Liability of a constructor for construction defect

Liability of a constructor for defects comes into question mainly in two different cases.

First of all the constructor (usually big construction companies) is liable to the housing company and new flat owners for the defects of the house they have built. The applicable law in these cases is the Housing Act and its provisions about a purchase of new apartment.

On the other hand a single consumer is allowed to have a house built on his property. Consumer Protection Act is applicable in these kinds of contracts.

Definitions of defects

Definition of the defect is almost similar in both of the laws.

The construction has a defect, if

• it does not correspond to the contract or to the legitimate expectations of the other party
• the construction or building is causing damage to one’s health
• good method of construction is not followed
• the construction materials are not of standard quality.

Inspection in the acquisition of a new apartment

If there is a defect in the performance of the constructor, it is important that the other party reacts to the defect properly and in reasonable time after detecting the defect. The law prescribes a certain annual inspection method when a new apartment is sold. The vendor has to arrange the inspection at the earliest 12 months and at the latest 15 months after the supervisory control of building authority has approved the building to be taken into use.

There will be discovered defects in the inspection both in the apartment and in other general facilities of the housing company. Found defects have to be entered in the record.

Performing the inspection does not, however, discharge the vendor from liability concerning defects found after the annual inspection. The buyer might, however, forfeit his right to make a claim because of a defect in the apartment if he does not report about the defects he has discovered, or he should have discovered, by the inspection. If the reasonable time limitation for the notice of defect is exceeded, the consumer might forfeit his right to put in a claim.

The buyer has to report about the defects in time

When a consumer orders construction work or for example ready-made house, there will be no annual inspection procedure.

In this case consumer has to make a complaint in decent time from the time he noticed the defect or he should have noticed it. If decent time to make a complaint is over, consumer may lose his right to put in a claim.

The consequences of a defect

The primary consequence of a defect for buyer or consumer is the right to demand that the defect is going to be fixed or corrected without any costs. The constructer has also right to perform this kind of correction if he makes it immediately after getting notice of the defect.

The other party can refuse to accept the correction e.g. if it is going to cause him harm or there is a risk, the costs he puts in it will not be compensated. The constructor can turn down the correction demand, if the costs would rise extortionately high.

If correction of the defect does not come into question, buyer or consumer has a right to demand discount corresponding the defect. If the agreement violation is essential, the agreement can even be dissolved.

The threshold to dissolve agreements in new apartment’s deal and in consumer contracts is very high. Buyers and consumers might also have a right to get indemnity.