Defects in a new-build dwelling

What are considered defects in new-build dwelling?

The following are considered defects:

• the dwelling does not correspond to what was agreed or what can reasonably be expected when buying an equivalent dwelling
• construction regulations or ordinances have not been complied with
• the dwelling has properties which may cause harm to health
• a construction material does not meet common standards in terms of durability, or the construction is not in accordance with good construction practice
• the seller has provided incorrect information about the dwelling or has failed to provide important information
• the buyer has been given incomplete or incorrect information on e.g. the financial standing of the housing company
• shares are subject to a right of ownership, pledge or other right of another person or entity, and there is no restriction on this in the trade agreement (a so-called legal irregularity).

Defects will be assessed based on the general provisions on defects of the Housing Transactions Act as well as provisions concerning failure to provide information, financial irregularities and legal irregularities.

Inspection before moving in

Before the buyer can move in and pay the final installment of the purchase price, the seller must arrange a pre-move inspection.

Any faults or defects, such as scratches in tiling or parquet flooring, will be noted in the inspection. These defects must be remedied either before the buyer moves in or in the first year’s inspection. It is important to make a note of any defects to avoid later disputes about when the defect happened and who caused it.

The first year’s inspection

The founding shareholder, i.e. the seller, must carry out a first-year inspection to determine whether there is a need for repairs in the building and its apartments. The first year’s inspection takes place 12–15 months after the building has been commissioned.

Every buyer of an apartment will check their own apartment and report any repairs needed. The board of directors of the housing company is responsible for inspecting common areas which are maintained jointly, such as stairways, the façade and outside areas covered by the building company’s maintenance responsibility, and reporting any defects.

The occupant must report immediately if, prior to the first year’s inspection, the apartment shows a defect that is detrimental to housing, more serious or potentially damaging to the building, such as water damage. Minor defects that do not affect habitability, such as surface defects in materials or sticking cupboard doors, and which occur after moving in and before the first year’s inspection, can be listed and reported in the first year’s inspection.

After the first year’s inspection, the seller is only responsible for hidden defects that were present in the building when the apartment was handed over to the buyer but appeared later. After the first year’s inspection, the purchaser can therefore no longer rely on defects that should have been detected and reported at the latest during the first year’s inspection.

If defects are found after the first year’s inspection, the buyer must submit their claim to the seller within a reasonable time after the defect is detected or should have been detected. Claims must be made in written. The complaint should include a clear demand for repairing or otherwise remedying the defect.

The seller has a duty and right to rectify

The seller has the right to rectify any defects in the building or apartment. The prior way to handle reported defects is rectifying them. Defects must be repaired within a reasonable time after they were reported. If a defect is reported before the first year’s inspection but it does not affect habitability, the seller can postpone the repairs to be done at the same time with first year’s inspection and repairs.

If the defect cannot be repaired or the seller will not repair the defect for some reason, the buyer has the right to demand a price reduction, which will be determined on a case-by-case basis.

If the guarantee for or post-construction is still valid and the seller does not repair or compensate for defects that are the seller’s responsibility, the buyer and/or the housing company can claim the guarantee or part of it.

In disputes, the bank does not normally hand over the security to the buyer or the housing company automatically; the matter is usually referred to the Consumer Disputes Board or a court to determine whether a defect has occurred.

If the defect and the associated breach of contract are significant and the seller does not remedy the defect, the ultimate solution is to cancel the purchase. However, this only happens in exceptional cases. For example, the purchase may be cancelled in the case of construction defects that cause a health hazard and which cannot be remedied.