What Are Hidden Defects?
Hidden defects are flaws or problems with a property that were not apparent when the purchase contract was signed. According to Article 197 of the Swiss Code of Obligations (CO), a defect exists if the property does not have the promised or reasonably expected qualities.
It does not matter whether the seller was aware of the defect—sellers are generally liable for all defects that significantly reduce the value or usability of the property. This includes both explicitly promised qualities and those the buyer could reasonably expect.
Types of Defects
Property defects are typically categorized into three types:
- Visible Defects: These are defects that are easily noticeable by the buyer. The seller does not need to specifically point these out.
- Hidden Defects: These defects are not immediately apparent and were unknown to the seller. They are only discovered by the buyer after the sale.
- Fraudulently Concealed Defects: These are defects the seller was aware of but intentionally concealed from the buyer. In such cases, the seller deliberately misrepresented the property.
Examples of Hidden Defects
Here are some common hidden defects in real estate. This list is not exhaustive:
- Odor or noise pollution
- Radon contamination
- Contaminated materials, such as asbestos in the building structure
- Mold or dampness in the basement
- Pest or fungal infestations
- Property subject to historical preservation restrictions
- Lack of permits for construction, additions, or use
Who Is Liable for Hidden Defects?
If a buyer discovers a defect after the sale, they must immediately notify the seller. This notification, or defect notice (Mängelrüge), must clearly describe the issues identified.
If the buyer can prove that the seller intentionally deceived them, the seller remains liable—even if the purchase contract excludes warranty claims. In such cases, the buyer can demand the following:
- Remedy: The seller must fix the defect or provide a replacement property of the same kind and quality.
- Price Reduction: The seller must refund part of the purchase price.
- Contract Termination: If the defect cannot be remedied, the buyer may ultimately rescind the contract.
- Damages: The buyer may claim compensation for losses resulting from the seller’s breach of duty.
Statutes of Limitation for Hidden Defects
Unless otherwise specified in the purchase contract, the liability periods under the Swiss Code of Obligations apply. The seller is liable for all defects for 2 years from the handover date. For construction work, the liability period is 5 years.
In practice, however, it is common for purchase contracts for older properties to explicitly exclude all warranty claims, often with the clause "purchased as seen." In such cases, the seller is only liable for fraudulently concealed defects, and the liability period is extended to 10 years.
For the buyer to make a claim in these circumstances, they must convince the court that the seller was both aware of the defect and intentionally concealed it. Hoowever, proving intent is very challenging.
