How to identify a hidden defect in a property and who is responsible for it?

Quick overview

A latent defect in a property is a defect that was present when the property was taken over but only becomes apparent later. According to Section 2100 of the Civil Code, a defect which the property had when the risk of damage passed to the buyer, even if it does not manifest itself until later, gives rise to rights under defective performance. In the case of a latent defect in a building connected to the ground by a solid foundation, a special five-year period for pointing out the defect applies under section 2129(2), but the purchaser must act without undue delay after he discovers the defect or could have discovered it with reasonable diligence. If the seller knew or should have known of the defect, he cannot defend himself as effectively by late reproof.

What is a latent defect in the property

In practice, a latent defect in a property is a defect which was not reasonably discoverable by ordinary inspection at the time of purchase but existed at the time when the risk of damage to the property passed to the buyer. Sections 2099 and 2100 of the Civil Code assume that a thing is defective if it does not have the agreed or legally prescribed characteristics and that a defect which becomes apparent later also gives rise to a right of defective performance if it was already present at the relevant time.

In the case of immovable property, this may include, for example, defects in waterproofing, roof defects, hidden wiring problems, serious defects in the heating system, drainage defects or structural problems. The decisive factor is not that the defect became apparent after the purchase, but whether it was already present at the time and just not apparent.

On the other hand, the buyer does not have rights under the defective performance if the defect is one which he should have known with the exercise of ordinary care at the time of conclusion of the contract. This is expressly stated in Section 2103 of the Civil Code. In other words, a crack, an apparently non-functioning window or long-standing visible moisture generally cannot later be passed off as a latent defect unless it was at the same time cunningly concealed by the seller or the buyer was expressly assured that the item was free of defects.

When the seller is liable for a hidden defect

Pursuant to Section 2084 of the Civil Code, the seller is obliged to notify the buyer of defects of which he is aware when negotiating the purchase contract. At the same time, the general rule of § 2100 applies that the seller is liable for a defect that the thing had when the risk of damage passed to the buyer, even if it does not become apparent until later.

In the case of the purchase of immovable property, the special rule of section 2129(2) is also relevant. If the buyer fails to point out to the seller a latent defect in a building connected to the ground by a solid foundation within five years of acquisition, the court will not grant him the right of defective performance if the seller objects to the late pointing out. However, the seller does not have this objection if the defect is the result of a fact of which he knew or should have known at the time of delivery.

This is very important in practice. Five years is not a “warranty” in the ordinary sense of the word, but the legal limit for pointing out a latent defect in the building. In addition to this, the general rule that the buyer must notify the defect without undue delay after he could have discovered it with reasonable diligence still applies. This follows from Section 2112 of the Civil Code.

What defects are typically dealt with

Typical hidden defects are mainly leaks in the structures, problems with moisture insulation, hidden cracks in the load-bearing parts, wiring defects or technical defects that only become apparent during normal use of the property. In the case of an apartment or house, it may also be questionable whether this is just normal wear and tear or a feature that the buyer must have taken into account given the age and condition of the property.

In practice, we often see buyers referring to any inconvenience discovered after moving in as a latent defect. However, this is not how it works. It is not enough that the problem is not discovered until later. It must be shown that it was there when the purchase was made and that it was not a defect that could reasonably have been discovered on a normal inspection or that the buyer caused by subsequent use.

In some cases, the boundary is unclear. For example, damp can be the result of a long-standing construction defect, but it can also be the result of later inappropriate use or neglected ventilation. This is why expert evidence is often essential in these disputes.

What are the buyer’s claims

The provisions on the purchase of immovable property apply mutatis mutandis to the purchase of movable property under section 2131. It follows that the buyer may, depending on the nature of the defect, demand the removal of the defect, a reasonable discount on the purchase price and, if the statutory conditions are met, even withdraw from the contract. The specific regime depends on whether the breach of contract is material or immaterial pursuant to Sections 2106 and 2107 of the Civil Code.

If the defective performance is a material breach of contract, the buyer can choose between repair, discount and withdrawal from the contract. In the case of an insubstantial breach of contract, the buyer is entitled to have the defect remedied or to a reasonable discount; only if the seller fails or refuses to remedy the defect in time may the buyer demand a discount or withdraw from the contract.

Withdrawal from the contract is therefore not an automatic solution to every latent defect. It is mainly applicable in the case of serious defects which constitute a material breach of contract or where the seller fails to fulfil his obligations even after the defect has been pointed out. Moreover, if the defect is not notified in time, the seller loses the right to withdraw from the contract. This is expressly provided for in Section 2111 of the Civil Code.

In addition to the rights arising from defective performance, a claim for damages may also arise if the conditions are met, for example, if the buyer has incurred additional demonstrable costs due to the defect. However, this is not an automatic consequence of every defect claim and must be assessed separately in law.

How to deal with the discovery of a latent defect

Once a hidden defect has been discovered, it is important not to delay. The first step should be careful documentation: photographs, videos, a brief description of the manifestation of the defect, the date of discovery and ideally a record of the circumstances under which the problem manifested itself. If the nature of the defect permits, it is advisable to call in a specialist or expert.

It is then advisable to criticise the defect in writing to the seller. The notice should state what defect was found, when it became apparent, why you consider it to be latent and what right you claim under the defective performance. Although the Civil Code does not prescribe one specific form of letter, it is reasonable to use a data box, registered letter or other demonstrable means of delivery for evidentiary reasons. The purpose is to meet the requirement of § 2112, i.e. to reproach the defect without undue delay.

In our practice, the most common mistake is for the buyer to first begin extensive repairs to the property and then figure out how to prove the defect. This sometimes complicates the evidentiary situation. If there is no imminent risk of damage or danger to health, it is better to provide documentation and a professional assessment first.

In the case of a latent defect in a building connected to the ground by a solid foundation, the five-year time limit under section 2129(2) is very important, but does not in itself mean that the buyer can wait arbitrarily long. In addition to this, the law still requires that the defect be pointed out without undue delay after it has been discovered or after it could have been discovered with reasonable diligence.

In practice, this means the following: if a leak in the basement is discovered after a year and the buyer waits several more months or years without a reasonable reason to make a claim, he or she may significantly worsen his or her procedural position. The five-year period is therefore no reason to be passive.

A special rule also applies to consumers. If the purchaser is a consumer and the defect becomes apparent within two years of the transfer of the risk of damage to the thing, the immovable property is deemed to have been defective at the relevant time under section 2129(3), unless the nature of the defect precludes this. This may make the buyer’s evidentiary situation significantly easier.

Can hidden advice be avoided?

The best defence against latent defects is prevention. Have the property thoroughly inspected by a professional – a structural engineer, structural engineer or technical inspector – before signing the purchase contract. The cost of an inspection is negligible compared to the costs that may be incurred later. Also check the building documentation, such as the building permit, revisions, plans, any building modifications.

The purchase contract should contain a clear statement by the seller about the condition of the property. If the seller claims to be unaware of any defects, this should be explicitly stated. This increases your protection in the event of a dispute. Avoid general wording such as “the property is sold as it stands and lies”, as such clauses tend to be mainly advantageous to the seller.

Pay particular attention to new buildings from developers. Hidden defects such as inadequate insulation, cracking plaster or poor floor expansion can also occur here. Therefore, check everything carefully after taking over the apartment and claim the defects immediately. Timeliness and documentation are the keys to success.

A hidden property defect can turn an ideal purchase into a nightmare. However, from a legal perspective, you are not defenceless as the law is on the buyer’s side. The important thing is to act quickly, document everything, and don’t be discouraged. Each case is individual and often the details – when the defect was discovered, how it was described and how the seller reacted – are crucial.

Remember that if a hidden defect manifests itself within five years of purchase, you have a chance to exercise your right. The sooner you start, the better your chances of success.

Summary

A latent defect in a property is a defect that the property already had when it was taken over or when the risk of damage passed to the buyer, but only becomes apparent later. The seller is liable for such a defect unless it is obvious or the result of later use. In the case of a hidden defect in a building connected to the ground by a solid foundation, the defect must be pointed out within five years of acquisition at the latest, but at the same time without undue delay after it has been discovered.

The purchaser may, depending on the circumstances, demand the removal of the defect, a reasonable reduction in the purchase price and, in the case of serious defects, withdraw from the contract. The key is a timely written notice of the defect, careful documentation and often an expert’s report. In practice, the dispute is usually not just based on the fact that the problem appeared, but mainly on whether it can be proven that the defect was actually a hidden defect existing at the time of purchase.