In case of a defect in a real estate transaction, the buyer is entitled to request a reduction in the purchase price. The right to a price reduction does not require the seller’s negligence, so the seller remains responsible for price reduction even if they have acted diligently.
If the defect in the property is such of a nature that neither the seller nor the buyer noticed it before the transaction, and the defect wouldn’t have been noticeable, it is considered a hidden quality defect. A latent defect also justifies a price reduction. However, the hidden defect must be significant enough that the property significantly deviates from what the buyer reasonably expected.
Price reduction aims to balance the legal action between the seller and the buyer so that the purchase price aligns with the value of the property. The amount of the price reduction is calculated as the difference between the purchase price and the value of the defect of the property at the time of the transaction.
Cancellation of the sale is possible if the defect is essential. The substantiality of the defect must be assessed on the basis of its overall significance. If the buyer cannot use the property as intended and the defect cannot be remedied within a reasonable time and at a reasonable cost, the defect is essential. The assessment is not solely based on the buyer’s subjective opinion; objective criteria must be present. The Supreme Court has taken a position on the threshold for cancelling a real estate sale in its decision KKO 2015:58. According to the decision, when considering the significance of the defect, importance must be given not only to the amount of repair costs (29 % of the purchase price in the case), but also to the inconvenience of living in the property and potential health risks.
When the sale is cancelled, the buyer returns the property to the seller and the seller returns the purchase price to the buyer. If the buyer has carried out basic improvements to the property, the seller must pay the buyer reasonable compensation for the beneficial costs of the improvements.
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