12.2.2016

Cancellation of an apartment deal

Cancellation of an apartment deal is possible if certain requirements under the Housing Transaction Act are met. Cancellation of the sale itself is exceptional and used only when other options are not available.

The right to cancel a deal of a used apartment?

The buyer has the right to cancel the sale if the defect causes him significant inconvenience. Furthermore, cancellation requires that no other option can be seen as reasonable.  If the seller is a merchant, the buyer has right of cancellation when the breach of contract is fundamental. The seller, on the other hand, has the right to cancel the sale only based on the buyer’s payment delay, requiring such a delay to be fundamental.

Cancellation may happen if correction of the defect is not enough

In event of a defect or default one needs to consider possibilities correction, claiming compensation only for the expenses caused to the buyer. Therefore cancellation is possible only in cases where the defect cannot be corrected without fundamental detriment or a price reduction cannot be seen as a sufficient enough consequence due to the significance of the defect or breach.

A fundamental detriment can justify cancellation

The line between cancellation on one hand and the right to compensation on the other, is however, both fine and ambiguous. Furthermore, every case or controversy is unique.  There are many court decisions handling defects in apartments.

The buyer has always the right of demanding cancellation. The seller has no such right without the consent of the buyer. Sometimes this can lead to unreasonable consequences for the seller, e.g. when the seller is obliged to pay a significant price reduction. In such a case cancellation of the sale could be a better alternative.

The buyer must make a complaint within reasonable time

The buyer must make a complaint concerning the defect or default within reasonable time after noticing it. Otherwise the buyer loses its right to appeal.  If the seller is a consumer, the buyer also needs to take a two-year-deadline into consideration, if the defect or default falls under the general liability rules of if the defect or default is judicial.

In such cases the buyer is obliged to file a complaint within two years from the time of the purchase/given access, e.g. to the apartment. If the seller has acted in bad faith or with gross negligence, the buyer has the right to claim compensation even after the two-year-deadline has ended.

Consequences of cancellation

The seller is obliged to return the contract price as well as pay interest on the amount as a consequence of cancellation. The buyer on the other hand is obliged to return the apartment and/or the apartment shares and/or other documents stating the right of ownership.

If the buyer has already received the proprietary rights and can be seen to have received a considerable advantage thereof, the buyer is obliged to pay reasonable compensation for the usage of the apartment. If the buyer is the party claiming cancellation, the nature of the breach as well as other aspects needs to be evaluated when appointing the amount of compensation. Quite often, parties are also claiming other types of compensation, e.g. costs of temporary accommodation or compensation for raising the value of the apartment.

At Lindblad we have vast experience of cancellation of apartment deals and related questions of compensation or default analysis. Furthermore we advise clients in all kinds of questions relating to residential property law.

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