Duty of Disclosure in Property Sales Under the Alienation Act – Requirements and Consequences

When you sell a property, you are obliged to provide the buyer with certain information about the property. This duty to disclose follows from the Alienation Act §§ 3-7 and 3-8. This article explains the content of the disclosure duty in more detail.

Content of the duty to disclose

According to the Alienation Act § 3-7, the seller must provide information about "circumstances concerning the property" that the buyer had reason to expect to receive. This includes all factors that may be significant to the buyer, including:

• The property's technical condition, including any defects or deficiencies

• Moisture, rot, fungus, or pests

• Previous repairs and maintenance

• Public law conditions, such as zoning plans or orders

• Neighborhood relations and potential conflicts

• Easements and other rights

• Other conditions that may affect the property's value or use

The decisive factor is whether the information can be significant for the agreement, meaning whether it can influence the buyer's assessment of the property or the purchase price.

Knowledge requirement

The duty to disclose pertains to conditions the seller "knew or ought to have known." The Supreme Court has clarified in several judgments that "ought to have known" is a normative concept - it is not a question of what the seller actually knew, but what the seller had no reasonable ground to be ignorant of.

The assessment depends on:

• How long the seller has owned the property

• Whether the seller has lived on the property

• The seller's professional knowledge and experience

• Whether there were visible signs or other indications of problems

Identification with assistants

The seller is identified with their assistants, such as the real estate agent and appraiser. This means that:

• Incomplete or incorrect information from the assistant is considered a breach of the seller's duty to disclose

• The seller becomes responsible for conditions the assistant "ought to have known"

• Stricter requirements are placed on professional assistants' knowledge

Relation to "as is" reservations

From January 1, 2022, "as is" reservations cannot be made in consumer sales. In other property sales, such reservations can be made, but they do not protect against breaches of the duty to disclose. The seller becomes responsible for missing or incorrect information regardless of any reservations.

Consequences of breach

A breach of the duty to disclose may give the buyer the right to:

• A price reduction pursuant to § 4-12

• Rescind the contract pursuant to § 4-13 (in case of material breach)

• Compensation pursuant to § 4-14

For the buyer to assert the defect:

• The missing information must have affected the agreement

• The buyer must have complained within a reasonable time after the defect was or should have been discovered

• The complaint must have been made no later than 5 years after the takeover

Conclusion

The duty to disclose is comprehensive and ensures that the buyer has a reasonable basis for decision-making. In case of doubt about whether information should be given, the seller should provide more rather than less. This reduces the risk of later claims for defects.