Termination of Co-Ownership of Property | Defect in Real Estate Transaction | The responsibility of a real estate agent | Inspector’s Responsibility |
Property Manager’s Responsibility | Real Estate Transaction Confirmation

What is a real estate?

In Finland, land ownership is private. Land is divided into defined areas, with the most significant being properties. Properties are registered in the land register. A property is formed through a real estate procedure that defines the property’s boundaries and any rights or obligations related to other properties. The primary subjects of trade concerning properties are land parcels and plots.
For the use of properties, it’s crucial to understand what is permitted on the property, such as what can be built on it. Additionally, obtaining a building permit is a requirement for construction.

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The law concerning real estate transactions, Code of Real Estate, defines the obligations and rights of both the buyer and the seller when conducting a real estate transaction. According to the law, the seller is required to provide extensive information about the quality of the property and other relevant matters before the transaction. Similarly, the law imposes a broad duty of inquiry on the buyer to investigate the property and its characteristics. Both the buyer and the seller should seek the assistance of experts at an early stage to avoid and resolve any potential issues.

Termination of Co-Ownership of Property

In the division of an estate or through other means, an individual may acquire a share of ownership in a property. If a co-owner no longer wishes to continue with co-ownership, they have the right to request the division of their share from the jointly owned property or object. However, dividing the property is not always feasible. In such cases, a co-owner has the right to apply for the dissolution of the co-ownership and the sale of the property through a trustee, by submitting an application to the district court. Even a single owner can submit the application, and the costs are distributed among all owners in proportion to their co-ownership. The applicant pays the application fee. Typically, a lawyer is appointed for this task, who, after checking for any conflicts of interest, gives consent upon request.

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Real Estate Transaction Confirmation

Transfer of a property, such as through sale or gift, is confirmed in the presence of all signatories of the transfer document. Without this confirmation, known as “kaupanvahvistus” in Finnish, the transfer is invalid, and the buyer cannot obtain “lainhuuto”, which is a registration of ownership for the property. Only a designated authority known as a “kaupanvahvistaja” can provide the confirmation. The deed of sale must adhere to specific content requirements.

At Annia, attorney Maria Puputti handles property transfer confirmations. The fee for the confirmation is 120 euros, in addition to travel expenses and a possible copying fee of 2 euros per page. The confirmation can be done, for example, at your bank or at our premises. You can opt for a comprehensive package that includes both the deed of sale and the confirmation for added convenience.

Defect in Real Estate Transaction

Typically, especially in single-family property transactions, a condition assessment is carried out before the sale. Despite this, the buyer might later believe that the property doesn’t match what was agreed upon, or it has defects that weren’t detected during the assessment. The defect could also stem from incorrect or misleading information provided by the seller. Such misinformation could involve inaccurate details about structures, area measurements, or zoning. On the other hand, the property’s advanced age and resulting repair needs usually don’t fall within the scope of the seller’s liability for defects, and compensation from the seller is generally not attainable for these matters.

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.

The responsibility of a real estate agent

Often in real estate transactions, a real estate agent is involved, and there is a brokerage agreement between the seller and the real estate agency. The real estate agent must perform their tasks professionally, diligently, and in accordance with good brokerage practices while considering the interests of both parties in the transaction. The real estate agent has an obligation to gather information and provide information. The agent must provide both parties with all the information that could influence the decision to proceed with the transaction. The agent is responsible for their own conduct, and depending on the situation, if they act erroneously, they might be liable to either the seller or the buyer. Liability to the seller for an error may relate to non-compliance with legal requirements or the brokerage agreement between the agency and the seller. The real estate agent is liable for providing inaccurate information. If the agent’s erroneous conduct results in damages, they may be held liable for compensation to the buyer. It’s important to remember to report any possible errors.

Inspector's Responsibility

When a defect arises after a real estate or property transaction, which was not present in the inspection report, questions may arise about the responsibility of the inspector. In cases where the consumer is the client requesting the inspection, consumer protection laws have an impact on the inspector’s liability. The inspector’s liability is also influenced by the agreement made between the client and the inspector. The inspector is obligated to perform their work professionally and diligently. The inspector is responsible for their own actions, and it’s important to note that the inspector usually isn’t responsible for defects in the property; such responsibility typically lies with the seller. However, several factors affect the inspector’s liability. The liability is generally limited to the amount of the fee.

Property Manager's Responsibility

Error in the Property Manager's Certificate in a Real Estate Corporation

The property manager’s certificate is an important document in real estate transactions, containing crucial information about a housing cooperative. The Housing Cooperative Act specifies what information must be included in the property manager’s certificate. If the information provided in the property manager’s certificate is found to be incorrect after the real estate transaction, the property manager may be held responsible for this. The housing cooperative itself can also be held liable for an erroneous property manager’s certificate. The Housing Cooperative Act outlines the property manager’s liability for damages. The Real Estate Transaction Act also contains provisions regarding liability related to the property manager’s certificate. Given the significant importance of the information in the property manager’s certificate to both buyers and sellers, it’s essential to exercise care in handling it. The property manager’s certificate is provided in mutual housing cooperatives that adhere to the Housing Cooperative Act or at least Section 7:27 of the Housing Cooperative Act, which concerns the property manager’s certificate.

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