Liability of the Investor Acting as Seller, Contractor, and Designer…

Purchasing an apartment is one of the most significant life and financial decisions. Therefore, the issue of liability for defects in an apartment – especially those affecting the solidity and safety of the building – is of exceptional legal and practical importance. In practice, the question often arises as to who bears responsibility when serious construction defects appear after handover, such as roof leakage, moisture penetration, or cracking of the structure of the building, resulting in damage to individual apartments as separate units.

This text provides an overview of the liability of the investor in the capacity of seller, as well as the liability of the contractor and the designer engaged by the investor, and outlines the legal remedies available to the buyer, in accordance with the Law on Obligations (LO) and relevant case law.

The Sales Contract as the Starting Point

The first step in any specific case is a careful analysis of the sales contract. The contracting parties may stipulate special rules regarding liability for defects; however, such provisions cannot derogate from the mandatory rules of the LO.

Article 486 of the LO provides that the parties may limit or completely exclude the seller’s liability for material defects, but contractual provisions limiting or excluding the seller’s liability for material defects are null and void if:

• the seller was aware of the defect and failed to inform the buyer, or
• the seller imposed such a provision by abusing a dominant or monopolistic position.

Even when the buyer waives the right to terminate the contract, they retain other rights arising from liability for defects.

Concept and Types of Apartment Defects

Apartment defects may be:

• Material (physical) defects – when the apartment lacks properties necessary for normal use, does not conform to the contract or design, or is constructed contrary to technical regulations (e.g., moisture, poor waterproofing, cracks, low-quality joinery).
• Legal defects – when the buyer’s right to the apartment is limited or contested by a third party (e.g., lack of registration, existence of a mortgage or dispute).

This text focuses on defects relating to the structural integrity of the building, which are subject to the strictest liability regime for material defects.

Liability of the Investor as Seller

When an apartment is acquired through an onerous legal transaction (most commonly a sale), the investor assumes the position of the seller and is liable under Articles 478-500 of the LO.

The seller is liable for defects that existed at the moment the risk passed to the buyer, regardless of whether the seller was aware of them, as well as for material defects that appear after the transfer of risk if they are caused by circumstances that existed beforehand.

In the case of visible defects, the buyer is obliged to inspect the item in the usual manner or have it inspected as soon as reasonably possible and to notify the seller of visible defects within eight days (without delay in commercial contracts); otherwise, the buyer loses the rights arising from such defects. If the inspection is carried out in the presence of both parties, objections regarding visible defects must be raised immediately.

In the case of hidden defects, i.e., defects that could not have been discovered by a customary inspection and become apparent only after delivery, the buyer must notify the seller within eight days from the date of discovery (without delay in commercial contracts), under penalty of loss of rights. The seller is not liable for defects that appear after six months from delivery, unless a longer period is stipulated by contract.

However, Article 488 of the LO, which defines the buyer’s rights, significantly tightens the seller’s liability and is particularly relevant here.

Under this article, a buyer who has timely and duly notified the seller of a defect may demand:

1. removal of the defect or delivery of an item free from defects;
2. reduction of the purchase price;
3. termination of the contract, but only if the buyer has first granted the seller an additional reasonable period for performance (in the case of a fundamental defect – i.e., when the apartment is effectively unusable, which in practice is rare and difficult to prove).

In all these cases, the buyer is also entitled to compensation for damages.

Of particular importance for damage to the buyer’s other property is paragraph 3 of this article, which provides that, independently of the above, the seller is liable for damage that the buyer has suffered to other property due to the defect, in accordance with the general rules on liability for damage.

This means that, although the damage arises in connection with the sales contract, damage suffered by the buyer to other property due to defects in the sold item does not constitute damage arising from a breach of contractual obligations, as the law expressly refers to the application of general tort liability rules. Consequently, general limitation periods apply (three years from the date the buyer learned of the damage and the liable party, or five years from the occurrence of the damage). Under general rules, the burden of proof lies with the buyer, who must prove the existence of damage, the causal link between the defect and the damage, and the seller’s liability to the required extent.

It should be noted that the buyer’s rights, if they have timely notified the seller of the defect, expire one year from the date the notice was sent, unless the buyer was prevented from exercising their rights due to the seller’s fraud. However, even after this period, if the buyer has not yet paid the price, they may raise a claim for price reduction or damages as a defense against the seller’s claim for payment, pursuant to Article 500 of the LO.

Liability of the Contractor and the Designer

Liability for defects in a building is regulated by Articles 641-647 of the LO (contract for construction), as well as Articles 614-621 of the LO (contract for work).

Of particular relevance is Article 642 of the LO, which provides that any subsequent acquirer of a building or part thereof has the right to demand removal of defects directly from the contractor to the same extent as the investor would have had, provided that no new notification or litigation period begins for subsequent acquirers; instead, the predecessor’s time limits apply.

Since the rules on liability for defects in construction apply mutatis mutandis to the contract for work, if a defect that could not be discovered by ordinary inspection appears, the client (or buyer, in the case of sale) may invoke it, provided they notify the contractor as soon as possible, and no later than one month from discovery. After two years from acceptance of the completed work, the buyer may no longer invoke defects.

The contractor is liable for defects in construction affecting the solidity of the building if such defects appear within ten years from the handover and acceptance of the works. The same applies to the designer if the defect originates from a flaw in the design.

With regard to defects affecting the structural integrity of the building, the liability of the contractor and the designer:

• lasts ten years from the handover and acceptance of the works (Article 644, paragraph 1 of the LO);
• cannot be excluded or limited by contract (Article 644, paragraph 5 of the LO).

The investor as client, or any subsequent acquirer, must notify the contractor and the designer of defects within six months from the date the defect was discovered, otherwise they lose the right to rely on it.

The right of the client or subsequent acquirer against the contractor or designer based on liability for defects affecting structural integrity expires one year from the date the contractor or designer was notified of the defect.

Where both the contractor and the designer are liable for damage, each party’s liability is determined in proportion to the degree of their fault.

It should also be emphasized that a client who has timely notified the contractor of defects cannot enforce their rights through the courts after the expiration of one year from the notification. However, even after that period, if the defects were timely reported, the client may raise claims for price reduction or damages as a defense against the contractor’s claim for payment, in accordance with Article 616 of the LO.

Conclusion

Liability for defects in an apartment – particularly those affecting the structural integrity and safety of a building – is regulated strictly and on multiple levels under the LO. In order to ensure effective protection of the buyer, the law provides remedies against the investor as seller, as well as against the contractor and the designer, and these liabilities may be cumulative depending on the nature and cause of the defect.

1. Buyer’s rights against the seller (investor)

A buyer who has timely and duly notified the seller of defects, provided that such defects appeared within six months, has the right to request:

• removal of the defect or delivery of an item free from defects;
• reduction of the purchase price;
• termination of the contract in the case of a fundamental defect.

In addition, the buyer has the right to compensation for damage caused by defects to their other property, in accordance with the general rules on liability for damage, within three years from learning of the damage and the liable party, or five years from the occurrence of the damage.

2. Buyer’s rights against the contractor and/or designer

The buyer, as a subsequent acquirer of a separate part of the building, has the right to:

• demand removal of construction defects directly from the contractor within two years from acceptance of the works by the client, and within ten years directly from the contractor and/or designer for defects affecting structural integrity;
• claim compensation for damage caused by construction defects.

The law distinguishes between contractual liability for defects in the object itself and liability for damage caused to the buyer’s other property, which is governed by general tort rules, with specific rules on the burden of proof and limitation periods.

Given the strict deadlines and the complexity of the applicable legal regimes, proper legal qualification of claims and timely action by the buyer are of decisive importance for full and effective protection of their rights.