Wednesday, February 14, 2007

Purchasing Real Estate in Sweden - The Purchaser’s Obligation to Investigate the Real Estate

The seller should inform the buyer of the condition of the real estate including any known defects.

According to Swedish law the seller is responsible for all defects. However, this responsibility is balanced by exclusion of all defects that were possible to discover with a careful examination of the real estate. In practice, this means that the seller is only responsible for “hidden defects”.

As soon as the buyer finds a defect prior to the purchase, it is of course no longer hidden and cannot be used by him against the seller. Even if only mere indications of defects (such as stains that are a result of damp or the smell of mould) are noticed, a more thorough investigation (by a professional) need to be made.

Normally, most buyers use a professional building inspector/surveyor who investigates the real estate and presents a written report. Although this does not automatically make the seller responsible for everything that the inspector has not found, it is normally easy for the buyer to point out that defects not discovered by a professional surveyor have to be considered as “hidden”. If the surveyor misses detectable defects, the buyer will lose the case against the seller but then the surveyor most probably will be responsible towards the buyer; at least to the extent of his insurance.

It is possible for the seller to exclude the responsibility for “hidden defects” as well. The wording of the exclusion provision in the contract is very important. If the exclusion is too general, it will not be accepted by the court. The seller is not helped by e.g. selling the real estate “as is” or in “existing condition”. However, this is acceptable in respect of specific parts of the real estate e.g. the heating system. Even with acceptable exclusions, the buyer can make claims against the seller for defects known the seller.

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