OGH: Warranty Waivers in Real Estate Contracts

Jul 7, 2023 Benn-Ibler Rechtsanwälte

The seller of an apartment is liable for hidden construction defects (i.e., defects that are not visible to the buyer during a thorough inspection), if there is an exclusion of warranty but the contract states that the buyer has inspected the apartment and is aware of its condition.

In the case at hand, the buyers of an apartment are asserting warranty claims against the seller arising from the private purchase of an apartment and owing to construction defects. The apartment had been described in the estate agent’s exposé as being in ‘very good condition.’

The defects had not been recognizable by the buyers during the inspection. The defendant seller believed his liability was contractually excluded because the purchase contract of the apartment contained the following clause:

‘The Purchasers have inspected the subject matter of the contract in detail before signing the contract and therefore know its nature, location, and external condition. The transfer and taking over of the purchase object shall take place in the existing actual condition of the same, without any liability of the seller for a certain state of construction or maintenance of the object or any other certain actual property or condition of the property.’

The court of first instance dismissed the claim on the merits of the agreed exclusion of liability. The court of appeal, however, ruled that the claim was justified. In principle, a comprehensive waiver of warranty also applies to ‘hidden' defects.’ However, the present contractual provision must be understood to the effect that liability is assumed for defects that were not apparent during the inspection.

The Austrian Supreme Court (Oberster Gerichtshof, OGH) confirmed the decision of the court of appeal. In previous decisions, comparable contractual provisions had been interpreted to the effect that warranty should always apply only to those defects that had been detectable by a buyer upon careful inspection.

This follows from the fact that the exclusion of liability is connected to the information to the buyer that the buyer is familiar with the condition of the object of purchase and is able to inspect it.

OGH 1 Ob 79/23h (23.05.2023)