What a latent defect is
The word “latent” means hidden. A latent defect is one that was not apparent at completion and could not have been found by reasonable inspection, such as a flaw in concrete or a faulty waterproofing detail that only causes damage after a period of use or weather. A patent defect, by contrast, is visible or discoverable when the work is inspected.
| Point | Patent defect | Latent defect |
|---|---|---|
| Visibility | Visible or discoverable on reasonable inspection | Hidden, not apparent at completion |
| Typical discovery | Snagging and inspection before handover | Later, after use, weather or deterioration |
| Example | A crack, misalignment or incomplete finish seen at inspection | A buried element that fails years later |
| Usual handling | Listed and rectified under the contract before or shortly after completion | Dealt with under the contract’s defects provisions and the law that applies |
How long liability may continue
Most construction contracts include a defects liability period, during which the contractor must rectify defects that appear. Some contracts also deal with latent defects, either through a longer period or by leaving the position to the law. Outside the contract, the law may continue to apply, and time limits on claims may start when the defect was discovered or should have been discovered.
Insurance and latent defects
It is a common assumption that insurance covers defects. In general it does not, at least not in the way contractors imagine.
- Contract works policies are written to cover accidental loss or damage during the works. They commonly exclude the cost of repairing or replacing defective work, even when accidental damage that results from the defect may be treated differently.
- Maintenance and defects extensions may cover damage arising from the contractor’s operations during the defects period, but do not usually pay for the contractor’s own defective workmanship.
- Public liability policies may respond to third-party injury or property damage caused by a defect, subject to the terms, but they do not pay to rectify the defect itself.
- Professional indemnity may be relevant where the defect arises from negligent design, subject to its own conditions. See professional indemnity for contractors.
- Specific defects cover exists in some markets. Whether it is available for a particular project in South Africa is something to discuss with us. We do not assume it exists.
Security for defects
Contracts often secure the defects period through retention or a guarantee. A retention guarantee or a performance guarantee may remain in place through the defects period. These are forms of security for the employer, and they do not insure the contractor. If they are called, the contractor will normally have to reimburse the provider.
Reducing the risk
Practical steps
- Read the defects provisions in your contract, including any separate period for latent defects.
- Keep quality records, test results and as-built information, which help you show that work was done properly.
- Inspect carefully before handover and resolve patent defects at that stage.
- Understand how long retention or guarantees must remain in place.
- Ask your insurer how defects and maintenance periods are treated before you rely on cover.
- Take legal advice about time limits and liabilities.
Common questions
Is a latent defect covered by my contract works policy?
Generally not as such. Contract works cover addresses accidental loss or damage during the works, and the cost of putting right defective work is commonly excluded. Ask the insurer how resulting damage is treated.
How long can I be liable for a latent defect?
It depends on the contract and on the law. Some contracts set a period, and the law may continue to apply beyond it. Take legal advice about your own contract.
Can retention or a guarantee cover latent defects?
They may secure the defects period, but they are security for the employer and not insurance for you. If they are called, you normally have to repay the provider.
What can I do to reduce the risk?
Keep quality records and test results, inspect carefully before handover and understand how long your obligations run. Good records help to show that work was done properly.
Want to understand how your policy treats defects?
Send us your policy wording or contract clauses and we will discuss how defects and maintenance periods are likely to be treated.
Get a QuoteAn enquiry does not put cover in place. Cover is subject to underwriting and policy terms.
Related reading
- Contractors All RiskCover for the works under construction, such as roadworks, drainage, pipelines and structures, subject to policy terms.
- Retention guaranteesHow a guarantee may replace cash retention where the contract and the employer allow it.
- JBCC insurance requirements: where to lookHow JBCC building agreements deal with insurance, and why your edition and contract data decide the requirements. Not a substitute for your own document.
- Performance guarantee vs insurance explainedThe commercial difference between a performance guarantee and insurance, who benefits, who ultimately pays and the repayment obligations contractors accept.