30. Nov 16

Purchasing property: Rescinding purchase agreement despite exclusion of warranty

Old houses often have quirks that are not immediately noticeable. If the seller of one such property fails to fulfil his obligations to disclose and provide information, it may be possible to rescind the purchase agreement.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: The dream of owning one’s own home has become a nightmare for a number of property buyers, with the flaws associated with the purchased home only becoming apparent after the sale. However, the buyers are not without recourse. Even if an exclusion of warranty was agreed to in the contract, it might nevertheless be possible to rescind the purchase agreement. A case in point is a ruling of the Oberlandesgericht (OLG) Hamm [Higher Regional Court of Hamm] from July 18, 2016 (Az.: 22 U 161/15).

In the instant case, the buyers had acquired a residential house in which the basement had been constructed as early as the 1930s. While inspecting the property, the buyer expressed his desire to use the basement as a storage space. Although the cellar walls’ crumbling paint and plaster did indicate damage resulting from moisture, it was not evident that the basement would be under water in the event of heavy rainfall, and the seller did not comment on this. The purchase agreement concluded by the parties included an exclusion of warranty. Upon discovering that the basement was full of rainwater, the buyer gave notice that he was rescinding the purchase agreement in light of this defect.

The Oberlandesgericht Hamm concluded that rescission was justified, ruling that the house had been in an unsatisfactory state because the basement became submerged following heavy rainfall. It stated that it is unreasonable to expect a buyer to anticipate this even in the case of a cellar that was constructed in 1938, it being commonplace for an old basement of this kind to be used as a storage space. The Court went on to say that the exclusion of warranty did not prevent the purchase agreement from being rescinded either, as the defect in question had been fraudulently concealed. The OLG held that the agreed exclusion of warranty was ineffective due to fraudulent action.

To prevent any nasty surprises from arising when purchasing a property, lawyers who are versed in the field of real estate and property law can advise on all matters pertaining to real estate. This not only applies to purchasing property but also, e.g. selling or bequeathing it as well as in the case of construction defects.

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