The seller concealed damp in the apartment: what you can claim

What happened in the case?

Our client bought a second-hand apartment in Tel Aviv. After delivery, damp appeared that turned out to be recurring. It emerged that the sellers had known about the problem, and that their own attempts to repair it had failed. The buyer claimed that he had been misled in the negotiations and that the defects had been concealed from him.

In the Magistrates' Court, independent professionals were appointed by the court: an engineer, a structural engineer and a project manager for the repairs. Once the extent of the problem became clear, a remedy of rescission of the contract was added to the claim, and the case was transferred to the District Court because of the amount involved.

What was achieved?

• On the court's recommendation, the buyer waived the demand for rescission in exchange for a full repair mechanism.
• An engineer was appointed by the court with the final say; he determined which repairs were required and supervised the works.
• The sellers bore all the costs of the repairs and the supervision.
• A six-month warranty was set for any recurrence of the defect from the same cause.
• The parties later reached a final settlement, and the claim was closed.

What must the seller disclose?

Contract law requires negotiations to be conducted in good faith and prohibits misrepresentation, including misrepresentation by silence, that is, failure to disclose facts that ought to have been disclosed (sections 12 and 15 of the Contracts (General Part) Law, 5733-1973). In addition, under the Sale Law, 5728-1968, a seller who knew of a non-conformity and did not disclose it to the buyer cannot argue that the buyer failed to inspect or to give notice in time (section 16; non-conformity is defined in section 11). Recurring damp is a clear example of a defect that must be disclosed.

What about an "as is" clause in the contract?

The clause protects the seller against defects that the buyer could have discovered by a reasonable inspection, or that were not known. It does not protect a seller who knew of a defect and concealed it.

Rescission or repair: which is better?

Rescinding a contract after the apartment has already been registered, and possibly financed by a mortgage, is a complicated and lengthy process. A full repair under the supervision of a court-appointed expert, together with compensation for loss of value if there is any, gives the buyer a sound apartment in a shorter time. In our case, that was the right solution.

And if you have already sold the apartment at a loss?

Selling the apartment does not cancel the right to sue the seller who concealed the defect. If a defect was concealed from you and caused you to sell the apartment for less than its value, you can claim compensation for the damage. The law grants compensation for damage that the party in breach foresaw, or ought to have foreseen, as a probable consequence of the breach (section 10 of the Contracts (Remedies for Breach of Contract) Law, 5731-1970).

In such a claim, you will usually need to prove three things:

• That the defect already existed at the first sale, and that the seller knew of it. For example: previous repairs, complaints by neighbours or insurance claims.
• That the loss resulted from the defect. Here an appraiser's opinion is important, comparing the value of the apartment with and without the defect.
• That you acted reasonably to mitigate the damage. The law does not require the party in breach to pay for damage that the injured party could have prevented or reduced by reasonable means (section 14 of the same Law). It is therefore important to document what you tried to do before the sale.

Before selling an apartment with a concealed defect, it is advisable to take advice and to document the defect in an expert opinion. After the sale, it is very difficult to prove the condition of the apartment.

How can this be prevented in advance?

• An inspection by an engineer or a leak detection technician before signing.
• A direct written question to the seller about damp, leaks and past repairs.
• A clause in the contract in which the seller declares any known defects.
• A check of insurance files and previous claims, where possible.

When should you consult a lawyer?

Bought an apartment and discovered a defect you were not told about? Send us the contract and the documentation, and we will review your rights.

To arrange a call: 052-5927592, or on WhatsApp using the button on the site.

About the author

Amos Ilan is an advocate (Israel Bar no. 35320) and a notary (licence no. 214444). The office is at 17 Tzahal Street, Ness Ziona, and handles real estate transactions, construction defects, condominium disputes and civil litigation.