Failure to Disclose Latent Defects

When commiting to a commercial real estate transaction, you want to make sure that all the disclosures are accurate. Disclosures are statements or affirmations regarding the state of the property at the time of sale. While no seller can fully contemplate all contingencies and issues that are likely to arise after the sale, there are some obvious things that must be disclosed to a would-be buyer. For those who are considering a large-scale investment — whether as the buyer or the seller — making sure the disclosures are right is a big part of the deal. For help with your next real estate investment, call the Law Offices of Eric Nesbitt, P.C. 

What are Disclosures?

A disclosure in a real estate contract is merely the seller’s statement as to what may be wrong with the property. Not everything must be disclosed to potential buyers. The key to deciding what to include in your disclosures is to identify latent defects and those items that may be material defects. This can be a bit challenging because what one person considers “material” or “latent” may differ from what someone else considers a latent or material defect. 

Latent vs. Patent Defects

A patent defect is a condition that is readily visible to a potential buyer upon inspection. So, if there are cracking walls in a room of the property, then it is reasonable to assume that the buyer will be able to see those with the naked eye and inspect further to figure out what is wrong. This allows the buyer to make an educated determination about whether to purchase the property or not. 

On the other hand, a latent defect is one that is not readily visible or identifiable upon typical inspection. If there is a condition that one would not expect a buyer to notice without performing a much more in-depth inspection, then this may be considered a latent or “hidden” defect. Examples may potentially include:

• Leaks in the roof
• Faulty HVAC equipment
• Foundation issues
• Subfloor damage

Hiding a Known Problem

While most latent defects must be disclosed, there are naturally times when even the seller has no idea a problem exists. This is not necessarily an indication that the seller is doing something fraudulent; it could just mean they are unaware of the underlying condition of the property. On the other hand, if a seller intentionally conceals problems that could materially affect the condition and value of the property, this could be grounds for rescinding the contract. Further, Colorado law views this type of concealment as potential fraud, and such false representation can give the other party the right to back out of the deal or pursue civil penalties. 

For more help with your next commercial investment, call an experienced real estate attorney near you to make sure you do not leave yourself exposed to liability. Call the Law Offices of Eric L. Nesbitt, P.C. today. Nothing compares to the experience and training of a seasoned real estate attorney when negotiating a commercial investment. So, do not take chances and leave yourself open to losing a lucrative deal ever again.