Seller’s Liability – Housing Co-ops
The seller’s liability in the sale of a share of stock in housing company is determined by the Housing Transactions Act. The law defines, inter alia, different situations with defects and their consequences.
The apartment is defective if:
1) It does not meet the terms that can be considered to be agreed;
2) it does not correspond to the information provided by the vendor on the apartment before the transaction, and such information can be considered to have influenced the transaction;
3) before the transaction, the vendor has failed to inform the buyer of any specific matter concerning the apartment of which he assumingly was aware and of which the buyer might reasonably expect to be informed, taking into account buyer’s opportunity to detect the matter concerned during the inspection of the apartment, the vendor’s awareness of any special requirements set by the buyer, and other considerations, and it can be assumed that the failure to provide information influenced the transaction;
4) it is significantly inferior in terms of amenities, condition or other properties to what the buyer had reasonable grounds to expect in view of the price and age of the apartment, the standard of amenities usual in the area, general requirements concerning reasonable housing standards, and other considerations.
The buyer shall not claim as a defect any matter of which the buyer assumingly was aware at the time of the transaction.
If the buyer has inspected the apartment before the transaction or, for no valid reason, has failed to make use of an opportunity provided by the seller to inspect the apartment, he shall not claim as a defect any matter that he should have detected in the course of the inspection. The buyer shall not be obliged to verify the correctness of information provided by the vendor on the apartment or to extend his inspection of the apartment to matters requiring special technical measures or other extraordinary arrangements, unless requested to do so by the vendor or there is some other special reason to do so.
Often irregularities are associated with various types of moisture and bacterial damages. If there are no special provisions in the articles of association of a housing company, the company is often responsible for these damages. In that case the vendor’s responsibility is practically limited to that part of maintenance charge the buyer has to pay when the company starts to take care of the problem.
It is advisable for the vendor to act as carefully as possible in the trade to avoid allegations on defects. The vendor is also responsible for the information provided by the realtor.
The irregularity in the apartment can be financial or legal. The transaction is financially irregular if, for instance, there has been provided incorrect information about maintenance charge, or the liabilities related to the ownership of the property prove to be significantly higher due to unexpected failure than the buyer had reasonably grounds to expect. A legal irregularity is for example related to situations when a third party has property rights to the object of trade, which restricts the rights of the buyer.