What is a Latent Defect? Plus: 6 Steps to Take if Your House Has One

As a new homeowner, one of the most distressing things that can happen is that you discover major hidden defects with a house that you’ve just purchased. Not only is it extremely upsetting to find out that the condition of the property you thought you were getting is very different than what you actually ended up with, you are probably angry because you feel like you were “tricked” by the seller.

In the 30 years that I’ve been practicing real estate law in Howard County, MD, I have received thousands of calls from panicked homeowners wondering, “What do I do now?” To answer that, we have to determine if the issue at hand qualifies as a latent defect under Maryland real estate law.

Bad Luck… or Latent Defect?

Some of the most common hidden defects that are discovered post-settlement include:

Mold
Water Damage
Termite damage
Well & septic issues
Electrical issues
Roofing issues
Plumbing issues
Foundation & other structural problems

Why wasn’t this problem discovered during my home inspection?

Many people wonder why they weren’t alerted to their problem during the home inspection, when they still had the opportunity to get out of the contract. The truth is that many of the issues mentioned above wouldn’t be obvious to either the buyer or the home inspector before settlement was completed.

Most buyers have very competent home inspectors that do their very best to help uncover some of these unseen issues. Unfortunately, even the most experienced home inspector can’t detect certain hidden defects. Much too often, these major problems are discovered by the homeowner later, after living in the home under normal living conditions.

For example, let’s consider the all-too-common scenario below:

John knows his house has faulty windows because they leak every time it rains. Before putting his house on the market, John repairs all existing water damage and covers up any evidence of water penetration around the window areas. Sarah puts in an offer to buy the home, with a home inspection contingency. John accepts Sarah’s offer.

The home inspection is done on a sunny day, and the home inspector sees no visible signs of window leakage. John and Sarah complete settlement, and Sarah is now a first-time homeowner! Two weeks later, there is a major rain storm while Sarah is out of town for the weekend. The windows leak, and the sitting water causes $7,000 worth of damage to the window sills, drywall, and flooring below.

Definition of Latent Defect in Maryland Real Estate Law

Under Maryland law, a seller of a residential property is can disclaim any representation to a buyer regarding the condition of the property but is legally required to disclose certain prior or current problems with the property being sold, no matter what. These potential problems are called “latent defects.”

Under Maryland law, a “latent defect” is an issue with the property that the seller knows about that:

Is not visible;
A buyer or home inspector could not reasonably be expected to uncover before the purchase is made; and
Could endanger the health or welfare of occupants or visitors to the property.

It is important to note that just because your house has a defect doesn’t mean it is a latent defect that the seller was required to disclose to you.

The term latent defect does not include all defects in the house, and the seller has to “know” about the latent defect when they sign the contract.

In the situation described above, the leaky windows were a latent defect. Since John had knowledge of the defect prior to selling the house, he had a legal obligation to disclose that fact to Sarah. Because he failed to do so, Sarah may have recourse against John should she choose to take legal action.

What Qualifies as a Latent Defect?

Mold is one of the most frequent problems uncovered by new homeowners. For instance, here’s a common scenario:

Michael purchases a house that needs some cosmetic updates, but believes the property has “good bones.” After settlement, Michael begins renovations and starts removing the outdated 1960s wood paneling from the basement walls. To his horror, Michael discovers a major mold infestation lurking behind the paneling.

Sadly, it is not all that unusual to find out that the seller did, in fact, know about the defect, but didn’t say anything because they didn’t want to risk losing the sale. In other words, they didn’t disclose what they were legally required to disclose. In this case, the question then becomes: Can you prove that the seller had knowledge of the defect before they sold you the house?

If the answer is yes, you may have recourse against the seller for non-disclosure of a latent defect.

The Law vs. Reality

Even though Maryland real estate law requires disclosure of latent defects, the reality is that it doesn’t always happen. As a result, it’s not uncommon for the new homeowner to be confronted with very expensive repair bills – sometimes totaling tens of thousands of dollars (or more).

In these situations, many homeowners react emotionally – feeling angry that they were “tricked” by the seller, and scared about how they are going to afford to fix the problems. While an emotional reaction is certainly understandable, the best thing you can do in these situations is to take a deep breath, remain calm, and follow the following steps.

6 Steps to Take If You Discover Hidden Defects:

If you find yourself with water in the basement of your new house, or if you uncover old termite damage, rot or mold that you suspect was there before you purchased the property, do NOT immediately change or repair those conditions. Instead, take the following steps:–

Ensure your family’s safety. First and foremost, the health and welfare of your family should be your first priority. If you discover mold, evidence of faulty electrical, or other potentially dangerous problems, you should vacate the property immediately and seek professional help.
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STOP! Do not destroy the evidence. Don’t tear out, clean up, or repair the problem — this WILL destroy valuable evidence that you WILL need to prove your case.
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Immediately document what you see. If the defect does not pose any immediate physical threat to you or your family, take pictures and video of the existing conditions as soon as possible, before anything is done to remediate the problem. If the situation is dangerous, proceed to step 4 and have an expert document the situation for you. This evidence could be critical if you end up pursuing legal action against the seller down the road.
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Call the experts. Depending on the issue that you are dealing with, contact an experienced home improvement contractor, mold remediation expert, structural engineer, and/or other appropriate professionals to evaluate the problem and give you an estimate of what it will cost to fix it. Once again, make sure to document everything in writing, and get at least two estimates for everything.
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Contact an attorney. If you’ve gone through all of the steps above and want to move forward with legal action, immediately contact an experienced Maryland real estate attorney to discuss your options and next steps. Do not wait, as these matters are often time sensitive. Also, do not take any steps to remediate the problem until after you have consulted with an attorney.It is important that you consult with a competent and experienced real estate litigator who knows this subject matter. Not all litigators — and certainly not all attorneys — are well versed in Maryland real estate law, so it is critical that you seek counsel from an attorney who has the experience and knowledge to deal with these issues effectively.
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Weigh your options. For many homebuyers, their first instinct in this situation is to “sue the seller.” However, as discussed above, it is important to react logically, not emotionally, in these situations. Your attorney will help you understand your options and put together a plan based on an evaluation of the following factors:
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How costly is the issue to fix? If it will only cost you a few hundred dollars to repair the problem, it is probably not going to be worth the time, money, or hassle of pursuing legal action against the seller. You’re most likely better off fixing the problem and moving on with your life. However, if you’re facing thousands of dollars in repair bills, seeking damages from the seller may make sense.

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Is there real evidence that the seller knew about this problem? Once again, in order to be a latent defect, the seller had to have knowledge of the problem prior to signing the contract. Even if you suspect that the seller knew about it, that is not enough. You have to be able to prove that fact in order to have a case against them.

Legal Process to Recover Damages

If you recently purchased a new house, discovered post-settlement that the property has major defects, and have reason to believe that the seller was aware of these problems beforehand, there may be legal steps that we can take to recover some, or all, of the expenses that you have incurred.

Often, many of the tools we have available to us are dependent upon the terms of the actual contract of sale that the parties used in the transaction. Generally speaking, in the Columbia, MD, area and beyond, most realtors use the Maryland Association of Realtors Residential Contract of Sale Form. This form contract contains very important components, including:

A required mediation session, which can be a helpful tool for reaching a resolution without having to go to court.
An attorney’s fees provision, which enables a buyer who has been defrauded by a dishonest seller to seek reimbursement for attorney’s fees if they have to take legal action against that seller.

Coover Law Firm, LLC is here to help. Call us Today.

If you’ve recently discovered major problems with your new home, you are undoubtedly under a great deal of financial and emotional stress. At Coover Law Firm, LLC, we have been handling these types of cases for over 30 years and understand what you are going through. The good news? You don’t need to go through it alone.

We are here to explain your options and, together, we will put together a plan. Call us today at (410) 995-1100 to schedule an initial consultation with experienced Howard County real estate litigator, Fred L. Coover, Esquire. We look forward to serving you!