What seller's warranties are provided under statute in the sale of real estate in this country (for example, as to the state of the building, asbestos etc)?
No. Parties may agree on warranties to be provided by seller however this varies from case to case.
Default warranties includes a title warranty (that who sells the property is its owner) and a warranty against hidden defects of the property. Parties can waive these default warranties or add additional warranties to a contract.
Generally speaking, no warranties are implied by law, although some Australian states and territories have legislation that does impose warranties on the seller in relation to certain forms of property (for example, that no government proposal exists to compulsorily purchase the property).
Therefore, general warranties are usually a matter for commercial negotiation. Common warranties relate to matters such as:
In the case of an asset deal, the Civil Code provides that all sellers are to guarantee two things. First, they must warrant the unrestricted use of the property to the buyer. This protects the buyer from any restriction on his use of the property by the seller or third parties who claim rights over the real estate. Secondly, they must warrant that the property sold is free from invisible defects (garantie des vices cachés / garantie van verborgen gebreken). The parties can agree to extend or limit these obligations in the contractual documentation.
Furthermore, specific legislation can impose additional warranties on the seller.
The obligation to guarantee unrestricted use is, in principle, subject to the usual time limit of 30 years. Complaints about hidden defects, on the other hand, must be made at ‘short notice’ to ensure the defect existed when the purchase agreement was signed and did not occur later. The parties can, however, specify a revised deadline in the purchase agreement.
In the case of a share deal, the warranties provided for by law only relate to the shares, not to the real estate which the company owns. In this case, therefore, additional contractual representations and warranties are needed.
Claims following the breach of a legal or contractual warranty have a general time limit of 10 years. However, it is common practice for this time limit to be reduced in the purchase agreement.
Seller's warranties are provided in respect of physical and legal defects in the property. For example, the seller's basic warranties included in the sale contract are as follows:
The time limit for claims to be made is one year from the date the buyer notified the seller of a physical defect, or, in the case of a legal defect, within one year of the date the buyer discovered the adverse third party rights.
The real estate deed will state the conditions agreed between the seller and the buyer that may vary from case to case, to establish such warranties. In case no representation regarding existing defects or encumbrances is made by the seller, the buyer can bring an action for eviction against the seller.
Seller’s warranties are generally not provided under statute and the seller and buyer will negotiate the extent of any seller’s representations and warranties when negotiating the SPA.
Seller's warranties for commodity housing (being all real estate that is available on the open market) are set out in the Administrative Measures for the Sale of Commodity Houses (2001).
Under Article 32, the real estate development company must offer the buyer a (rather comprehensive) set of warranties in a Warranty of Residential Building and a Manual for House Use.
Under Article 33, the real estate development company must guarantee the repair of the house sold to the buyer. The parties must agree in the contract on the scope, period (subject to statutory minimums) and responsibility for the guarantee and so on. The period of guarantee is to be calculated from the day of delivery. The real estate development company must keep the house in good repair and be liable for losses resulting if such quality problems occur within the guarantee period and fall within the guarantee scope.
In addition, the Administrative Regulations on the Quality Management of Construction Engineering set out a regime for ensuring developers and construction contractors meet their warranty obligations.
According to Safe Housing Law (Ley de Vivienda Segura) the constructor or seller of a new housing unit in a building with five or more housing units intended to be transferred to third parties, must constitute a warranty to cover any damage that may be caused to the buyer or successive owners of these housing units, when within ten years following the issuance of the fitness for use certificate (certificado de ocupación), the construction perishes or threatens to fall in ruin, wholly or in part. The mechanism may be a guarantee trust, a bank guarantee, an insurance policy or other mechanisms approved by the Finance Superintendency.
As many warranties as possible should be set out in the agreement. The law provides only a general provision on seller's liabilities in relation to material and legal defects. The liability period is two years.
The seller's liability can be excluded or limited by contractual agreement.
Under the Civil Code, the seller must inform the buyer of any defects in the property that he is aware of. The term 'defects' covers factual defects (such as pollution, asbestos etc) as well as legal defects (such as the rights of third parties etc). If a seller fails to disclose this information, the buyer is entitled to a discount on the purchase price or, in some circumstances, to withdraw from the agreement.
If the buyer withdraws from the transaction, he is entitled to receive a refund of the price paid for the property and to obtain additional compensation for any losses suffered.
Claims in respect of hidden defects in the property must be made within five years from the acquisition, except when the seller knew or must have known about the defect at the time of handover of the property.
The purchase agreement usually includes a limited catalogue of warranties and/or statement of facts, most of which are qualified by the seller’s knowledge. Unqualified warranties will generally be limited to fundamental matters such as title, encumbrances or pending disputes. Aside from these fundamental matters (subject to negotiation), the property is transferred 'as is,” and any warranties or statements of facts with respect to hidden defects, pollution, etc. will be qualified by the knowledge of the seller.
For share deals, the share purchase agreement will also include further unqualified warranties with respect to corporate matters, accounting, taxes and VAT, liabilities and employees. Most commonly, certain limitations will be agreed upon in respect of the seller’s liability for breach of warranties, eg de minimis amount, basket, cap and time limitation. Certain fundamental warranties such as ownership/ title, taxes and VAT will normally be exempt from the agreed limitations.
French law imposes the following obligations and warranties on the seller:
The obligations are stricter when the buyer is not a real estate professional.
Under statutory law, the seller must deliver the property free of any legal or physical defects. However, the seller's statutory liability for physical defects is often wholly or partially excluded. The buyer is then responsible for obtaining information which may affect the value of the property through careful due diligence. However, the seller has a statutory liability to provide valid title (which cannot be excluded).
In addition, the seller is responsible for disclosing any important matters which may have a negative impact on the property's value and are known to him but are not easily detectable through due diligence. If the seller fails to do this, then he will be deemed to have acted fraudulently. It is therefore common to include a clause in the sale and purchase agreement stating that, to the best of the seller's knowledge, there are no such defects.
No warranties are given by law and warranties related to the state and condition of the building are very rare.
Since warranties are not compulsory they can be varied to suit the parties involved in the transaction.
Under the Hungarian Civil Code, the seller warrants that he has title to the property, that the property is free from any third party rights, and that it is free from any defects or lack of essential qualities that might preclude the use of the property or have a negative impact on its value.1
Under Hungarian law, there are restrictions on the exclusion of statutory warranties. Where defects were disclosed to the buyer before or at the time the sale and purchase agreement was entered into then the buyer may not be able to make warranty claims in these areas.2
1Civil Code, 6:175-176.§
2Civil Code, 6:157.§
Once contracts have been exchanged, the buyer's solicitor normally raises a set of standard questions (Requisitions) relating to the seller's title to the property, covering details of the rents, outgoings, rights, covenants, conditions, liabilities, planning and taxation. The seller’s replies to these Requisitions may be relied upon by the buyer.
The warranties provided by the seller are those provided in the Conditions of Sale (a standard form published by the Law Society of Ireland) and replies to requisitions on title. Usually the parties will agree to include certain special conditions which amend the position as set out in the general conditions.
Generally, it is the buyer's responsibility to satisfy itself about all aspects of the property.
According to statutory law, the seller guarantees that it has title to the property, and that the property is free from any third parties’ rights and from any defects that might prevent the agreed use of the property or have a negative impact on its value.
The seller must issue a declaration that the equipment installed in the property complies with the relevant legal provisions.
If these warranties are breached, the buyer is entitled to request the termination of the sale and purchase agreement with a full refund of the purchase price, as well as payment of any additional damages. Alternatively the buyer may ask for a reduction in the purchase price.
The buyer must notify the seller of any breach of the warranties within eight days of discovering it.
A one-year statute of limitation applies from the date the buyer takes possession of the property.
The statutory warranties can be negotiated by the parties, apart from those relating to certain limited issues. Current practice in the Italian real estate market is to limit the extent of the warranties and to place more importance on the role of due diligence by excluding any issues disclosed through due diligence from the warranties.
If the property is newly built, the buyer also benefits from a ten-year warranty provided under statutory law. This makes the developer liable if the structure collapses or suffers from serious defects.
A seller is liable for defects in the property under the Civil Code. Where there are physical or legal defects in the property, the buyer can claim damages or terminate the SPA on account of the seller's breach.
Under Dutch law, the seller guarantees that it has valid title to the property, and that the property is free from any mortgages and enforcement. The seller also has an obligation to transfer the property in accordance with the agreement by both parties, as set out in the transfer deed: this usually includes the size and the use of the building.
Other warranties can be negotiated by the parties.
It is generally agreed that complaints about the state of the property must be made within two months and any court proceedings must be instigated within two years of purchase.
In addition, the seller must provide the buyer with an energy certificate or a similar document in accordance with the Dutch Structures Living Environment Decree (Besluit bouwwerken leefomgeving). The energy certificate states the energy consumption of the property being transferred and offers advice on how to reduce this consumption.
Generally, there are no warranties required by legislation. Standard warranties and representations are set out in the ADLS/REINZ Agreement for Sale and Purchase of Real Estate, and these can be amended to fit the requirements of each transaction.
There are statutory obligations that the vendor cannot contract out of such as the requirement to provide a pre-contract and pre-settlement disclosure statement when selling a property subject to the Unit Titles Act 2010.
Standard contractual warranties and representations under ADLS/REINZ Agreement for Sale and Purchase of Real Estate include:
The seller undertakes that on both execution and settlement date:
There are no sellers’ warranties provided by the law with respect to the state and condition of the building. The parties are at liberty to agree the specific warranties to apply to each party.
According to statutory law the seller may disclaim responsibility for the property by selling it as seen, often referred to as 'sold as is'. Even if the contract includes such a clause (which it often does), sellers may still be held responsible if they have given inaccurate information about the property, failed to provide important information of which they are aware, or if the property is in a substantially worse condition than expected.
This responsibility may not be fully disclaimed in a contractual agreement with the buyer.
It is common for Professional parties (companies etc) to negotiate specific warranties.
The buyer must notify the seller within a reasonable timescale if circumstances are discovered which may constitute a breach of contract.
Under the general terms of the Civil Code, the seller is liable for all physical and legal defects in the real estate. The parties may extend, limit or exclude this liability by specific agreement. Any exclusion or limitation of liability will be ineffective if the seller deliberately concealed a defect from the buyer.
The general limitation period for making a claim under the Civil Code in relation to physical defects is two years, but for defects in real properties this is five years from the date of transfer of ownership. The seller is exempted from liability if the buyer was aware of the defect at the time the contract was entered into.
Seller is obliged to provide several warranties. In fact, property must not suffer from any defect with a negative impact on the property's value or which makes its normal use impossible. In addition to that, the real estate must also have the characteristics warranted by the seller and be free from any charges, liens or encumbrances if the seller has expressly declared so in the transaction agreement. It should be noted that this sort of warranties may be expressly waived by the parties.
In case of breach of warranties the buyer is entitled to ask for a refund, a reduction in the purchase price or may file a legal action for the annulment of the sale and purchase agreement. In the new construction the buyer must provide notice of the relevant breach to the seller within one year counted from the date of discovery of the defects and within five years of the date the property was handed over to the buyer.
Under Romanian legislation, following the execution of the sale and purchase agreement, the seller will indemnify the buyer against:
The parties may nevertheless contractually agree to limit or exclude liability in connection with the transfer of ownership. However, the seller cannot exclude liability arising from its own wilful actions.
Additional representations and warranties can be negotiated by the parties depending on the specific circumstances of the transaction, such as: environmental compliance, planning, financial standing, etc.
Under the Civil Code, the seller must inform the buyer of any defects in the property that he is aware of. The term “defects” covers factual defects (such as pollution, asbestos etc) as well as legal defects (such as the rights of third parties etc). If a seller fails to disclose this information, the buyer is entitled to a discount on the purchase price or, in some circumstances, to withdraw from the agreement. Claims must be made without undue delay, and the rights arising from the responsibility for damages can be applied in a court, if the claims are made no later than 24 months after the transfer of the property.
Carrying out legal due diligence before a purchase ensures that the buyer's risk is kept to a minimum.
The general limitation period for making a claim under the Civil Code is three years. This limitation period, however, does not apply to rights of ownership, where no limitations apply, meaning the rightful owner may claim title to the real estate at any time.
The seller is liable, for up to six months following the handover of the property, for ensuring that the buyer receives legal and peaceful possession of the property and that there are no hidden defects. The parties can exclude these obligations by mutual agreement, unless the seller is acting in a dishonest manner.
Since May 2000, buyers of newly built property have benefited from a 10-year warranty provided by statute, under which developers are liable in the case of collapse or serious structural defects. The statute of limitation runs from the date the building is completed.
If the real estate differs from what has been agreed between the parties, or from what the buyer could reasonably have expected under the circumstances, then the buyer may be entitled to a reduction in the purchase price or to terminate the agreement. However, the buyer cannot make a claim if he ought to have detected the defects when examining the property prior to the completion of the contract. In the case of commercial transactions it is common for the parties to agree to limit the seller's liability for defects.
Warranties may be excluded in writing.
Claims must be made by the buyer within a 'reasonable time' of detecting any defects or of the date it is deemed that the buyer ought to have detected the defects. Claims relating to the purchase of real estate are ultimately subject to a limitation period of 10 years. In the case of commercial transactions it is common for the parties to agree to limit the seller's liability for defects.
Under the Civil and Commercial Code, the seller's warranties are as follows:
No warranties are implied by law.
The law provides that a developer selling property is liable, for 10 years from the date the completion certificate for the property is issued by the relevant authority, to repair any structural defects of which it is notified.
In respect of defective installations in a newly constructed property, the law provides that a developer is liable to repair or replace such items for a period of one year from the date the completion certificate is issued. Installations includes mechanical and electrical works, sanitary and plumbing installations and similar items.
No warranties need to be given by law, and warranties related to the state and condition of the building are very rare. However, it is common practice for sellers to give a level of ‘title guarantee’ confirming that there are no defects in the title and undertaking to assist the buyer in registering as the new owner.
Any matters which the seller has already disclosed to the buyer or which should be revealed by the buyer's searches are excluded from the seller's guarantee.
Since warranties are not compulsory they can be varied to suit the parties involved in the transaction.
Any claims under the title guarantee need to be made within 12 years of the date of the transfer deed.
Statute does not impose any direct warranties on the seller. In practice it is unusual for the seller to give any warranties in relation to the state and condition of the building and the buyer normally needs to satisfy itself through its own enquiries. The buyer may seek to obtain warranties from the seller where information is not evident from the buyer's own enquiries but should be within the seller's knowledge. The sort of warranties normally sought relate to statutory compliance and, in the case of investment properties, confirmation of the issues relating to the leases affecting the property.
The contract will state how long the warranties and other provisions are to remain in force. The standard period is normally two years, but this time limit does not usually apply to any claims or court actions raised within that time.
The only standard warranty normally obtained from a seller in every case is that the buyer will, upon registering the title in the Land Register, obtain a good and marketable title to the property ‘without exclusion or limitation of warranty’, ie the state guarantee of the title is not limited.
Under the Ukrainian Civil Code, the seller is obliged to warn the buyer about any rights of third parties affecting the property (eg rights of tenants, security interests, rights of lifelong use etc).
In the event that a third party brings a claim against the buyer, concerning matters which arose before the sale, the seller must participate in the court hearings on the side of the buyer.
The seller is obliged to transfer the property and to deliver all the related documents (eg the 'technical passport' –- the set of documents containing all the technical information about the premises) to the buyer in accordance with the sale and purchase contract and relevant legislation.
The property that the seller transfers to the buyer must comply with quality requirements. The warranty period in which a claim can be brought is three years unless the contract provides for a longer period.
Generally statutory warranties can be limited by agreement of the parties, although some statutory warranties cannot be changed.
Seller’s warranties are generally not provided under statute and the seller and buyer will negotiate the extent of any seller’s representations and warranties when negotiating the SPA; although as discussed above, many states have mandatory disclosures by sellers of residential properties.
There are no sellers’ warranties provided by the law, although warranties can be agreed upon by the two parties involved. In practice, the sale of property is conducted voets stoots (sold at the buyer’s risk and without guarantee or warranty). The buyer may require additional warranties from the seller, however this is subject to contractual agreement.
