Lack of drainage around residential buildings gives buyers price reductions

Lack of drainage around residential buildings gives buyers price reductions

The buyers of a house find that it is riddled with moisture damage. Closer examinations show that there is no drainage around the house, despite the fact that drainage has been made in the prospectus. The Court of Appeal finds that the writing in the prospectus is to see as contractual content why the absence of drainage means that the house does not conform to what was agreed. Furthermore, in the light of the expert opinions relied on, the Court’s assessment is that drainage was likely to have helped against the moisture damage. The lack of drainage therefore constitutes such a deficiency as to make buyers eligible for price reductions.

A couple buys a house from another couple in May 2017. However, after some time, buyers notice that the house has moisture damage. The discovery prompts them to make further investigations where they discover, among other things, that the land around the house lacks drainage. However, the prospectus the buyers took note of ahead of the deal stated that drainage was carried out in 2011. Buyers are therefore of the opinion that the lack of drainage deviates from what was agreed, which they inform the sellers about in September 2019. In addition, an action is brought before the District Court (TR) with a claim for a price reduction in accordance with Chapter 4. Section 19 of the Land Act (JB).

The sellers refer to an expert opinion according to which the construction of the house means that drainage would not help against the moisture damage in question. The sellers therefore claim that the absence of drainage does not constitute a deficiency and therefore does not entitle them to a price reduction in accordance with Chapter 4. 19 c § JB. It is further argued that the reason why the buyers did not know about the moisture damage at the time of purchase is that they did not examine the house thoroughly enough. Consequently, they have failed to fulfil their duty of inquiry under Chapter 4. 19 § JB and cannot claim price deduction due to errors.

Finally, the sellers claim that the buyers advertised the alleged defect too late. According to Chapter 4. 19 a § JB complaints shall be made within a reasonable time from the time when the buyer discovers or should have discovered a defect. Since the buyers moved in May 2017 and the sellers were notified of the alleged defect only in September 2019, the sellers do not consider that the complaint was made within a reasonable time.

Judgment of the District Court

The District Court (TR) begins by investigating whether the house was encumbered with a so-called concrete error during the sale. A concrete error occurs when a house deviates from what was agreed by the seller providing a guarantee or a so-called enuntiation. An enuntiation is reminiscent of a guarantee but does not have to be as explicit and unequivocal. If there is a specific error, it means that the purchasers’ obligation to investigate is not nearly as far-reaching as it would have been otherwise. The court notes that drainage is not mentioned in the purchase contract, nor is there any evidence indicating that the sellers guaranteed that the land around the house is drained. In contrast, the writing in the prospectus, according to which drainage was done in 2011, is judged to be an enuntiation. The Court’s conclusion is therefore that the lack of drainage constitutes a concrete error. In the case of a concrete defect, the buyers have also fulfilled their duty of investigation even though they did not carry out more thorough examinations to see if the house is drained before the purchase.

However, in order for the defect in question to give buyers a price reduction, it is necessary that it has a connection with the moisture damage and thus lowers the market value of the house. To ascertain whether this is the case, TR looks at four expert opinions relied on by the parties. According to three of the statements, drainage would almost certainly in any case reduce the amount of moisture absorbed by the walls. However, one of the experts argues that the construction of the house implies that drainage would not alleviate the errors that have arisen in the first place. However, with three out of four opinions stating that drainage would likely have mitigated the problems, the Court finds that this has been proven to be the case. Thus, TR believes that it has also been shown that the lack of drainage affects the market value of the house.

Finally, the court examines whether the error was reported in a timely manner. According to Chapter 4. 19 (a) § JB, the warranty period begins to run when the buyer notices or should have noticed the defect. In the case, the buyers discovered the lack of drainage only when they started digging around the house. As the court considers that they were justified in their opinion that drainage existed, it does not find that the purchasers should have noticed the fault sooner. The complaint has thus been made on time, which is why the purchasers are entitled to a price reduction. The case is appealed to the Court of Appeal (HoVR), which will hear the case. However, the HoVR shares TR’s assessment in all material respects why the judgment is upheld.