ExamPassMaterial Fact vs Material Latent Defect
A material fact is any information that could affect a reasonable buyer's decision or the price they would pay, while a material latent defect is one specific kind of material fact: a hidden, serious problem that a reasonable inspection would not reveal and that affects the property's use, value, or safety. Every material latent defect is a material fact, but most material facts are not latent defects, and the two carry different disclosure duties. Under the Trust in Real Estate Services Act, 2002 (TRESA), the General Regulation (O. Reg. 567/05) defines a material fact and requires a registrant to take reasonable steps to determine and disclose it, while a known material latent defect carries a heavier, statutory duty: under O. Reg. 567/05, section 22.2, a registrant who knows of a latent defect the seller is legally obligated to disclose, one that makes the property dangerous, potentially dangerous, or uninhabitable, must disclose it to every buyer who expresses an interest in the property. That seller obligation comes from the common law, and the Code of Ethics (O. Reg. 365/22) honesty rules reinforce the registrant's duty.
At a glance: a material fact is "anything that could change the decision," and a material latent defect is "a hidden, serious flaw the buyer could never find on their own."
| Dimension | Material fact | Material latent defect |
|---|---|---|
| What it is | Any information that could affect a reasonable person's decision or the terms they agree to | A hidden, serious property defect a reasonable inspection would not uncover |
| Scope | Broad: the property, the transaction, or the surrounding circumstances | Narrow: a specific subset of material facts about the property's condition |
| Owed to whom | Your client, as part of representation | Prospective buyers, not only your own client, once it is known |
| What triggers disclosure | Take reasonable steps to determine it, then disclose it to your client at the earliest practical point | Known to the registrant: a latent defect the seller must disclose is disclosed to every buyer who expresses an interest in the property |
| Worked example | A pending special assessment on a condo unit, or a planned road widening beside the lot | A spring-thaw foundation seep sealed behind a newly finished basement wall |
Students mix the two up constantly, and the exam leans on that, because the disclosure consequences are different and real. Getting it wrong in practice can harm a client, and getting it wrong on the exam costs you marks.
What is a material fact under TRESA?
A material fact is information that would affect a reasonable person's decision to buy, sell, or lease, or the terms they would agree to. The General Regulation under TRESA (O. Reg. 567/05) defines it in section 2, and the definition is broad on purpose: a material fact can be about the property, the transaction, or the circumstances around it. What counts as material depends on the client and their situation, which is why the duty (set out in O. Reg. 567/05, section 22.1) is framed around taking reasonable steps to discover the facts that matter and disclosing them to your client at the earliest practical opportunity.
The key exam idea: the material-fact duty runs to your client. It is part of representation, and it is about equipping your client to make an informed decision.
What is a material latent defect?
A material latent defect is narrower and more serious. It is a property problem that is hidden, meaning a reasonable inspection would not reveal it, and significant, such as something that makes the property dangerous, unfit to live in, or unsuitable for a purpose the buyer has made known. Think of a concealed structural failure behind finished walls, or a recurring backup that leaves no trace between episodes.
Because a buyer cannot protect themselves against what cannot be seen, a known material latent defect must be disclosed to prospective buyers, not only to your own client. The order of authority matters here. The seller's underlying obligation to disclose a latent defect that makes the property dangerous, potentially dangerous, or uninhabitable comes from the common law. The registrant's duty is statutory and operative: under O. Reg. 567/05, section 22.2, where the seller is legally obligated to disclose such a fact and it is known to the registrant representing the seller, the registrant must disclose it to every buyer who expresses an interest in the property, making best efforts to obtain a written acknowledgement of the disclosure. The Code of Ethics reinforces this: a registrant must act with honesty, integrity, and good faith toward every person (O. Reg. 365/22, section 1) and must make best efforts to ensure representations are accurate and not misleading, and must not engage in misrepresentation (O. Reg. 365/22, section 5). By contrast, a patent defect, one a reasonable inspection would reveal, is the buyer's side to discover through their own inspection.
How does the exam test the difference?
Exam questions usually hinge on two things: classifying the problem (is this fact material, and if it is a defect, is it latent or patent?) and routing the disclosure (who must tell whom, and when?). A wrong option will typically misroute the duty, for example treating a material latent defect as something you mention only if asked, or treating a material fact owed to your client as something you can sit on until later.
What does a material latent defect look like in practice?
A seller client mentions, almost in passing, that the finished basement bedroom backs up with sewage two or three times a year, and that the carpet and baseboards were replaced this past spring after the most recent backup. It is now mid-summer, the room is clean and odour-free, and nothing a routine inspection covers would surface it. That is a known material latent defect: hidden, significant, and known to your side. The credited answer discloses it to prospective buyers. Options built on "only if asked," "the inspection is the buyer's job," or "stay quiet to protect the seller's price" are all wrong, and each one is a misconception the exam deliberately tests.
How do you practise telling them apart?
ExamPass questions test classification and routing repeatedly, and every option's explanation names the misconception it represents, so you learn why "only if asked" keeps appearing and why it keeps being wrong. When a scenario gets tangled, the AI Tutor can break it down and show how the rules apply to that exact situation. Related reading: client vs customer (now client vs self-represented party) and TRESA exam prep.
This guide is a study aid and a plain-language summary, not legal advice. The current text of TRESA and its regulations is always the final authority. ExamPass is an independent study aid. It is not affiliated with or endorsed by RECO, Meazure Learning, Humber Polytechnic, Career College Group, Fleming College, Algonquin College, or any other education provider. Provider and exam names are used only to identify the courses students are preparing for.