canada?

This article is for general information only and does not constitute legal advice. For advice on your specific transaction or dispute, consult a licensed Ontario real estate lawyer.