Legal aspects to consider when buying or selling a house in Finland
When considering buying a house, there are lots of things one should take into account. Buyer and seller have many essential duties before and after the sale. If neglecting some of the duties, a long and expensive court process may follow. In this article we will take a closer look at some of the duties.
In the sale of a second-hand flat the responsibility and liability of the seller is extensive. The scope of the responsibility of the seller is extensive both with time and subject matter. According to the Finnish Land Code, the buyer has five years to notify the seller of a defect in quality or other mistake in the contract. Those five years are counted from the moment of transfer of possession.
A restriction on this right of the buyer is that the notification of a mistake must be done within a reasonable period from the actual notice of an error. According to case law what is meant by a reasonable period here is a couple of months, which can be extended if the situation has special circumstances.
Notification of errors
It is clear however that the notification of an error should be done as soon as a mistake or error has been noticed. The notification should specify accurately what the mistake is and what the buyer is expecting or demanding from the seller as compensation, when the amount of repair costs or other damage is found out. Thus, when the decision of drawing up a notice of a mistake is made, it is recommended to seek legal counsel so that any loss or legal rights due to a mistake would not happen.
The liability of the seller is also extended to mistakes which the seller did not know about or should not have known about. This is called a hidden defect. The seller is however protected from these kind of mistakes by a 'threshold of significance', which requires that the hidden defects should be significant enough.
After buying a house in Finland, notifications of defects or mistakes must be done within a reasonable period from the actual notice. According to case law, a reasonable period here is a couple of months
The determination of significance happens on a case-by-case basis, but as a common rule if the repair costs of the hidden defect are over 5% of the selling price the defect is deemed significant enough. This 5% threshold however can only be thought of as an overall guideline as there are many things that determine the threshold of significance in the end.
According to the Finnish Land Code governing all sale of property in Finland, the ground rule is that there is contractual freedom in the sale of property in Finland. According to the principle of contractual freedom, the seller and the buyer can freely decide what they are contracting on and with what clauses. However, in the sale of property, the contractual freedom is not absolute, meaning that some of the aspects of the sale come straight from legislation.
For example, according to case law, it is not clear whether a natural person acting as a seller can limit their liability of a hidden defect. The starting point here is that the seller should not be able to limit their liability in such a way, but even here the determination is taken on a case-by-case basis. Some opinions in favor of allowing liability limitation point to the common understanding and agreement of the contractual clauses by the seller and the buyer as a justification of limitation by the seller.
Effective and legal use of liability limitation clauses usually requires help from experienced lawyers. Practice has proven seeking help from legal counsel usually mitigates and lessens the need and costs of further conciliation and investigation, which naturally can be very expensive.
In order to minimize the risks of an expensive and long-lasting legal process, it is warmly recommendable to contact a professional lawyer already when making the contract of sale.
You should anyhow contact a lawyer immediately, as a buyer when you notice a failure and as a seller when a buyer informs you about a failure. When reacting on time, lots of money, effort and time will be saved, and the possibility to find an effective solution grows extensively, which is always a bargain.
*Ville Peurasuo is a Finnish lawyer expert in real estate law from Autio Associates