Content of this article:
The starting point is that you can not withdraw from house purchases without legal grounds. The way to get out of the contract is to terminate the purchase or there may grounds for the contract being void. Terminating a house purchase means that the agreement is cancelled and the parties get their benefits back. This can not be done without further ado. Among other things, you can not cancel the house purchase before taking over, if you no longer want to buy the home. After the agreement has been entered into, the starting point is that the agreement must be kept. To be able to terminate, it is required that there is a significant breach of contract. In this article, we will look at when you can terminate a purchase and sale of a home and what kind of compensation you can get.
Termination of house purchases due to defects
To be able to terminate the house purchase, there must first be a defect. The starting point is that there is a defect if the house does not correspond to what has been agreed upon in the contract. For example, if it is agreed that there will be a storage room in the house, but it is not there, there will be a defect. One must therefore always look at whether the house complies with what the agreement says.
Even if no defects can be read out of the agreement, there will also be a defect if the rules in the Alienation Act § 3-2 to 3-6 are violated. This is, among other things, if the property does not suit the purposes for which a dwelling is usually used or is not following public law requirements.
In many cases, the home will be sold “as is”. Then the deficiency rules described above do not apply. On the other hand, there will still be a defect if incorrect information has been provided, missing information or the property is in significantly worse condition than expected, cf. the Alienation Act § 3-9.
However, the fact that there is a defect is not sufficient to be able to terminate the purchase. The defect must be serious to obtain this right.
Serious defect
What constitutes a serious deficiency is an overall assessment. The defect or deficiencies must generally give the buyer a reasonable reason to withdraw from the contract. The starting point in the assessment must be taken in the nature and extent of the objective deficiency. If, for example, a house is found to have major damage and large repair costs will be required, you may have the right to terminate. However, there is no basis for setting up a percentage theory to assess the right of cancellation. The size of the repair costs is then assessed against the purchase price, and if it exceeds a certain percentage, there will be a significant shortcoming. However, the Supreme Court has said that it will serve as an aid in the assessment. Practice shows that there will usually be a serious defect if the repair costs exceed 15-20% of the purchase price.
If the seller has withheld information about moisture damage in the home, this will be a defect. If the repair costs for the moisture damage will be more than 15-20% of the total price for the house, there will often be a basis for terminating the purchase.
That this percentage doctrine does not always apply must be seen in connection with how the corrections can be made. If the repair costs are above 15-20%, it can still not be significant, if the defect is easy to repair. This can be the case if it takes a short time to repair and the probability of a repair being successful is high. The opposite will be the case with less extensive repair costs, which are difficult to repair. Then there may still be a significant defect if it takes a long time to repair and the probability that the repair will succeed is low.
Another important factor will be the significance of the defect for the buyer. If it is important for the buyer that the property has special traits, this could be of crucial importance. Eg. That the property has a lift for a disabled buyer. However, the seller must gain knowledge of the significance of the defect for the buyer, before the sale.
It will be important for the termination question if the defect can be repaired through other remedies for breach of contract. If the storage room does not follow as the agreement said, price reductions will easily be able to restore the financial consequences of the defect. Where the defect is of special importance to the buyer, cf. above, a price reduction will be less useful for restoring the breach of contract.
Other factors that may be important are the buyer’s expectations and the seller’s blame. If the house is new and marketed to a high standard, it will give the buyer an expectation of a home without major defects. If the seller has intentionally omitted information about the defect in the house, this will also indicate that the serious requirement is fulfilled.
Whether there is a right to terminate the house purchase will in any case always be a specific assessment. The factors above can be used as a starting point for the assessment, but there can always be specific circumstances that make the assessment different than normal.
Termination from seller
It is not only the buyer who has the right to terminate a house purchase. The seller also has the right to terminate the sale of a house, if the buyer commits a significant breach of contract, cf. the Alienation Act § 5-3. It is mainly late or non-payment that will give the seller the right to terminate. The fact that the buyer does not pay on time is usually not enough. An additional deadline must be set and it is only when the buyer does not comply with this, that termination is relevant.
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