In the Code of Real Estate, great emphasis is placed on the seller's obligation to disclose information concerning the quality of the property and other pertinent details in a broad-based manner before concluding the transaction. A property is considered to have a defect e.g. when it does not correspond with what was agreed upon, the seller has, prior to the transaction, provided the buyer with incorrect or misleading information on e.g.
- the square area of the property, the condition or structures of buildings and this information is considered to have influenced the transaction
- effective zoning plans, building restrictions, limitations on transfer or various permits and decisions, and this information can be assumed to have influenced the transaction
- the seller has failed to provide the aforementioned information or has not corrected the buyer's misconceptions regarding said information
- due to a concealed defect, the property is significantly different from what can generally be expected from properties of similar type and price
- incorrect information has been provided regarding the ownership relationships pertaining to the property
Age and normal wear and tear are not considered defects
Repairs resulting from the aging of a house do not fall within the seller's liability. A single-family house requires maintenance and repairs as it ages. The renovation needs are already accounted for in the price of the house. The price of an old single-family house on roughly the same size of plot in the same area is significantly lower than that of a new or fairly new house.
For example if a 1950s single-family house, bought in its original condition, has a leaking metal sheeted roof, the floor drain in the washroom has leaked water into insulation or cast iron drains tend to get completely clogged up, there are no legal grounds to make claims regarding such defects to the seller. They are all considered standard repairs required in an aging house.
However, if the seller has been aware of a leaking roof, perhaps rectified some damage caused by it and clearly concealed the matter, he may be partially liable for the associated repair costs.
Most disputes stem from concealed defects. Such defects could not have been detected by the buyer in a standard inspection and the seller was not aware of them either.
Compensation payable by the seller for a defect that is concealed and unknown to the seller is generally lower than in cases where the seller was aware of the defect but failed to disclose it. The law emphasises the significance of the defect in provisions pertaining to concealed defects. Compensation may be claimed if the concealed defect results in the house being significantly different from houses of similar age, price and condition.
Defects in single-family houses are reported to the seller
In real estate transactions the seller’s term of liability for defects depends on whether the seller is a private individual or a professional trader.
In real estate transactions between two private individuals the seller’s liability for defects is limited to five years. In cases where the seller has acted in gross negligence or contrary to the rule of good faith, the buyer’s right to appeal to a defect may be extended.
In transactions between a private individual and a professional real estate trader or home builder, the seller may remain liable for defects up to ten years.
Instead of claiming compensation from the seller, the buyer of an old single-family house may report a defect to the factory that sold the house as a prefabricated product, the contractor or the builder whom the seller or the previous owner had bought the house from or whose services they had used. However, factories for prefabricated houses or other entrepreneurs can only be made liable for defects that they would be responsible for to their own contracting party.
The buyer must report a defect to the seller and claim compensation for it within reasonable time of detecting the defect. The assessment of reasonable time takes into consideration the fact that the buyer often has to examine the extent of the defect and estimate the cost of repair before filing a claim.
The assessment of whether a defect falls within the seller's liability takes into consideration
- the age of the building
- the question of whether the defect and its rectification are seen as part of normal aging of the house
- information concerning the property provided by the seller or real estate agent
- the question of whether the seller might have been aware of the defect but elected not to disclose it
- the question whether the buyer should have detected the defect in a standard pre-transaction inspection
- information in the condition inspection report regarding the defect If the buyer reports a defect, he
- must report the defect to the seller before taking steps to rectify it
- must give the seller the opportunity to observe the defect for himself
- should take photographs of the defect prior to rectification for use as evidence in the event of disputes
- should request written proposals for rectification of the defect, preferably from several service providers
A price reduction is the most common consequence of a defect
In transactions for used houses the buyer may not demand that the seller rectifies a defect. The seller, for his part, is not entitled to rectify a defect to avoid having to pay monetary compensation.
The most common consequence of a defect is a price reduction. The purpose of a price reduction is to adjust the price of the property to a level that corresponds with the value of the defective property on the transaction date.
When claiming a price reduction from the seller, the sum should be realistic. When a used single-family house is repaired or renovated, the value of the house generally goes up compared to the purchase price. Dispute resolutions generally do not recommend that price reductions cover 100% the costs of defect rectification in full.
In some cases, the buyer may also be entitled to compensation for damages. In the case of a concealed defect that was not known to the seller, compensation for damages does not apply. This is based on the principle that compensation for damages only applies to cases involving negligence on the seller's behalf. In some cases the buyer may demand that the transaction be annulled. This only applies when the defect and its costs of rectification are very significant.
File a complaint with the company
You can use the complaint forms on our website for making a claim regarding defects.
File a complaint with the company
If your complaint is unsuccessful, contact the consumer advisors.