Patent and la­tent de­fects in a prop­erty

Do your due dili­gence to en­sure there are no undis­closed faults in the prop­erty you wish to buy

HT Estates - - HTESTATES - Su­nil Tyagi

The sale and pur­chase trans­ac­tions of im­move­able prop­er­ties usu­ally in­volve in­vest­ment of huge amount of money. There­fore, be­fore fi­nal­is­ing a sale pur­chase trans­ac­tion, buy­ers must be cau­tious about t he t i t l e and other re­lated as­pects of the prop­erty that they in­tend pur­chas­ing. Usu­ally due dili­gence is re­quired to dis­cover de­fects in the prop­erty, some of which may not have been dis­closed to the pur­chaser by the seller.

In gen­eral, it is the duty of the buyer to make proper en­quiries about the prop­erty he in­tends to pur­chase. A buyer can dis­cover de­fects in a prop­erty even on or­di­nary in­spec­tion. De­fects that can be found out by or­di­nary in­spec­tion are known as patent de­fects.

How­ever, there are cer­tain de­fects that the buyer can­not, dis­cover for him­self. Such de­fects are known as la­tent de­fects. Some ma­te­rial de­fects are con­sid­ered to be ma­te­rial la­tent de­fects, be­cause if the buyer was aware of them, he might not have en­tered into a con­tract for pur­chase of the prop­erty at all. The rights that in­ter­fere with the right of ownership or re­stricts the right of trans­fer, or af­fects the ti­tle, are con­sid­ered to be a ma­te­rial la­tent de­fect.

The Trans­fer of Prop­erty Act 1882, pro­vides for safe­guard­ing the in­ter­est of buy­ers, by putting the onus on the seller to dis­close all ma­te­rial in­for­ma­tion in re­la­tion to ti­tle of the prop­erty that he in­tends to sell/trans­fer.

Under the Act, the seller is duty bound to dis­close such ma­te­rial la­tent de­fects in a prop­erty to the prospec­tive buyer. To give an ex­am­ple, a de­fect in the ti­tle of the prop­erty is con­sid­ered to be ma­te­rial la­tent de­fect. This is be­cause the seller has a ti­tle that is ex­clu­sively within his own knowl­edge and he is bound to state it ex­plic­itly.

The seller is duty bound to dis­close any re­stric­tive agree­ment/un­der­stand­ing and any breach of a agree­ment/un­der­stand­ing by him with re­spect to the prop­erty which is pro­posed to be sold to the buyer and any such non dis­clo­sure may en­ti­tle the pur­chaser to re­pu­di­ate the con­tract.

A ma­te­rial de­fect, of which the seller is aware, but the buyer

is not aware, and which the buyer could not with or­di­nary care dis­cover, should be dis­closed by the seller to the buyer.

How­ever, a seller can­not be faulted for not dis­clos­ing some­thing that could not be said to have known to him at the time of en­ter­ing into an agree­ment/un­der­stand­ing/ ar­range­ment with the buyer re g ard­ing t he sale of t he prop­erty.

To sum up, it is the duty of the seller to dis­close to the prospec­tive buyer the ma­te­rial la­tent de­fects in a prop­erty be­fore en­ter­ing into any kind of un­der­stand­ing/ar­range­ment/ agree­ment with the buyer with re­spect to the prop­erty.

An omis­sion by a seller to make such a dis­clo­sure about the ma­te­rial la­tent de­fects in a prop­erty to the buyer is con­sid­ered to be fraud­u­lent. The buyer can re­pu­di­ate such a con­tract. Also, in such cases, spe­cific per­for­mance of con­tract in favour of the seller can­not be en­forced on the buyer. In other words, a buyer is not bound to com­plete the sale of the prop­erty if there are de­fects in the prop­erty that are ma­te­rial and also la­tent, that is to say, not dis­cov­er­able by ex­er­cise of or­di­nary care, or if the ti­tle of the prop­erty is not free from rea­son­able doubt.


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