You might be able to look to the FCI contract and speak with Tim or Lucy about the trade being defective and see what FCI says.    

(There has been no suggestion that you failed to disclose latent defects.)This is a bigger problem for the buyer’s broker.

(Info from Travelers Guarantee Company of Canada).Equally as interesting, is that CHS Safeclose (Canada Home Shield Safeclose - Ontario only) sells Defect Coverage to home buyers.

@David Krulac is correct that in 99 percent of cases, defective notice to an interest holder means that the sale does not divest that interest. 

Even so, your friend didn't have to buy the house due to some sort of title defect. 

In my area, if the pest report shows termites, then it's a Section 1 defect and has to be fixed by the seller, then re-inspected and cleared. 

In other words, if the buyer finds out later that there's a non-disclosed lien on the title, hidden termite damage, or some other unknown defect that would make closing impossible or inadvisable, they are SOL, as the saying goes.

I agree that all sellers should disclose property defects but you also know that is not always the case.

As a landlord, I have the tenant write any defects on the move-{in/out} check list AND I take pictures. 

Possession won't resolve a defect in title or any claim adverse to your position as buyer, of course.QCD is best thought of to use to release an interest that is or may be present.