A deal gone bad: claims to bring after buying a defective property

Elliot Elsey, Partner in the Russell-Cooke Solicitors, dispute resolution team.
Elliot Elsey
3 min Read

Buying a property is a complicated and stressful process. Although the majority of property transactions proceed without a hitch, it is an unfortunate reality of life that innocent buyers are sometimes left in a situation where they have purchased a defective property that needs to be fixed, through no fault of their own.

This article will outline a number of potential claims a buyer can bring if they are left in such a predicament.

The buyer's objective

The buyer's primary objective when faced with a defective property will generally be to fix the defect. Depending on their available funding options, the buyer may want to fix the problem as soon as possible by incurring the cost of fixing the defect, and then look to pursue a claim to recover that cost and other losses they have suffered.

Alternatively, if the buyer is willing to wait or simply lacks the resources to fix the problem, they may wish to pursue a claim first to obtain sufficient funds to pay for the remedial works. It is always sensible to obtain legal advice at an early juncture in case a proposed course of action prejudices the buyer's position.

Potential claims

The insurance policy

The first claim a buyer should consider is one under an insurance policy, such as a buildings insurance policy or a new build warranty. Whether such a claim is ultimately successful will depend on the coverage available under the policy. Regardless, the buyer will need to notify their insurer of the claim as soon as they identify the defect to mitigate the risk that the insurer rejects the claim on the basis that it was not notified in time.

The seller

If insurance is unavailable the buyer may look to pursue a claim against the seller. The merits of such a claim will largely depend on whether the seller owes a positive obligation to the buyer, such as an obligation to make sure any information they provided about the property is correct. Factors such as whether the seller has any assets to meet any liability arising from a claim will also determine whether it is worthwhile.

The advisers

If for whatever reason a claim cannot be made under an insurance policy or against the seller, the buyer could look to any advisers that assisted them in their purchase to make things right (such as conveyancers, surveyors or financial advisers). Such a claim would be based on whether the adviser was negligent because they failed to spot or otherwise deal with the risk of the defect.

These types of claims can be attractive because the advisers usually have the benefit of insurance which will cover them if they are found liable. The merits of any such claim will ultimately depend on what exactly went wrong, the adviser’s role and the terms of their service contract.

The builder

Finally, if the defect was caused by the work of a builder, then the buyer could look to pursue a claim against them. The merits of such a claim will depend on the builder’s relationship with the buyer. Generally speaking, the more tenuous the link between the buyer and the builder, the more challenging this type of claim can be.

To wrap it up

If a buyer has bought a defective property then they will probably want to fix it as soon as possible. How the buyer approaches that objective will depend on their available resources, which (if insufficient) could prompt the buyer to pursue one or more of the types of claims outlined in this article in order to procure compensation to fund the remedial works.

A buyer in that situation will need to carefully consider their options in order to choose one that achieves their objective in the most cost-effective way possible. Russell-Cooke’s team of specialist litigation lawyers can provide bespoke advice and assistance to help resolve such a situation.

Briefings Real Estate Russell-Cooke property Michael Dimas Elliot Elsey disputes claims litigation residential mixed-use commercial real estate