RECA Residential Real Estate Exam Prep Unit 4
(2025/2026) | Property Defects, Disclosure &
Inspections.
3 Types of property defects
Patent, Latent, Material latent
What are Patent defects (on a property)?
obvious flaw discovered upon reasonable inspection. caveat emptor applies (meaning that the
buyer should have inspected enough to find anything like this). Unless the seller provides
information or warranties regarding the patent defects, it is the buyers responsibility to address
them.
What are Latent defects (on a property)?
Latent defects are physical deficiencies that do not render the property dangerous or potentially
dangerous, so caveat emptor applies.
Latent (or hidden). A true latent defect is one that is not known to either the seller or buyer at
the time of the sale.
Liability becomes an issue when it can be proven that a defect was known to the seller but
could not have been discovered by the buyer, even upon a reasonable inspection.
What are material latent defects (on a property)?
A material latent defect is a "hidden" defect that materially (largely) affects the use or value of
the property.
Material latent defects are of significance because the seller is aware of them but the buyer will
not discover them through a reasonable inspection. These effects may render the property
dangerous or potentially dangerous, unfit for habitation or unfit for the purpose that the buyer
is acquiring it.
What is caveat emptor?
Let the buyer beware. However, this rule is often violated; people are often required to speak
up
,Two types of patent defects
Minor and material
8 examples of Minor patent defects
Broken window pane, damage to entry walkway/stairs, Ill-fitting or damaged doors, ill-fitting
windows, cracks in cement driveway, stained/damaged walls and ceilings, worn or damaged
flooring, worn or damaged faucets/fixtures.
7 examples of Material patent defects
Roof requiring re-shingling, Large windows with broken seals, cracked heat exchanger in
furnace, easily observable foundation deterioration, property located in flood hazard area,
property located near a fertilizer plant, property condemned by Alberta Health Services.
What are material patent defects?
defects that could pose serious health and/or safety concerns for occupants or visitors to the
property.
5 examples of Latent defects
1. a hole in drywall hidden from view by a wall hanging. 2. A dent in hardwood flooring hidden
from view by an area carpet 3. Broken window latch hidden from view by window covering 4.
Water stains on carpeting hidden from view by a large plant stand 5. Damage to the inside wall
of a bedroom closet hidden from view by clothes.
8 examples of material latent defects
1. Significant structure damage that has been concealed 2. Notices from local authorities that
prejudicially affect the property 3. Any renovation or repair work that lacks
required/appropriate permits from the local municipality or other authority 4. Concealed crack
in the foundation wall 5. Concealed electrical wiring improperly installed 6. Environmental
contamination not remediated and is concealed 7. Properties formerly used as marijuana grow
op or drug lab what were renovated but not professionally remediated 8. Corroded post-tension
cables
If the buyer is not represented, it is the seller's REP to communicate material latent defects to
the unrepresented buyer?
Yes, as it in the best interest of the seller (or else the buyer may sue the seller if it is not made
clear).
What does misrepresentation refer to?
, a false or misleading statement or representation made by one party to another
3 types of misrepresentation
negligent, reckless and intentional
Negligent Misrepresentation
a false or misleading statement made by a person, who believed it to be true, and where the
person carrying out the misrepresentation took reasonable steps to assure the accuracy of the
statement
Reckless Misrepresentation
false or misleading statement made by a person who had not intended to mislead but failed to
take reasonable steps to confirm the statement's truthfulness or accuracy
In general property inspectors should have in-depth knowledge on the following 6 areas
1. New and old building service systems 2. How different building service systems interact 3.
Causes and effects of building systems deterioration and remedies 4. Applicable legislation 5.
Hazardous material 6. Current safety standards
In Alberta who governs residential property inspectors and inspection businesses?
The Fair Trade Act, Home Inspection Business Regulation
How to determine if a property inspector or business is currently licensed?
Visit Service Alberta website at servicealberta.ca
What is the Property Inspection Request form and what does it include?
RECA created the Property Inspection Request form to assist REPs in educating their clients
about property inspections. The form includes a list of the various inspections and reports
available to buyers.
What is an ESA?
Environmental Site Assessment. To determine if a property is contaminated
True or False - An ESA Phase 1 assessment does not typically involve lab testing or items like
paint, soil, air, or moisture.
True, that is done in Phase 2
What is the ESAR?
(2025/2026) | Property Defects, Disclosure &
Inspections.
3 Types of property defects
Patent, Latent, Material latent
What are Patent defects (on a property)?
obvious flaw discovered upon reasonable inspection. caveat emptor applies (meaning that the
buyer should have inspected enough to find anything like this). Unless the seller provides
information or warranties regarding the patent defects, it is the buyers responsibility to address
them.
What are Latent defects (on a property)?
Latent defects are physical deficiencies that do not render the property dangerous or potentially
dangerous, so caveat emptor applies.
Latent (or hidden). A true latent defect is one that is not known to either the seller or buyer at
the time of the sale.
Liability becomes an issue when it can be proven that a defect was known to the seller but
could not have been discovered by the buyer, even upon a reasonable inspection.
What are material latent defects (on a property)?
A material latent defect is a "hidden" defect that materially (largely) affects the use or value of
the property.
Material latent defects are of significance because the seller is aware of them but the buyer will
not discover them through a reasonable inspection. These effects may render the property
dangerous or potentially dangerous, unfit for habitation or unfit for the purpose that the buyer
is acquiring it.
What is caveat emptor?
Let the buyer beware. However, this rule is often violated; people are often required to speak
up
,Two types of patent defects
Minor and material
8 examples of Minor patent defects
Broken window pane, damage to entry walkway/stairs, Ill-fitting or damaged doors, ill-fitting
windows, cracks in cement driveway, stained/damaged walls and ceilings, worn or damaged
flooring, worn or damaged faucets/fixtures.
7 examples of Material patent defects
Roof requiring re-shingling, Large windows with broken seals, cracked heat exchanger in
furnace, easily observable foundation deterioration, property located in flood hazard area,
property located near a fertilizer plant, property condemned by Alberta Health Services.
What are material patent defects?
defects that could pose serious health and/or safety concerns for occupants or visitors to the
property.
5 examples of Latent defects
1. a hole in drywall hidden from view by a wall hanging. 2. A dent in hardwood flooring hidden
from view by an area carpet 3. Broken window latch hidden from view by window covering 4.
Water stains on carpeting hidden from view by a large plant stand 5. Damage to the inside wall
of a bedroom closet hidden from view by clothes.
8 examples of material latent defects
1. Significant structure damage that has been concealed 2. Notices from local authorities that
prejudicially affect the property 3. Any renovation or repair work that lacks
required/appropriate permits from the local municipality or other authority 4. Concealed crack
in the foundation wall 5. Concealed electrical wiring improperly installed 6. Environmental
contamination not remediated and is concealed 7. Properties formerly used as marijuana grow
op or drug lab what were renovated but not professionally remediated 8. Corroded post-tension
cables
If the buyer is not represented, it is the seller's REP to communicate material latent defects to
the unrepresented buyer?
Yes, as it in the best interest of the seller (or else the buyer may sue the seller if it is not made
clear).
What does misrepresentation refer to?
, a false or misleading statement or representation made by one party to another
3 types of misrepresentation
negligent, reckless and intentional
Negligent Misrepresentation
a false or misleading statement made by a person, who believed it to be true, and where the
person carrying out the misrepresentation took reasonable steps to assure the accuracy of the
statement
Reckless Misrepresentation
false or misleading statement made by a person who had not intended to mislead but failed to
take reasonable steps to confirm the statement's truthfulness or accuracy
In general property inspectors should have in-depth knowledge on the following 6 areas
1. New and old building service systems 2. How different building service systems interact 3.
Causes and effects of building systems deterioration and remedies 4. Applicable legislation 5.
Hazardous material 6. Current safety standards
In Alberta who governs residential property inspectors and inspection businesses?
The Fair Trade Act, Home Inspection Business Regulation
How to determine if a property inspector or business is currently licensed?
Visit Service Alberta website at servicealberta.ca
What is the Property Inspection Request form and what does it include?
RECA created the Property Inspection Request form to assist REPs in educating their clients
about property inspections. The form includes a list of the various inspections and reports
available to buyers.
What is an ESA?
Environmental Site Assessment. To determine if a property is contaminated
True or False - An ESA Phase 1 assessment does not typically involve lab testing or items like
paint, soil, air, or moisture.
True, that is done in Phase 2
What is the ESAR?
