Legal Updates

A seller of an apartment that withheld materiel information from the purchaser during negotiations is acting in bad faith and must compensate the purchaser

November 4, 2021

A purchaser of an apartment sought compensation from the seller because she failed to disclose hidden material defects in the apartment, including neighbors' complaints about moisture and water damage that originated from defects in the apartment plumbing system.

The Court accepted the claim and held that the purchaser should be compensated for failure to disclose the hidden defects in the apartment during the negotiations. Parties must act in good faith at the stage of negotiating a contract. Therefore, the seller has a duty of disclosure, the scope of which is indefinable and depends on the circumstances of each case. The existence of moisture and water defects in the property is an important information, which is taken into account when making a decision regarding the purchase of a particular real estate property and should also be weighted in the price. Here, the issues of moisture and leaks existed at the time of signing of the agreement and the seller knew about the neighbors complaints even before the transaction as a warning letter had been sent to the seller on that subject but it was ignored. Despite this, the seller stated in the agreement that to the best of her knowledge "there are no hidden defect in the apartment" - a statement that is incorrect. Therefore, the seller is to compensate the purchaser.