Material errors and defects in real estate – what should you be especially aware of?

After being handed the keys to your future home, it’s not unusual for you to discover material errors and defects in the property.

The question is: what rights do you have as a buyer, and what should you be especially aware of?

If the seller has had a condition report and an electrical installation report drawn up, submitted a change of ownership insurance offer, and a declaration regarding payment of half of the change of ownership insurance premium, then this will generally have absolved the sellers of their 10-year errors and defects liability. This means that you, as a buyer, cannot invoke your warranty against latent defects against the seller.

You then have the following options

If the defect is not listed in the condition report or the electrical installation report, then the damage must be reported to the change of ownership insurance. As a buyer, you must not start to repair the damage, as it must be possible to document the defect for the change of ownership insurance, and potentially for the Insurance Complaints Board (Ankenævnet for Forsikring) and the courts. To clarify the issue and the scope of the damage, the insurance company will typically send their own professional expert out to assess the defect. Here we recommend that you, as a buyer, team up with your own professional expert who can act in your interests.

Note that reporting of defects must be done no later than five or 10 years after the handover day, depending on whether you, as buyer, took out a change of ownership insurance policy with basic coverage of five years, or an expanded change of ownership policy of 10 years. If we’re talking about a defect that has occurred after the handover day, it will typically be reported as part of the home insurance. Whatever the circumstances, it’s a good idea to take out both change of ownership insurance and home insurance with the same company, so that you as a home buyer don’t end up getting shuffled between two different insurance companies.

If, against all expectations, it turns out that the defect is not covered by the change of ownership insurance, you, the home buyer, will be able to direct any claims against the building surveyor, if this concerns a defect that should have been mentioned in the condition report, for example. In addition, it may be possible to make a claim against the seller if they have failed to live up to their loyal duty of disclosure, or if it concerns a defect that is not covered by the property inspection scheme. The change of ownership insurance only covers defects in the actual building. The seller may therefore still be liable for defects that are discovered beyond the building’s foundations. In this case, these could be defects in the property’s utility connections or in the land lot, for example, contaminated soil.

Claims and obsolescence

If you, as buyer, make a claim against the seller, the general limitation period is three years calculated from the date when the defect was discovered. There is, however, an absolute limitation period of 10 years, which means that the claim lapses 10 years after the handover day/start of the limitation period – regardless of whether the buyer was aware of the defect in question at that time, or not.

As a buyer, you should, however, be aware that the chance of a claim being settled in your favor gets smaller the more time has passed since the transaction was completed. Not only must the buyer make a convincing argument that the defect was present at the time of the transaction, but they must also submit their claim within a reasonable period of time after the defect was discovered or should have been discovered. It is therefore crucial that you, as buyer, submit a complaint as soon as you discover the defect.

Limitation period for contaminated soil:

In the case of contamination, the absolute limitation period for bringing a claim against the polluter is 30 years, cf. Section 3 (1) of the Danish Limitation Act. The deadline is calculated from the end of the harmful act.

Judgment regarding limitation U.2018.409Ø:

Person A contacted the municipality in 1996 regarding an oil spill on A’s land. On the basis of several subsequent studies, the municipality reported that there was no basis for taking further action. The case was then closed.

In 2012, the owners of the properties located nearby received notification from the region that that the oil spill on A’s land could potentially have spread to the neighboring plots of land. The properties in question were then mapped pursuant to the Soil Contamination Act.

In 2015, the affected owners chose to bring an action against the municipality with a claim for compensation, in that the municipality had failed to inform the landowners about the oil spill in 1996.

The municipality asserted in the case that the claim was obsolete, cf. Section 3 (2) of the Danish Limitation Act, whereby limitation becomes effective at the latest: “10 years after the cessation of the harmful act for claims for compensation for material defects caused outside of the contractual relationship, which are not covered by no. 1”.

The affected landowners stated that the claim was not obsolete by referring to Section 3 (1) of the Danish Limitation Act, whereby limitation becomes effective at the latest: “30 years after the cessation of the harmful act for claims for compensation for personal injury, cf. however item 4, and for claims for compensation for damage caused by contamination of air, water, soil or underground or by disturbances of noise, vibrations or similar”.

The High Court found that the claim in this case was obsolete and referred to the provision in no. 1 regarding the fact that 30-year limitation can only be invoked against the polluter, and therefore not against a managing authority that is tasked solely with handling the case proceedings.