Hidden defects

Recently the Court of Appeal of Amsterdam ruled that under certain circumstances the seller of a dwelling also has a duty to investigate. For investors who carry out a major renovation and advertise the property as having been renovated, the Court of Appeal sets the bar higher. They must either carry out adequate research during the renovation or inform the buyers that they have failed to do so.

In this case, the sellers of the property were investors who had renovated the property in order to sell it afterwards. They had advertised the property as a "fully renovated flat". The property included a newly laid parquet floor.

After the sale, it turned out that the parquet floor had been seriously damaged and was unusable due to a moisture problem in the crawl space.

When you buy a home, you can expect it to have the properties required for normal use. If this is not the case, there is a question of non-conformity. In answering the question of whether the buyer can rely on non-conformity and hold the seller liable for damages, the buyer's obligation to investigate and the seller's obligation to disclose play an important role

The obligation to investigate means that the buyer may only expect properties whose presence he does not need to doubt. If there are signs that give cause for doubt, he must investigate. For example, by having an architectural inspection carried out.

On the other hand, the seller is obliged to inform the buyer if he knows that the purchased property is unsuitable for the buyer's intended use. The seller's duty of disclosure prevails over the buyer's duty to investigate. If the seller violates his duty of disclosure, he cannot claim that the buyer did not conduct enough investigation.

In this case, article 2 of the sales contract stated that the sellers had used the house exclusively as an investment.

In addition, Article 3 of the sales contract contained the following stipulation regarding the obligation to inform and investigate:

The Seller warrants that he has provided the Purchaser with all the information which ought to have been provided to the Purchaser, on the understanding that the Seller need not provide information about facts which are known to the Purchaser or which could have been known to the Purchaser on the basis of his own investigations, in so far as the Purchaser may be expected to carry out such an investigation in accordance with generally accepted practice."

The Sellers mainly defended themselves with the argument that they did not know about the defect and that the Buyers had not fulfilled their duty of investigation. The Buyers had not had a structural survey carried out.

The Court of Appeal ruled that the sellers were liable for the buyers' loss. According to the Court of Appeal, it was important that the sellers had advertised the property as "fully renovated". Buyers of a renovated flat where structural work has been done and where a new parquet floor has been laid, do not have to expect that the crawl space is so damp that the parquet floor will be unusable within a few months. The buyers were entitled to expect that the sellers, before laying a new parquet floor in a substantially renovated house, would have an investigation carried out into the condition of the floor and the crawl space. Under these circumstances, according to the Court of Appeal, the buyers had no obligation to investigate. This duty rested on the sellers, also because a certain professionalism could be expected from them as they were investors. By failing to do so and by not informing the buyers, the sellers had breached their duty of disclosure under Article 3.

Although the sellers cannot normally be expected to investigate possible defects, in view of this ruling investors selling renovated homes should beware!

If you have any questions or need help because you have discovered hidden defects and want to hold the seller liable, or because you as a seller are being held liable by the buyer, please feel free to contact one of our lawyers without obligation. We will be happy to assist you.

SPEE advocaten & mediation Maastricht