Supreme Court gives homebuyers the right to a price reduction for incorrect information regarding housing area
Supreme Court gives homebuyers the right to a price reduction for incorrect information regarding housing area
The fact that the living area of a newly built house does not correspond to what has been agreed between the construction company and the consumer constitutes a fault in service according to HD.
Furthermore, the defect has not been so obvious that it can be assumed to have been discovered by the consumer before the area measurement was carried out.
Finally, it is stipulated that price reductions in the event of a fault in service – in cases where remediation is not relevant – shall correspond to the significance of the defect for the client.
Failure in service
Spouses J.M. and T.M. enter into an agreement with the contracting firm LM Design to Live in AB (LM Design) whereby the firm will construct a house on the spouses’ newly acquired plot.
In the purchase contract regarding the construction of the house there is an object description stating that the house should have a living area of 224 square meters and an unspecified secondary area.
When the house is completed, the spouses carry out a measurement whereby it appears that the living area of the house is 161 square meters and the bee area is 63 square meters.
The spouses therefore bring an action in the District Court (TR) and claim that the contracting company should be ordered to pay SEK 1,400,000 due to fault in service.
According to TR, there is indeed a defect in service, but when it is held that the spouses complained about the error too late, the action is dismissed.
The spouses appeal the case to the Court of Appeal (HovR) which, unlike TR, assesses that the complaint was made on time and obliges LM Design to pay SEK 900,000 in price reductions.
LM Design appeals the ruling to the Supreme Court (HD) which grants leave to appeal.
Reductions
HD agrees with HovR that there are errors in the service performed and thus has to examine whether the complaint was made in a timely manner and how the price reduction should be calculated in that case.
Since it is a consumer relationship and the construction of a single-family home, the Court initially states that the Consumer Services Act (KtjL) applies.
Paragraph 17 of the KtjL states that a consumer who wishes to invoke a defect in service must inform the trader of this within a reasonable time after the defect has been noticed or should have been noticed.
Furthermore, complaints that take place within two months of the consumer noticing the defect shall always be considered to be made in time, whether it should have been noticed earlier or not.
Complaint
It is established that the spouses complained about the error a week after the measurement when they claim that the error was discovered.
However, LM Design argues that the spouses must have discovered the defect earlier simply by seeing the design of the house.
Admittedly, the court agrees with the contracting firm that the spouses should have realised that the area of the house did not correspond to the agreement even before the measurement.
Furthermore, however, it is emphasized that it is not obvious what constitutes the living area and the bee area and that the deviation cannot therefore be seen as so obvious that the spouses must have been aware of the error before the measurement.
LM Design has therefore failed to prove that the spouses knew of the defect earlier, which leads the court to the conclusion that the complaint was made on time and that price reductions should therefore be paid.
Calculation of price deductions
The next question to be investigated is how the deduction should be calculated.
HD argues that price reductions under Sections 21 and 22 of the KtjL shall correspond to what it costs the consumer to have the defect remedied.
In cases such as the current one where remediation is not seen as an alternative, it is not directly clear from the law how the sum is to be calculated.
However, if the remedy involves an unreasonably high cost, section 22 stipulates that the price reduction must correspond to the significance of the defect for the consumer and the Hd – which considers that the situation is similar to the present one – decides that the sum should be calculated in the same way.
Since the result of the service is objectively less valuable in the present case, the Court argues that the price reduction must correspond to the market value reduction.
The spouses claim that the difference in market value amounts to SEK 1,400,000 and rely on an expert opinion that makes a comparison with other houses in the area as evidence.
According to the court, however, the opinion is flawed because not all the houses from the dossier are assessed as comparable to those of the spouses.
LM Design, on the other hand, relies on another expert opinion where the difference is instead estimated at SEK 0.
The Court notes that the statement is based on a comparison with only one object and is therefore not reliable.
In view of the inadequate investigations, the Court does not consider itself able to draw any firm conclusions about the difference in market value.
This leads the right to the conclusion that the price reduction should be determined at a reasonable amount based on an overall assessment of the investigation.
HD therefore sees no reason to deviate from the HovR’s assessment and LM Design is ordered to pay SEK 900,000 in price reductions to the spouses.