Property defects
Defects in quality, defects in possession and defects in title
Property defects are regulated in Chapter 2 of the Code of Real Estate. A property may have a defect in quality, a defect in possession or a defect in title. Defects in real estate transactions are most often due to the property not having the characteristics agreed upon.
You can contact us in all matters relating to defects in real estate transactions
Defects in quality
Chapter 2, Section 17 of the Code of Real Estate regulates defects in quality in real estate.
A defect in quality occurs when the property does not correspond to the agreed characteristics or when the seller has provided the buyer with incorrect or misleading information about the property that can be assumed to have influenced the transaction. A defect in quality also exists when the property has a hidden defect or the seller has failed to disclose a characteristic that typically affects its use or value, of which the seller is aware or should have been aware and which can be assumed to have influenced the transaction.
Most defects related to real estate transactions are hidden defects. A hidden defect is one that was unknown to both the buyer and the seller prior to the transaction. Typical hidden defects include internal structural moisture and microbial damage. Due to a hidden defect, the quality of the property differs significantly from what can justifiably be expected based on the purchase price and other circumstances. It is a matter of overall assessment, and when assessing the significance of the defect, factors such as the extent of the repair work required and the cost of repairing the defect, the health hazard caused by the defect and other possible hazards, and the age of the building are taken into account.
Seller's liability for defects
When assessing defects in quality, the basis for assessment is the quality of the property at the time of sale. The seller is liable for defects in the property at the time of sale, even if the defect only becomes apparent after the sale. However, the seller is not, in principle, liable for any deterioration in the quality of the property during the buyer’s ownership. Nor can the buyer invoke a defect that the seller has properly repaired before transferring the property to the buyer.
The buyer is entitled to a price reduction on the basis of the defect or, in case of a material defect, to cancel the sale. The buyer is also entitled to compensation for loss incurred. In case of a hidden defect in the property, the buyer is entitled to a price reduction. The price reduction is often based on the cost of repairing the hidden defect. The buyer has no other right to compensation for damages based on a hidden defect.
The constructor's liability for hidden defects
It should be noted that, as a rule, the builder or constructor when acting as a seller cannot invoke hidden defects in a real estate transaction. If, for example, the property has been built in violation of a building permit or building regulations, the seller is presumed to have been aware of the defect.
Notice of defect
According to Chapter 2, Section 25 of the Code of Real Estate, the buyer may not invoke a defect unless he notifies the seller of the defect and his claims based on it within a reasonable time after he discovered the defect or should have discovered it. A few months is considered a reasonable time.
In addition, the defect must generally be notified within five years of the transfer of possession of the property. If the seller is a business operator, the five-year maximum period does not apply. In housing transactions, defects can generally be notified within two years of the transfer of ownership to the buyer. Notifications of defects should always be made in writing and sent to the seller in such a way that the timeliness of the notification can be verified later if necessary.
Remember to notify of defects in a reasonable time
Time limits for notification of defects and the statute of limitations
As a general rule, the seller is liable for any defects in the property that existed at the time of sale for five years after the sale. This notification period applies to real estate transactions. In a housing transaction, a notice of defect can be made no later than two years after the transaction and transfer of possession to the buyer. However, any defect discovered must be reported immediately, in general no later than 2-3 months after the defect is discovered.
Contact us in good time and we will clarify whether the issue you have detected can be considered a defect for which the seller is responsible and what you can claim from the seller on the basis of the defect. If necessary, we will also prepare a notification of defect and obtain the necessary clarifications.
We are experts in real estate disputes with decades of experience
Most disputes arising from real estate transactions are settled through a settlement agreement without going to court. A settlement is often a more affordable and, above all, faster alternative to litigation. An experienced and competent lawyer specializing in real estate law is an important asset in ensuring the best possible outcome.
With decades of experience in matters related to real estate transactions, we help our clients achieve a solution that is in their best interests. We assess our clients’ situation and select the best approach for handling the matter. If no agreement can be reached, the matter may be brought before a district court for resolution. We assist both buyers and sellers in real estate disputes throughout Finland. We are experts in litigation with over 50 years of experience.
Defect of possession and defect of title
The defect of possession is regulated in Chapter 2, Section 18 of the Code of Real Estate. The possession of real estate refers to the right to perform legal acts related to the real estate and to administer the real estate. A defect of possession occurs, for example, when the use of the real estate or the right to dispose of the real estate is restricted due to the lack of official permits, for example, when a building permit is missing or is incorrect for the intended use of the property.
In a real estate transaction, a defect of possession is incorrect information given to the buyer, for example, about zoning. A defect of possession occurs when the seller has given the buyer incorrect or misleading information prior to the transaction, for example, about the valid zoning plan, a building ban, a transfer restriction, or another official decision restricting the use or control of the property, and the information provided can be assumed to have influenced the transaction. A typical misrepresentation in real estate transactions is, for example, the sale of a property as a permanent residence, but according to the building permit, it can only be used as secondary residence. In this case, there is a defect of possession in the property being sold.
A defect of title is regulated in Chapter 2, Section 19 of the Code of Real Estate. A defect of title may arise, for example, in situations where the seller of the property is not the rightful owner of the property.
A defect of title exists in a property, for example, when the seller has, prior to the transaction, provided the buyer with incorrect or misleading information about the holder of the title, a lien on the property, a rental right or other right of another party, or the ownership of a building, equipment or other object normally belonging to the property, and the information provided can be assumed to have influenced the transaction.
In the case of both a defect in possession and a defect in title, the buyer is entitled to a price reduction based on the defect or, if the defect is material, to cancel the sale. The buyer is also entitled to compensation for their loss.