What to Do If You Find a Defect in Your Property

  • Advice

After you purchase a property, sometimes you might find a defect in the property. It is best to know what types of laws, insurance, and services are required to avoid troubles with the transaction or interactions with the seller.

First, what is Defect Liability? Defect liability is a seller(developer)’s obligation to compensate for any of the new property’s defects. If you find a defect such as a leaking roof or termite damage in your property, call for the compensation or the property’s repairing to a seller under the sales contract. If the property is not livable due to the defect, you can demand the seller to discharge the contract.

In the real estate transaction, a seller usually sets a time period for which he or she can be held responsible for the property’s defects. The period is usually two years if a seller is a real-estate company. In the case in which the period is extremely short, you might be able to discharge the contract for unfairness. You can find the period of defect liability in the contract. Please be sure to acknowledge the period because if you find a defect after the period ends, you cannot demand compensation or discharge of a contract from the seller. However, if a seller did not intentionally tell you about a defect, you can demand compensation.

Because sellers are responsible for defects, they buy insurance from property insurance company. If the real-estate company goes bankrupt, you can still demand compensation from the insurance company. You can receive insurance money or a payment back under the Act of Securing Housing Quality(住宅の品質確保の促進等に関する法律) even if a real-estate company have gone bankrupt or they are unable to pay for the compensation. According to the act, a seller is responsible for the defect of a house for 10 years after the property transaction. Also, the Act of Housing Defect Compensation(住宅瑕疵担保履行法) obliges a seller to buy  insurance: if the seller is unable to pay for the compensation, a buyer still can get the money back.

If you purchased a second-hand property, the defect liability applies differently. When buying a second-hand property from a real estate company they are usually responsible for defect liability for two years, but if the company runs out of business you may not receive compensation or repairing fees. Moreover, an individual seller tends to make the defect liability period short. Therefore, you should review the contract again before you purchase a second-hand property and ask for the home inspection report in order know of any property defects. If an individual seller or a real estate company buy the insurance, you are able to get the money for repairs.

There are also post-purchasing services wherein a real estate company covers the expenses of property defects. You should consider asking the company what kind of services they offer. The most important thing is to review a sales contract and ensure that there is an adequate defect liability period and to notice any hidden defects of a property as soon as possible.

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