Your rights: Construction Defects in New Housing

Defects in the contract, too...

Her contract contains a thorny passage on the subject of "Defects Rights.” It reads as follows: The construction company “assigns all warranty claims to the buyer or the condominium community.” That sounded relatively harmless to Eva, who even felt that because of this she had special or even better rights than usual.

But this is precisely the provision, found in the chapter titled, “Construction Defects in New Housing,” that is clearly to the detriment of—mostly unsuspecting—buyers: Because with this act of transfer, the seller or general contractor disclaims any liability for his building. The seller or general contractor does not offer any warranty and is nowhere to be found if it turns out that any construction work has been carried out improperly. Legally interpreted correctly, this type of contract means that the homeowner must instead negotiate with the individual craftsmen, subcontractors and other involved parties—if it is even clear who can be held accountable for which particular defect or botched-up work.

Pitfalls: “Construction Defects in New Housing”

“This contradicts the important principle that a general contractor provides an overall service and is also fully responsible for flawless work,” criticized Thomas Oberle, an attorney for the Home Owners Association Switzerland (HEV Switzerland). From the apartment buyer’s point of view, this kind of constellation is “a shot in the dark,” warns the expert: “Because in terms of defects in the apartment, the buyer is suddenly supposed to deal with people with whom he is absolutely not familiar and whose responsibilities he was never informed about.” For example, the buyer cannot the expected to know who is responsible for what and what kinds of agreements have been concluded between the seller or general contractor and the subcontractors that the general contractor hired.

“Construction defects in new housing” includes even more difficult aspects—especially for condominium owners. If it is a condominium—thus legally a freehold—then everything becomes a little more complicated, because the individual condominium owner has special legal rights and common parts of buildings such as roof, outdoor spaces, a common underground garage, etc. have to be kept separate. In general, all aspects of stand-alone home ownership also applies to condominium ownership, meaning that a condominium owner can also demand that construction defects be fixed and that botched construction work be remedied. It gets a bit more complicated as far as  common areas are concerned—for example, water damage in the common underground parking garage.

Basically, it is the right and the duty of every single condominium owner to become actively involved in handling construction defects on common parts of buildings themselves. In fact, however, individual condo owners have to agree regarding the defect and any rectification work that needs to be carried out. Apart from minor defects, the condominium community is better off seeking legal counsel.

Construction Defects in New Housing: Two- and 5-year warranty periods

In principle, a statute of limitation period of five years from date of acceptance applies to structural defects. Defects not identifiable upon acceptance (so-called hidden defects) must be reported immediately after their discovery in accordance with the provisions of the Code of Obligations, otherwise the client forfeits his rights. The statute of limitation period of five years from the date of acceptance also applies to these defects.

The provisions of SIA Standard 118 provide a little more latitude: complaints regarding defects can be lodged at any time during the first two years from date of acceptance. The warranty period then runs for another three years, but any defects must be reported immediately. However, the SIA standard only applies if expressly agreed to.

Conclusion: When it comes to the topic of “construction defects in new housing,” you should inform yourself in advance of your rights, the applicable standards and framework conditions. Because it can get expensive if severe defects show up later on and the responsible entrepreneur or craftsman is out of the picture!