Duty of investigation

How far does the obligation to investigate go when purchasing a home?

We still have to deal with an overheated housing market in which buyers often feel compelled to decide hastily whether or not to buy. Even in Corona time, the buyers’ market is busy. Where it used to be customary to carry out research before buying a property, this is now often skipped. But doesn’t a buyer lose any rights if he doesn’t do (enough) research? In this blog we look at the duty of investigation of the buyer of a house.

Non-conformity

When buying a property one may expect that the property possesses the properties necessary for normal use. If this is not the case, there is non-conformity (Article 7:17 of the Dutch Civil Code). Normal use is understood to mean that it must be possible to live in the home in a sufficiently safe manner, with a reasonable degree of durability, without the enjoyment of living being substantially affected.[1] If this is not the case, then in principle there is non-conformity and the buyer is entitled to have the defects repaired or even dissolution of the purchase agreement can be demanded.

Purchaser’s duty of investigation

Before a buyer can invoke non-conformity, it is checked whether the buyer has fulfilled his obligation to investigate. In principle, a buyer cannot invoke non-conformity in the case of visible or apparent defects[2].

Visible defects

If, for example, a buyer was able to see with the naked eye that there was a leak in the attic, he cannot invoke non-conformity after the purchase. In that case, he has violated his duty of investigation since he has been able to observe the visible defect himself before the sale.

Apparent defects

In addition to visible defects, there may also be noticeable defects. These are defects that the buyer knew or should have known were present. If, for example, you buy a 150-year-old farmhouse, which was last renovated in 1950, more defects must be taken into account in advance than when buying a new house. Another example of noticeable defects are defects of which the seller has explicitly notified in advance or when the defects are included in the sales contract. At that time, the defects are known to the buyer. In that case, too, the buyer cannot invoke non-conformity. Obvious defects may also be subjective in nature. For example, a professional party is expected to have more knowledge and will therefore be more likely to become aware of a known defect.

Seller’s duty of notification

The buyer’s duty of investigation is offset by the seller’s duty to provide information. In most cases, this obligation to provide information outweighs the buyer’s obligation to investigate. This means that if the seller is aware of a significant defect, but fails to notify the buyer, the buyer can still invoke non-conformity despite the fact that the buyer has not carried out any or sufficient investigation. Incidentally, if the seller was not aware of a defect, the buyer can still invoke non-conformity if this makes the property unsuitable for normal use.

Advice

When purchasing a house, it is wise to have an survey carried out. The costs often outweigh the possible misery it saves. But even if the buyer is unable or unwilling to have an architectural survey carried out, he can still do what is necessary to safeguard his rights. In addition to viewing the property, it is wise for the buyer to ask the seller many questions about the property. In this way, the buyer not only meets his obligation to examine the property, but also increases the seller’s duty of disclosure. After all, the seller will have to answer all questions truthfully in order to fulfil his duty of disclosure. If possible, it is preferable to record these questions and answers (afterwards) by means of, for example, e-mail correspondence. Real estate agents also often use a standard questionnaire on which many subjects are discussed.

The consequence of these questions is that the buyer can no longer complain about defects that have already been reported by the seller. In that case, it is important for the buyer to take good note of the answers to the questionnaire and to ask if there are any ambiguities. In that case, the defects are deemed to have been taken into account in the purchase price. Therefore, if the investigation shows that there are defects, the buyer will have to negotiate about the price.

Do you have any questions about this blog or would you like advice on a purchase agreement? Please feel free to contact M2 lawyers.

Lawyer Ginio Beij (beij@m2advocaten.nl)

1] See e.g. Hof Amsterdam 3 September 2019, ECLI:NL:GHAMS:2019:3226

2] See e.g. HR 7 October 2016, ECLI:NL:HR:2016:2287

tape measure NVM

Realtors in the Netherlands must not apply double standards

The Supreme Court recently ruled that an NVM broker (NVM is the Dutch organsation for realtors) can be held liable for mentioning an (incorrect) living space in a sales brochure that has not been measured according to a measurement instruction laid down by the NVM. A clause in the sales brochure stating that no rights can be derived from information in the brochure does not detract from this liability.

 NVM measurement instruction

Since 2010, NVM brokers are obliged to measure the house according to a special uniform NVM measurement instruction.  In this way, the NVM wants to promote that customers know exactly where they stand in case an NVM broker gives an indication of the surface area. Despite this measure, unfortunately not all NVM brokers comply with this measurement instruction. The disciplinary board of the NVM therefore regularly reprimands members for mentioning a larger quantity of square metres than would be the case if the measurement instruction were properly carried out. The question is whether the broker has also acted unlawfully towards the buyer under civil law and if he can therefore be held liable.

Unlawful (also with standard exclusion clause)

In answering this question, the Supreme Court concurred with an earlier judgment of the Amsterdam Court of Appeal. The Court of Appeal ruled that an estate agent acts unlawfully if he states a larger living area than would be the case if he followed the measurement instruction, because the buyer of a dwelling may rely to a large extent on the fact that the measurement instruction was carried out in accordance with the measurement instruction. The measurement instruction, which the NVM has made compulsory for its members, is specifically intended to protect the interests of prospective buyers. An NVM broker cannot, therefore, simply use a different measuring method. The fact that a broker states in the sales brochure that no rights may be derived from measurements mentioned in the sales brochure is set aside by the Court of Appeal and the Supreme Court. “Such a standard statement is in itself not specific enough to undermine the confidence that the prospective buyer may derive from the mandatory nature of the measurement instruction”.

Exceptions

Although the starting point is that an NVM broker acts unlawfully if he does not comply with the established measurement instruction, this may be different when;

  1. the buyer had to understand from statements or behaviour of the realtor that a different measurement method was used;
  2. there are specific circumstances that should have led the buyer to doubt the stated area.

Did the buyer suffer any damage?

Finally, there may have been unlawful conduct, but there can nevertheless be no damage. In a case before the Court of Appeal of Arnhem-Leeuwarden, the real estate agent had also failed to comply with the measurement instructions used by the NVM. However, despite its smaller size, the house turned out to be worth more than the price originally paid for the house. Furthermore, the buyer could not prove that he had not bought the house for the same amount of money as he had known that the house was smaller. Therefore, the court of appeal rejected the claim for compensation now that there was in fact no question of damage.

Does your home not comply with what the real estate agent had measured? Then please feel free to contact M2 advocaten for free advice.

 

Lawyer Ginio Beij (beij@m2advocaten.nl)

checklist

Duty of care mediator. Control tenant. Damage due to loss of rent?

This question was recently raised in a case before the Arnhem-Leeuwarden Court of Appeal. The case was as follows.

A number of heirs offer the house of their deceased parents for sale through a mediator. After some time, the mediator let them know that no candidate buyers have presented themselves, but there is a candidate who would like to rent the house. Initially the heirs do not really feel for this opportunity, but eventually they agree and through the intermediary a rental agreement is made.

After this, things start going wrong. The police discover a hemp plantation in the house and by order of the mayor the house is closed. It is also established that electricity has been stolen. For the damage of over Eur. 7.000,– that Liander suffers as a result, the heirs are sued.

The heirs then take the mediator to court and claim compensation for the damage suffered by them. As a basis for their claim, the heirs argue that the intermediary has failed in his duty of care because he did not sufficiently investigate the tenant.

The Court of Appeal goes along with this. The Court of Appeal considers that the mediator should check the identity of the potential tenant and whether the tenant is able to pay the rent due, by obtaining information about his income.

The intermediary has fulfilled the first obligation – although the identity card handed over had already expired when the lease was entered into – but has not fulfilled the second obligation. The tenant submitted a payslip – which was later found to be forged – which raised numerous questions and which should have been a reason for the intermediary to obtain more information (copy of the employment contract, employer’s statement, etc.) and, if necessary, to contact the alleged employer. By contenting himself with the pay slip, the mediator violated his duty of care.

The question remains as to which damages are eligible for compensation. First of all, the heirs claim compensation for repairs to the house of more than Eur. 17,000. This is awarded because it is directly related to the presence of the hemp plantation in the house. In addition, compensation of the evacuation costs and compensation of Liander’s claim of over Eur 7,000 will also be awarded.

But what about compensation for missed rental income? That will be rejected. After all, the Court of Appeal considered that if the mediator had recognised that the tenant had submitted a false pay slip (i.e. had been careful), no rental agreement would have been concluded and the heirs would not have had any rental income.

The ruling shows once again that a mediator is obliged to screen candidates properly. If not, he violates his duty of care. If this is the case, not all damages are eligible for compensation, but only damages that are (causally) related to the violation of the duty of care. This is not the case for lost rental income.

Would you like to know more? Feel free to contact us.

Marius Rijntjes (rijntjes@m2advocaten.nl)