Hidden defects and Dutch NVM sales contract

Hidden defects and visible defects can lead to liability of the seller of real estate in the Netherlands. The standard NVM purchase contract for Dutch property excludes  seller liability for hidden defects, but cannot always be relied on. Furthermore, the seller has a duty to disclose any defects present at the time of the conclusion of the sale. n. Article 6.1 of the NVM purchase contract states that: ‘The immovable property shall be transferred to the ownership of the buyer in the condition in which it was at the time of conclusion of this sales contract, therefore with all pertinent rights and claims, servitudes benefiting the property as the dominant tenement and qualitative rights, visible and hidden defects, without being mortgaged or seized and without any registrations of mortgages or seizures in respect thereof.’

Assessment of liability for a hidden defect

It appears, from article 6.1 of the NVM sales contract, that a buyer of property has no remedies when a hidden defect is discovered in the property. However, it is dependent on the facts and circumstances of each case, as article 6.1 is not all-encompassing. . For example, article 6.3 of the NVM sales contract, referencing article 7:17 of the Dutch Civil Code (conformity with the sale agreement) states that:  “At the time of the transfer of ownership, the immovable property will possess the actual characteristics that are necessary for its ordinary use as a house. If the actual transfer (giving possession) takes place at an earlier date, the immovable property should possess the characteristics that are necessary for its ordinary use at such earlier date. The seller does not warrant that the property has any characteristics other than those required for its ordinary use. Defects that prevent ordinary use and that are known or apparent to the buyer at the time of creation of this sales contract will be for the account and risk of the buyer. The seller is exclusively liable for the repair costs of defects that prevent normal use and that were not known or apparent to the buyer at the time of creation of this sales contract.” The buyer therefore only has a claim for hidden defects that he was unaware of and prevent the normal usage of the house . This  will have to be evaluated on a case-by-case basis. Leaks, faulty electricity and rotten beams, for example, will quickly get in the way of normal use.  

Sale of an old house and age clause (‘ouderdomsclausule’)

In the case of an old house, not every defect prevents normal usage.  An age clause obliges the buyer to investigate thoroughly; an old house is expected to show defects associated with the age of the house. The age clause limits the seller’s liability for hidden defects due to the age of the house. However, There remains a duty on the seller to report all known defects; the age clause does not remove the obligation on the seller to provide information The bar is set depending on the age of the house; the buyer can hardly expect a 100 year old house to be in a similar state to a house that was built only five years prior. Furthermore, a distinction must be made between legal and technical defects; only the first will be enforceable in a court. The nature of the effect determines whether the buyer will have a remedy.

Ordinary use despite hidden defects?

When does the hidden defect stand in the way of  “ordinary use” of the house? That question follows from Dutch real estate law. The Dutch Supreme Court, in a 2005 judgment (December 23, 2005, NJ 2010/62, m.nt. M.H. Wissink (De Rooij / van Olphen) provides  clarity about the way  the provisions of the NVM sales deed must be interpreted. . In this judgment, the question concerned the interpretation of the term ‘ordinary use’.. The Supreme Court states that the Haviltex criteria must be taken as a starting point. . The starting point for the interpretation of a (pre-printed) clause in a model agreement, such as the NVM sales contract, is the ‘according to common usage principle.

Hidden defect unknown to seller

The seller cannot argue ignorance of defects on the basis that he never experienced any problems or had not lived in the house. Liability does not require the seller to be aware of the defect. . The seller cannot escape liability for compensation under Dutch law by stating that he is not at fault. Furthermore, if a mutual error of the buyer and seller can be established during the sale, a Dutch property lawyer will be able to determine the correct basis for establishing liability.

A visible defect is not a hidden defect

A Dutch lawyer can only bring an action against the seller if the defect is hidden. There lies a duty of investigation on the buyer, meaning that, if the defect could easily be identified, the seller will not be found liable if the buyer fails to inquire. Clearly visible defects, such as traces of leakage or mould on the floor, are examples of apparent defects for which the buyer has a duty to investigate.  If, however, the seller is aware of chimney leakage in the event of the wind blowing in a certain direction, he will have a duty to report this in the context of his obligation to provide information. A seller cannot be held liable for visible defects after the conclusion of the sale. Buyer’s duty to complain after discovering hidden defect

The buyer who discovers a hidden defect has a duty to file a complaint directly to the seler c (‘klachtplicht’). This obligation to complain applies to both movable and immovable property in the Netherlands. The  buyer of a house or apartment must, upon  discovering defects in the house, immediately  make a written complaint to the seller. The complaint should lay down all the hidden defects and shortcomings that the seller is responsible for according to the purchase contract. For more information refer to the ‘complaint at the sale’ article published on the Blenheim website.

Obligation to inform seller prevents liability for exclusion

The seller has a duty to disclose, but the buyer also has an obligation to investigate. The seller will not be responsible for the buyer’s failure to investigate, unless the seller was aware of the defects and had a duty to disclose them. This duty to disclose arises when there is a leak in the roof or defective air conditioning, along with other such examples. . The seller cannot rely on article 6.1 of the NVM if he had a disclosure obligation in respect of the deficiencies identified subsequently. Violation of the obligation to disclose under Dutch law results in liability of the seller for the hidden defect discovered by the buyer. . In practise, a seller is often well-aware of the defect in his property, however, the burden of proof lies on the buyer to show that the seller was aware of the defects.

Buyer may rely on execution in accordance with the building plan

Property in the Netherlands is built according to a building plan that was certified by the Municipality. A buyer may rely on execution in accordance with the building plan that was certified by  the  building permit of the Municipality.  A building, or part of a building, that was built without a permit from the Municipality without mentioning this to the buyer will lead to the seller being in default.  For example,  if an expert compiles a report determining that the foundations of the house are not equal to those in the building plan, the court will find the seller to be in default, as the buyer is entitled, in the absence of a notice by the seller, to trust that the foundations have been installed in accordance with the building plan.  

Non-conformity gives entitlement to reduction of purchase price

Non-conformity to the building plan  entitles the buyer to a reduction of the purchase price, as set out in  art. 7:22 of the Dutch Civil Code. In the above example, The seller could have reasonably foreseen that the applied foundations and the foundations in the building plan provided to the buyer were not equivalent, thus he has a duty to disclose.  The Court can award a reasonable reduction of the purchase price to repair the defect(s). The court can also rule that extrajudicial costs, such as the expert report, must be borne by the seller. Please not that Dutch courts do not award full compensation for legal fees; costs of the civil procedure are established with a statutory tariff.

Feel free to inquire about any legal issues relating to the purchase of real estate in the Netherlands.

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