Legal conflicts over hidden defects in the purchase and sale of old properties and their resolution in court

According to data published by the National Institute of Statistics ("INE"), the number of property sales in Spain between January and June 2024 was 299,223. Of these, 79% were second-hand properties and only 21% were new homes; so it is correct to say that in Spain there are thousands of second-hand properties sales every year. Homes that, in many cases, are old or in need of renovation.

When properties of these characteristics are acquired (old homes or "to be renovated") it is common that, after the signing of the sale, discrepancies occur between buyer and seller derived from the appearance of pathologies in the property. Normally, what happens is the result of the following sequence of events:  

1. The seller, who is not an expert in the real estate sector, goes to a real estate agency to receive advice and appraise his home. 
2. The real estate agent sends an agent to the home. This will be in charge of appraising the property and preparing the commercial and contractual documentation. 
3. The buyer visits the property accompanied by the real estate agent. 
4. Once the purchase and sale has been signed, pathologies appear in the acquired property. Pathologies allegedly not reported by the seller or the real estate agent.
5. The buyer claims against the seller the repair of those pathologies. 
6. The seller defends himself by claiming that the house was old / in need of renovations, and that this is something that the buyer knew, or was taken into account when setting the price of the sale.

In practice, it is very common to encounter conflicts of this type. Conflicts that can take one form or another depending on the action brought: hidden defects, lack of conformity of the good with the contract, breach of contract, etc. Whatever the action, the questions we ask ourselves are always the same: how are these processes resolved? Is the buyer or seller right?

The answer to these questions will depend on a wide range of factors, such as: the price of the sale, the information provided to the buyer, the seriousness of the pathologies reported, the degree of concealment of the same, etc. However, there are some judgments that allow us to know the majority opinion of our Courts when facing conflicts arising from the purchase and sale of old properties.

First of all, What is a hidden vice and where are they regulated in Spain? 

Hidden defects are regulated in Article 1484 of the Civil Code ("CC"). In accordance with this, "the seller will be obliged to repair the hidden defects that the thing sold has, if they make it unsuitable for the use for which it is intended, or if they diminish this use in such a way that, if the buyer had known about them, he would not have acquired or would have given a lower price for it; but he will not be responsible for manifest defects that are visible, nor for those that are not, if the buyer is an expert who, by reason of his trade or profession, should easily have known them".

In Catalonia, Book Six of the Civil Code of Catalonia ("CCCat") introduces a novel and very detailed regulation for hidden defects. There, however, there is no mention of hidden defects, but of "lack of conformity of the good with the contract". In this way, article 621-23 CCCat establishes that "the seller is liable for the lack of conformity that exists at the time of delivery of the good or its complete installation and manifests itself during the following three years".

Due to the youth of the Catalan law (and the obvious parallels between that law – CCCat – and the common one – CC -), the Catalan Courts have been relying on common jurisprudence to resolve cases of "lack of conformity of the good with the contract". In other words, to determine whether an asset is (or is not) in accordance with the contract, Catalan judges resort to the commonly accepted requirements to declare the existence of hidden defects. 

In this regard, the Judgment of the Provincial Court of Girona No. 266/2022, of 15 June and the Judgment of the Provincial Court of Lleida No. 80/2022, of 1 February. The latter establishes the following:

“(…) It is noted that the "lack of conformity" and the "remedies" established in Book VI CCCat are paralleled (in the essence and effects that concern us here) with the regulation of the remediation for hidden defects and the redhibitory and estimatory actions or quanti minoris provided for in articles 1.484 and 1.486 CC (LEG 1889,  27), so that in view of the concurrent factual circumstances in this case and the result offered by the evidence adduced, it could be understood that the legal consequence would be the same (...)"

What characteristics or requirements must a pathology meet to be considered a "hidden defect"?

In accordance with the wording of the above-mentioned rules (CC and CCCat) and the purpose of the legislator, our Courts have ended up defining the requirements that a pathology must meet in order to be considered a hidden defect. These are:

• The defect must be hidden, that is, it must not be known or easily recognizable by the buyer. At this point, it is important to note that in order to determine whether the buyer was aware of the defect (or could not reasonably have been unaware of it), it will be taken into account not only the pre-contractual information received, the location and/or nature of the pathology, but also the rest of the circumstances surrounding the purchase and sale of the property (i.e. transaction price,  training and professional and technical training of the buyer, etc.).

  In this regard, the SAP Barcelona (Section 4) no. 430/2021, of 16 July [JUR 2021\298731] is clear:
  “[T]he defect must be hidden, that is, not known or easily recognizable by the buyer; the person of the buyer is taken into account and the seller is exempted from liability if the buyer is an expert who, by reason of his trade or profession, should have easily known them.”

  The Catalan Civil Code also insists on this last point, even including a provision in this regard in its article 621-26: 
  “[T]he seller is not liable for a lack of conformity known to the buyer or which could not reasonably have been ignored at the time of conclusion of the contract, except in cases of wilful concealment, gross negligence or the seller has assumed the guarantee of conformity.”

• b) The defect must be pre-existing at the sale (and the buyer will have the burden of proving its pre-existence). In this regard, Judgment no. 430/2021 of the Provincial Court of Barcelona is equally clear:
  “[T]he defect must be pre-existing at the time of the sale, without any liability for the defects that have occurred, since the thing must be delivered in the state in which it was when the contract was concluded (Article 1.468 of the Civil Code); hence the buyer must prove not only the existence of the defect, but also that it existed at the time of the perfection of the contract”.
• c) The defect must be serious. In this regard, the Provincial Court of Barcelona (Section 4) is very clear in Judgment no. 430/2021 of 16 July:
  “(…) [T]he vice must be serious; It is required that the defect entail a certain importance, that is, it will only be taken into account, with respect to the thing sold, if they make it unsuitable for the use for which it is intended, or if they diminish this use in such a way that, if the buyer had known about them, he would not have acquired it or would have given a lower price for it. (…).”

Thus, for a pathology to be claimable against the seller, it must meet, at least, the aforementioned three requirements: (1) be hidden; (2) be pre-existing at sale; (3) be serious. 

What happens to the hidden defects behind the purchase and sale of old properties?

Now that we know the requirements that a pathology must meet to be considered a "hidden defect", it is clear that the problem faced by buyers of old properties when making this type of claim is to prove the hidden nature of the defect.

In these cases, hidden is not only synonymous with hidden. It also means that the defect must not be foreseeable and/or reasonable taking into account the characteristics of the property, the conditions of the sale or the professional and technical training of the buyer. 

This last point has led our Courts to dismiss countless claims of hidden defects in the sale of old properties; since, according to our Courts, except in cases of manifest or intentional concealment, whoever acquires an old properties can hardly ignore the existence of defects or pathologies in it. In this regard, the SAP Girona (Section 2) no. 266/2022, of 15 June:

“(…) [T]he mere existence of the defects is not sufficient for the action for hidden defects claimed by the buyer to succeed, as indicated above. In the present case, the defect subsequently known to the roof by the buyer must be of such a nature that it is not expected in a home of the age and construction quality such as the one acquired, which is 34 years old. (…)

The party was not unaware that he was acquiring a home that was 34 years old, the defects found would be inadmissible in a new home, but not in a home of that age (...)".

Thus, it is clear that in the sale of old properties it will be difficult for the buyer to prove the hidden nature of the defect. Unless the parties have expressly agreed in the contract that the property is delivered in perfect condition, it is normal and usual for it to present disagreements (and, therefore, it is normal to expect such disagreements).

Below, we extract some fragments of judgments that reflect the tendency of our Courts to dismiss claims of hidden defects when the age of the property is incompatible with the allegation of concealment: 

• SAP of Albacete (Section 1) no. 53/2006 of 21 April:

"(…)[T]he property in question, which is currently 25 years old, was acquired by [the Buyer] by virtue of a contract of sale when the property was 23 years old, the deficiencies observed being those of the passage of time (...) [T]he buyers were aware of what they were buying and therefore they had to assume as they also assumed to carry out renovations in the acquired property (...).”

• SAP of Santa Cruz de Tenerife, no. 447/2018 of 14 December: 

“(…) [I]t is normal for the plaintiffs to intend to equip their home with the waterproofing and sanitation measures that are currently common, but this does not justify that , having acquired an old and deteriorated property, which allowed them to "determine" the price, they intend to attribute the character of hidden defects to the defects noticed in which,  It should be noted that it was the defendant's habitual residence until the sale, which guarantees the habitability of the property, in order to obtain a greater reduction in the price and thus access a higher quality home than the one actually purchased, distorting the principle of equity that inspires the action brought (...).”

• SAP of Girona (2nd Section) no. 266/2022, of 15 June [JUR 2022\245372]:

“(…) [I]t must be concluded that we are not in the presence of any hidden defect in the present case in view of the characteristics of the house, since it was not a new construction but was about 34 years old. In the present case, it means that the defect discovered by the buyer should be of such a nature that it would not be expected in a home of its age, which is not the case in the present case".

Looking at these judgments, it seems that what our Courts seek is to prevent those who acquire an old property, paying a lower price for it than they would pay for a new or renovated home, from later being able to finance its repair or reform at the expense of the seller. 

Applying this reasoning, Ceca Magán Abogados has very recently obtained a favourable judgment (which is now final). This is Judgment no. 190/2024, of 30 July, of the Court of First Instance and Instruction No. 1 of Sant Feliu de Llobregat. This takes into consideration the age of the home to end up rejecting a claim of hidden defects:

“(...) It must be concluded that there is no evidence of non-compliance with the seller's obligation to deliver in the acquisition of the property (...). The defendants sold the plaintiffs a house that was thirty years old, unrenovated, habitable, which they had visited on several occasions before the contract, and from which they were able to obtain all the information they requested. (...).”

Now, as we indicated at the beginning, the one we have just explained is a common rule, but not absolute. This means that the buyer of an old property will always be eligible for compensation for hidden defects. Its viability, however, will depend on being able to demonstrate that, despite the age of the property, taking into account the specific circumstances or conditions surrounding the sale, the defect(s) exceeds what could reasonably be expected. 

What should each party do in this dispute arising from the sale and purchase of old properties?

In view of what we have just explained, there are certain strategies, or precautions, that will help us avoid (if we are sellers) or ensure (if we are buyers) the accrual of compensation for hidden defects. 

What should the buyer do?

If, as buyers of an old property, we want to avoid that the age of the property is an impediment when claiming defects / defects known after the purchase, we must ensure that the contract includes a description of the state of the property, in general, and of those elements of it that concern us.  in particular. 

In other words, the contract must state that the property, despite its age, meets certain conditions/characteristics. It will be the breach of these conditions that will allow us to claim hidden defects or even a breach of contract. 

What should the seller do?

If, as sellers of an old property, we want to prevent our buyer from claiming damages due to the age of the property, it does not hurt to include in the contract references to the age of the property, or to the fact that the buyer knows and accepts the condition of the property. 

What we recommend at CECA MAGÁN Abogados

Thus, it is clear that the viability of a claim for hidden defects will depend, basically, on the fact that all the requirements demanded by our jurisprudence can be proved. That is, it must be proven that: (1) the defect is hidden, (2) it is pre-existing for sale, and (3) it is serious.

Precisely for this reason, it is not easy to access compensation like this in cases of sales of old properties. And, as can be seen from the judgments referred to above, our Courts understand that whoever acquires an old home can hardly ignore the existence of defects or pathologies in it (and, consequently, the hidden nature of the defect will be lacking).

For this reason, we recommend that all buyers of old properties take certain precautions to safeguard their right to claim compensation for hidden defects. Contact our expert lawyers to discuss your case.

Luis Valverde

Lawyer in the litigation and arbitration department