How to Act When Hidden Defects Emerge?

The fact that people are not sufficiently aware of the consequences of hidden defects appearing has caused many problems. Faults or inconveniences may come to light over time in any home and also in new buildings. Defects are considered as such when they are justified, provable and significantly violate contract or living conditions. Trivial reasons, such as a house not withstanding wind or squirrels not eating in a bird feeder, cannot be considered hidden defects. What should both the property seller and buyer know about hidden defects?

A seller who wishes to sell their own real estate on their own may cause harm to themselves through ignorance if they do not record the defects present in the property in the sales contract. Defects can include, for example, a large hole behind a heavy cabinet, a non-functioning heating stove, a leaking pipe under a kitchen sink, unbearable odor in the stairwell, mold and noise or vibration levels exceeding established standards – all of these would significantly worsen living conditions or make living in these rooms completely impossible.

According to Estonian law, the thing transferred to the buyer must comply with the contract terms if the thing has agreed and presumed properties and the possession of a license and there is no third party claim regarding the real estate. Agreed and presumed properties should be understood to include the heating capabilities of the real estate, water supply and sewerage, the thermal insulation of the living space, noise and vibration levels, maintenance and also defects. When communicating real estate data to the buyer, one must proceed from information that the buyer has a recognizable significant interest in regarding the further use of the real estate. Or, noisy parties from neighbors, apartment association problems with debtors, the fact that the stove does not draw, walls are not insulated, etc. should also be mentioned.

A hidden defect is considered non-compliance with contract terms that the buyer could not have discovered by examining the thing externally with expected diligence. If the buyer discovers after the transaction a significant defect in the real estate that was or should have been present at the time of the transaction, he must notify the seller of the non-compliance with contract terms within a reasonable time. It is best to notify the seller immediately after discovering the defect, submitting a written notice thereof and adding an appropriate claim.

If the real estate does not comply with the contract terms, the buyer can demand from the seller performance of the contract, i.e. improvement or replacement of the thing, if this is possible and does not cause the seller unreasonable expenses or unjustified inconvenience. If improvement or replacement of the thing fails, the seller refuses to repair the thing or does not do so within a reasonable time from notification, then it is considered that the seller has substantially violated the contract terms. It is certainly important to know the fact that even if the seller was not aware of the defect in the real estate at the time of the transaction, but it was present at the time of the transaction, the seller is liable for it in any case.

If the seller is represented by a broker, the seller has an obligation to inform the broker of significant defects in the real estate or other circumstances related to the real estate. In this case, the broker can knowingly reduce the seller's future risks by marking the necessary defects in the sales contract and transmitting the information to the buyer. The broker is not liable for false or incomplete information provided by the seller. However, the broker is liable if he himself knowingly conceals significant defects in the real estate.

In summary:

If hidden defects have appeared (the seller has substantially violated the contract) and the buyer has notified the seller within a reasonable time, the buyer has the right to demand compensation for damages, reduction of the purchase price or to withdraw from the contract.

Important facts:

• The limitation period for claims arising from the transaction is 3 years.
• The limitation period for claims arising from a work contract due to a defect in a structure is 5 years.
• The limitation period for a claim for transfer of real property, encumbrance of real estate with a right in rem, transfer or modification of the content of a right in rem is 10 years.
• The limitation period for a claim arising from law is 10 years from the time the claim becomes enforceable, unless otherwise provided by law.
• In the case of consumer sales, for example, when purchasing real estate from a developer, the consumer must notify the seller of non-compliance with the contract terms within 2 months of becoming aware of the non-compliance.
• The risk of accidental destruction of the thing passes to the buyer only upon transfer of the thing, i.e. upon signing the transfer act, which records the actual transfer of the thing.