What is a real estate?

Before a transaction, the buyer must thoroughly inspect the property and familiarize themselves with the information provided by the seller regarding the subject of the sale. A sale has a defect if the property is not as it was supposed to be.

The buyer cannot claim as a defect something they could have detected through a normal property inspection or something they should have known about when making the purchase. Thus, complaining to the seller about deficiencies and errors that can be observed during a regular superficial inspection is futile. The buyer cannot assume, for example, that the roof of an original 1960s house wouldn't need replacing or that a bathroom from the same era doesn't need to be updated to meet modern requirements. These aspects are usually already considered in the purchase price.

On the other hand, the buyer does not need to extend their inspection to matters that would require technical or significantly unconventional actions to investigate. The buyer cannot be expected, for example, to make structural openings unless a specific need for it has arisen from a structural inspection.

A property can also have a defect that the seller was completely unaware of at the time of the sale. This is referred to as a hidden defect or latent defect. In such cases, the seller might still be liable for compensating for this kind of defect, even if they didn't intentionally hide any information about the property or its attributes. However, if the defect or an indication of it was detectable at the time of the sale, the buyer assumes the risk and may not be able to later rely on such shortcomings.

The buyer must notify the seller of the defect and the resulting claims within a reasonable time from discovering the defect. In private individuals' real estate transactions, the seller's liability for defects generally lasts for five years from the transfer of possession of the property. If the notification is not made in a timely manner, the buyer may lose the right to rely on the defect and receive compensation from the seller.

Consequences of Defect:

Price Reduction
The most common consequence of a defect is a price reduction, which adjusts the property's purchase price to a level that corresponds to the value of the property with the defect. When determining the amount of the price reduction, the potential increase in property value and improvement achieved by repairs are also taken into account. Price reduction rarely directly matches the amount of repair costs.
Rescission of the Contract (Cancellation of the Sale)
Rescission of the contract usually comes into play when the defect in the property has significant repair costs compared to the purchase price.
In simple terms, the rescission of a real estate transaction means that the obligations of the seller and the buyer cease, and any performance already made must be returned. Rescission of a real estate transaction is a consequence of a material breach of contract by one of the parties. The rescission agreement must be made in the required form for real estate transactions, and it should be noted that rescission could lead to the obligation to pay transfer tax twice. The condition for rescission may also be included in the original purchase agreement.

If a settlement is not reached, the rescission must be sought through the court. If there was a home insurance policy in effect at the time of the transaction, including legal expenses insurance, it may cover some of the costs. In the event of rescission, the seller must refund the paid purchase price and compensate the buyer for any damage, as well as reimburse any significant profit or benefit derived from the property. The seller must pay statutory interest on the refunded purchase price from the day they received it.