Hidden flaws
Lawyer hidden defects
M. (Maarten) Blok
About hidden defects
The buyer often does not discover the defects until after completion because they were not immediately visible prior to purchase. These are also known as “hidden defects. The question then arises for whose account hidden defects come into play when selling a home.
The lawyers specialized in hidden defects from the real estate section can help you draw up proper contracts to avoid disputes. If there is already a dispute over a hidden defect, one of our lawyers can advise you on the steps you can take to hold the other liable or avoid liability.
A buyer should not blindly trust that a home is free of defects. As soon as there is any reason that a defect exists, the buyer must investigate it. This is called the “duty to investigate. The buyer can fulfill this duty to investigate by, for example, having an architectural inspection performed on the home. Does the buyer have a duty to investigate and did he not discover a defect because he did not investigate further? In that case the seller is not liable and the (repair) costs for the defect are for his own account.
Opposed to the buyer’s duty to investigate is the seller’s so-called “duty of disclosure. The seller is obliged to inform the buyer about defects of which he is aware. If the seller fails to inform the buyer about this defect, then the seller is liable.
If both seller and buyer were unaware of the defect, under circumstances the seller may still be liable for the defect.
Under the law, the buyer may assume that the house has properties that he could expect based on the purchase agreement. Model agreements are generally used when buying or selling homes. These often deviate from this legal regulation.
For example, a clause is regularly included which – in short – means that the buyer accepts the house including all visible and invisible defects. This assumes that all defects are, in principle, the responsibility of the buyer.
At the same time, a provision is usually also included, stating that the seller guarantees to the buyer – as it were – that the house is suitable for normal use. A home is not suitable for normal use when, for example, there is asbestos, wood rot, a leak or a rotten roof construction. The answer to the question of whether a defect prevents the normal use of the home will always depend on the nature and severity of the defect and the circumstances of the case.
The above implies that, in principle, a seller is liable for defects that prevent the normal use of the home. This is different when the buyer was aware of the defect or should have conducted further investigation into the defect. In that case, the buyer’s duty of investigation, cited earlier, is decisive.
The buyer must report the discovery of a defect to the seller within a reasonable time by “complaining” about it. What period is reasonable will depend on the nature and severity of the defect. Typically, a period of two months will be considered reasonable.
The period begins to run from the time the buyer could reasonably have discovered the defect. If the defect is not complained about within a reasonable time, there is a risk that the costs of repairing the defect may not be recovered from the seller.
Are you in doubt as to whether a complaint was made within a reasonable time? Then it is advisable to contact a lawyer about this.
Exclusion clauses can be included in purchase agreements, which mean that the seller of a home is not liable for defects in the home discovered after delivery. The old age clause and the non-self-occupancy clause are two well-known examples of exclusion clauses. The applicability of exclusion clauses can mean that certain hidden defects are ultimately for the buyer’s account.
Whether the seller is liable for hidden defects will depend on the contents of the contract, the circumstances of the case and the nature and severity of the defect. The seller will generally be liable for hidden defects when:
- the defect prevents the normal use of the home and the buyer has not neglected his duty to investigate;
- the seller knew of the defect when the purchase agreement was entered into, but did not disclose it to the buyer.
A seller will not be endlessly liable for hidden defects. First, the buyer must have complained within a reasonable time, as cited earlier. Failure to do so will result in the (dis)costs of the hidden defect being borne by the buyer.
In addition, the buyer should not sit idle for too long after a complaint has been made. If the seller and the buyer cannot come to a mutual agreement, the buyer must initiate legal proceedings within two years after the complaint has been made to claim compensation. If the buyer does not do so within these two years, his rights will be time-barred. This means that the buyer can no longer legally enforce his claim for indemnification. The buyer can circumvent the statute of limitations by notifying the seller in writing that his rights, in short, are being enforced.
If you are dealing with hidden defects in the sale or purchase of a home, it is advisable to consult a lawyer. If, as a buyer, you are dealing with a defect that you discovered after the delivery of your new home or, on the contrary, as a seller you are confronted with a buyer who claims a hidden defect, please feel free to contact one of our specialists.