A Deal Gone Bad: Claims To Bring After Buying A Defective Property – Real Estate and Construction

Buying a property is a complicated and stressful process.
Although the majority of property transactions proceed without a
hitch, it is an unfortunate reality of life that innocent buyers
are sometimes left in a situation where they have purchased a
defective property that needs to be fixed, through no fault of
their own.

This article will outline a number of potential claims a buyer
can bring if they are left in such a predicament.

The buyer’s objective

The buyer’s primary objective when faced with a defective
property will generally be to fix the defect. Depending on their
available funding options, the buyer may want to fix the problem as
soon as possible by incurring the cost of fixing the defect, and
then look to pursue a claim to recover that cost and other losses
they have suffered.

Alternatively, if the buyer is willing to wait or simply lacks
the resources to fix the problem, they may wish to pursue a claim
first to obtain sufficient funds to pay for the remedial works. It
is always sensible to obtain legal advice at an early juncture in
case a proposed course of action prejudices the buyer’s
position.

Potential claims

The insurance policy

The first claim a buyer should consider is one under an
insurance policy, such as a buildings insurance policy or a new
build warranty. Whether such a claim is ultimately successful will
depend on the coverage available under the policy. Regardless, the
buyer will need to notify their insurer of the claim as soon as
they identify the defect to mitigate the risk that the insurer
rejects the claim on the basis that it was not notified in
time.

The seller

If insurance is unavailable the buyer may look to pursue a claim
against the seller. The merits of such a claim will largely depend
on whether the seller owes a positive obligation to the buyer, such
as an obligation to make sure any information they provided about
the property is correct. Factors such as whether the seller has any
assets to meet any liability arising from a claim will also
determine whether it is worthwhile.

The advisers

If for whatever reason a claim cannot be made under an insurance
policy or against the seller, the buyer could look to any advisers
that assisted them in their purchase to make things right (such as
conveyancers, surveyors or financial advisers). Such a claim would
be based on whether the adviser was negligent because they failed
to spot or otherwise deal with the risk of the defect.

These types of claims can be attractive because the advisers
usually have the benefit of insurance which will cover them if they
are found liable. The merits of any such claim will ultimately
depend on what exactly went wrong, the adviser’s role and the
terms of their service contract.

The builder

Finally, if the defect was caused by the work of a builder, then
the buyer could look to pursue a claim against them. The merits of
such a claim will depend on the builder’s relationship with the
buyer. Generally speaking, the more tenuous the link between the
buyer and the builder, the more challenging this type of claim can
be.

To wrap it up

If a buyer has bought a defective property then they will
probably want to fix it as soon as possible. How the buyer
approaches that objective will depend on their available resources,
which (if insufficient) could prompt the buyer to pursue one or
more of the types of claims outlined in this article in order to
procure compensation to fund the remedial works.

A buyer in that situation will need to carefully consider their
options in order to choose one that achieves their objective in the
most cost-effective way possible. Russell-Cooke’s team of
specialist litigation lawyers can provide bespoke advice and
assistance to help resolve such a situation.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.