6 July 2020
It is common for buyers to discover defects after purchasing a property.
You may discover, for example, that you have woodworm in your new home, or that the sewer line is damaged, or that a leak occurs after heavy rain. In this blog, you can learn about property defects in and around a new home, what to do if you find them, and who is liable.
The most common defects buyers find after purchasing a home include asbestos or contamination of the site, and damaged or broken drains. In addition, buyers may find that a planned extension or improvement to the property is not permitted, or even that the property that they purchased as a home may not be used as a home due to the zoning plan.
Buyers have a duty to research the property they wish to purchase. This is important because this information contributes to what the buyer could “reasonably” have known. If a defect is obvious or if the buyer should reasonably have known that the defect was present, it will be difficult to argue that there is a hidden defect. The buyer’s research could reasonably include actions like measuring the square area, or explicitly asking about age-related problems such as the presence of asbestos.
In principle, you as a buyer cannot hold the seller liable for defects that you find after transfer (as stated in the model purchase agreement). You buy the house with all “visible and invisible” defects. However, there are two exceptions to this rule.
First, the seller has a duty of disclosure. When the seller is aware of certain defects in the home, they must notify the buyer. If the seller does not do this, they are in principle liable. The notification obligation applies not only to constructional matters, but also to factors related to the residential environment, such as noise nuisance, etc.
Please note: the seller does not have to report everything. If a defect in the home is clearly visible, such as visible damp spots, the seller does not have to report this.
The second exception applies if there is a hidden defect that prevents the normal use of the home. The seller may then be liable. A hidden defect is a defect that was not reasonably visible. Whether normal use is prevented depends on the circumstances of the case. For example, the age of the house plays a major role. One can expect more from a new home than from an old home. Examples of such hidden defects often concern serious matters such as substantial leakage, structural defects, damage to the wood by borer/woodworm, or rotten floors and beams.
The path to be taken depends on your wishes of as a buyer. Do you want to terminate the purchase agreement due to the defects, or do you only want to recover the repair costs of the defect from the seller?
This advice applies in general: arrange if you can, litigate if necessary.
Many people believe that litigation is the best way to win a legal battle. However, there are good reasons to negotiate a settlement instead. If your case goes to court, you can incur higher costs. Not every dispute can be resolved. Keep in mind that you risk losing if you choose to sue. A settlement offer is guaranteed; in a courtroom, the result can be unexpected.
It is advisable to have the content of the purchase agreement thoroughly checked in advance by a lawyer. Check the environmental permit, the zoning plan and measure your home properly. It is also wise to have a financing or construction inspection carried out in advance.
If your newly purchased home proves to have significant issues that hinder normal home use, consider taking legal action. A real estate lawyer can review your purchase agreement and advise you.
“After you become aware of the defect, in principle you have only have two months to address the seller. So act immediately.”
GMW lawyers has a team of real estate lawyers who can assist you. For advice, mediation or disputes about real estate law, please contact us.
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