Hidden Defects in Construction: How to File a Claim and When to Terminate a Contract for Work

Quick Overview

What to Do If You Discover a Hidden Defect in a Building

• Document the defect —take photos or a video, and for more serious problems, consider obtaining a professional or expert assessment.
• Notify the contractor without undue delay. For hidden defects in a building, the law sets a maximum time limit of five years from the date of acceptance of the building.
• State what you are requesting. Depending on the specific situation, this may include, for example, a repair, a reasonable discount, or—if the legal conditions are met—withdrawal from the contract.
• Do not wait simply because the five-year period has not yet expired. It is also crucial that you reported the defect without undue delay after you were able to discover it.
• Consumers have an important advantage: if a defect becomes apparent within two years of taking possession of the structure, it is generally presumed that the structure was defective at the time of possession.

Have you discovered a defect after a renovation or construction project, and is the contractor refusing to acknowledge it? Have our attorneys review your contract for work and your claims arising from defective performance. We’ll help you determine what you can demand and prepare a complaint, a demand to remedy the defects, or a notice of withdrawal from the contract.

The Contractor’s Liability for Construction Defects

The contractor’s liability for construction defects applies primarily to defects that existed at the time of handover or that were caused by a breach of the contractor’s obligations. A typical problem is hidden defects in construction—that is, defects whose cause already existed at the time of acceptance but which the client could not detect during a routine inspection and which only became apparent later. These may include, for example, improperly installed waterproofing, inadequate insulation, leaks, or cracks that gradually appear.

The Civil Code stipulates that a hidden defect in a building must be reported without undue delay after the client could have discovered it with due care, but no later than five years after the building was accepted.

In addition, it is possible to agree on a so-called warranty, under which the contractor undertakes to remedy, at its own expense, any defects that arise within a certain period after completion. This warranty is particularly important for the customer when entering into a contract for construction work where the structure is expected to have a service life of several decades.

Even if the contractor hires other entities—so-called subcontractors—to complete the work, the customer does not enter into a contract for work with them. The customer remains in a contractual relationship with the contractor with whom they signed the contract, and that contractor is also liable for defects, even if they were caused by a subcontractor.

If the client wants to ensure that the work will be flawless, the contractor will sometimes agree that the client will pay the remaining 20–30% of the price only after the work is completed—specifically, 20% of the agreed-upon price upon completion of the entire renovation and 10% one year after the work is completed, in case any hidden defects should arise. It is also advisable to include in the contract a provision requiring the contractor to maintain sufficiently high insurance coverage in the event that the contractor causes damage to the client’s house or apartment during the renovation, as well as insurance coverage specifically for liability arising from subsequent defects.

How to Report Hidden Defects in the Work, Step by Step

How can you report hidden defects in the work so that you have proof later of what you reported to the contractor and when? Don’t rely solely on a phone call. Report the defect in writing and keep proof of delivery.

In your complaint, be sure to include, in particular:

1. identification of the contract and the work,
2. a specific description of the defect and when it first appeared,
3. photographs, a video, or, if applicable, an expert opinion,
4. the date you discovered the defect,
5. what you are requesting from the contractor,
6. a reasonable deadline for the contractor’s response or for rectifying the defect.

For more serious construction defects, it may be advisable to have an expert opinion or an expert report prepared before making repairs. If you repair the defect immediately, it may later be more difficult to prove its extent, cause, and who is responsible for it.

Claims for Construction Defects After Completion

Claims for construction defects after completion are not the same as an automatic five-year warranty. For hidden construction defects, the five-year period represents the latest deadline for reporting them, not the period during which the contractor is liable for any defect arising in the construction. The defect must be one for which the contractor is liable under the contract and by law.

As soon as you discover a hidden defect, take action without undue delay. It is therefore not sufficient to wait, for example, four years on the grounds that the five-year period has not yet expired. If the contractor argues that the defect was reported too late, this could have a significant impact on the success of your claim.

When Is It Possible to Withdraw from a Contract for Work Due to Defects

Withdrawal from a contract for work represents one of the most serious options for addressing defective performance and cannot be invoked automatically for every minor defect. If the defect constitutes a material breach of contract, the client may, in addition to other claims, also have the right to withdraw from the contract.

A material breach is generally defined as one that would have prevented the client from entering into the contract in the first place had they been aware of it beforehand. In the case of a defective work, the client may, depending on the circumstances, have the right to demand, for example, rectification of the defect, a reasonable price reduction, or termination of the contract. If the client first requests a repair and the contractor fails to remedy the defect within a reasonable time or notifies the client that they will not remedy it, a price reduction or withdrawal may also be considered, provided the legal conditions are met.

In the case of withdrawal from the contract, the decision depends on the severity of the defect, prior communication, and the chosen remedy. If you are unsure whether you already meet the conditions for withdrawal, we will prepare a legally sound notice of withdrawal or a pre-litigation demand for you.

An Example from Legal Practice

For example, Martin entered into a contract with a contractor to renovate his cottage. He paid a deposit of 50,000 crowns, and the contractor was supposed to begin work within 10 days of signing the contract. However, when the contractor had not started work even after five weeks, Martin withdrew from the contract and demanded a full refund of the advance payment. This was because the contractor had committed a material breach of the contract, constituting defective performance.

One reason for the contractor to withdraw from the contract is, for example, the customer’s failure to provide the necessary cooperation. It is therefore necessary to communicate with the contractors, grant them access to the apartment, and take care of other matters required for them to do their work. Of course, the customer will then be able to withdraw from the contract if the work ultimately turns out to have significant defects.

Anyone who wants to ensure that their apartment is properly cleaned up after the renovation can stipulate in the contract that the contractor must clean up everything properly and not leave a mess behind.

Summary

Hidden defects in a structure are defects that were not detectable at the time of acceptance but whose cause already existed at the relevant time. The contractor must be notified of such defects without undue delay upon discovery; for structures, the law sets a maximum period of five years from the date of acceptance. It is advisable to file a complaint in writing, thoroughly document the defect, and clearly specify the desired remedy. Depending on the severity, the client may request, for example, a repair or a discount, and if the legal conditions are met, withdrawal from the contract for work may also be considered. Furthermore, for consumers, if a defect becomes apparent within two years of acceptance, it is generally presumed that the structure was defective at the time of acceptance.

We prepared this article for the Lidové noviny series “Law & Housing.” Be sure to check out other articles in the series:

1. What to Watch Out for When Buying Real Estate
2. How to Get a Mortgage
3. What to Check Before Buying Real Estate
4. Who Pays Real Estate Transfer Tax and How?
5. What a real estate purchase agreement should include
6. Common Mistakes When Drafting a Land Registry Application
7. Buying a Property from a Developer
8. Escrow of the Purchase Price When Buying Real Estate
9. The difference between a cooperative apartment and a privately owned apartment
10. What Is an Annuity?
11. How to Properly Donate Real Estate
12. What is the purpose of an easement?
13. Drafting a Will and Settling an Estate
14. What Is a Collation?
15. What Should Be Included in a Lease Agreement
16. When Can Rent Be Increased
17. Termination of a Lease
18. Agreement to Terminate a Lease
19. How to Draft a Contract for Work with a Tradesperson
20. Hidden Defects and Withdrawal from a Contract for Work
21. When Do You Need a Building Permit for Property Renovation?
22. House Rules
23. What Does a Position on the Apartment Building Committee Entail?
24. Why You Shouldn’t Underestimate the Bylaws of an Apartment Building
25. Common Areas in an Apartment Building
26. What Is Involved in Renovating an Apartment Building?
27. Can a homeowners’ association or housing cooperative go into debt?
28. How to Approach the Renovation of a House or Cottage
29. What to Watch Out for When Dealing with a Construction “Company”?
30. Building a house on a “greenfield site”
31. How to Remove Land from the Agricultural Land Fund