The article deals with the legal treatment of land shortages in case law, with particular focus on two judgments from the Supreme Court, which resolve a different practice in the two high courts.
The question of the legal treatment of land shortages has been thoroughly discussed in various articles, but the issue is also still highly topical, as many legal cases are still pending on the subject.
On August 30, 2013, the Supreme Court issued two judgments on the issue, and the judgments now definitively clarify that area defects are not covered by the seller's exemption from liability under the Consumer Protection Act in the Acquisition of Real Property.
In short, defects in real estate are divided into actual defects and legal defects. Actual defects include everything that cannot be described as a legal defect. Actual defects are characterized by the fact that it is possible to pay for them to be repaired physically. Actual defects do not only concern the property itself, but can also concern conditions on the land. However, not all actual defects can also be categorized as physical defects, including, for example, area defects, as the buyer will not have a right to the missing area being added to the property.
Legal defects, on the other hand, are characterized by the fact that the seller did not have the legal authority to sell the property as he did. It may be that the seller did not have the right of ownership, or that the seller sold the property despite a right of first refusal to another party. Unlawful possession is a legal defect.
The Consumer Protection Act in the Acquisition of Real Property, Section 2(1), has the following wording:
"If the buyer has received from the seller a report on the physical condition of the buildings (a condition report) and information on change of ownership insurance, cf. sections 4 and 5, the buyer cannot claim against the seller that the physical condition of a building is defective, cf. however, subsections 2-6. The buyer cannot claim against the seller that a defect should have been mentioned in the condition report."
The wording of the Consumer Protection Act states that the seller is exempt from liability for defects in the physical condition of the buildings if certain conditions are met.
In report no. 1276/1994 p.159, the committee behind the Consumer Protection Act refers directly to the fact that the seller may be exempted from liability for physical defects if a number of conditions are met. The report generally distinguishes between actual defects and physical defects, and it is clear that it was the committee's intention that the seller should only be exempted from liability for physical defects.
The committee behind the law, cf. report no. 1276/1994 p. 161, intended to ensure that most shortage problems (would) be averted in advance, and not to completely rule out that buyers could assert objections to defects at all. From p.137 of the report it appears that If a condition report has been prepared in connection with the transfer of real estate, its central legal effect in the relationship between buyer and seller will be that errors mentioned in the report cannot later be invoked as defects.. And on page 148, that there can This strengthens the position of consumers when purchasing real estate by limiting problems with physical defects. And page 154, that Even if a condition report is available, the parties will not be able to be completely sure that no shortage problems can arise after the transaction is completed. It has thus never been the purpose of the Consumer Protection Act to completely prevent a buyer from claiming compensation or a proportionate reduction from the seller in the event of defects.
On page 149 of the report it is stated that When purchasing real estate, both the buyer and the seller are usually unprofessional, and therefore "consumer protection" should be aimed at both parties as much as possible... Limiting the problems of defects should therefore be done in a way that benefits both the buyer and the seller..
As a consequence of the fact that area deficiencies are not a physical deficiency, a buyer cannot insure themselves against the property's area turning out to be different from what the seller stated.
In 2010, however, the Eastern High Court issued a judgment, U 2010.343 Ø, in which the court concluded that a lack of area of 27 m2 was a physical defect in the property, and that the seller was exempt from liability for the same reason through the Consumer Protection Act when acquiring real estate, as the seller had previously submitted a condition report and offered to pay half of a change of ownership insurance.
The judgment has since – rightly – been sharply criticized, including by former Chief Justice HP Rosenmeier in U 2010B.210, and as stated above, the judgment is in stark contrast to the report and the intentions behind the Consumer Protection Act, as the judgment only protects the seller, but renders the buyer without rights.
The Eastern High Court errs in U 2010.343 Ø because the Eastern High Court makes actual defects and physical defects the same. Physical defects in the property are a segment under actual defects. But they are not the same. There are other actual defects than just physical defects, including area defects and defects in the land in general. With the two new judgments from the Supreme Court, U 2010.343 Ø no longer has any precedential value.
The Western High Court subsequently made the opposite decision in two cases in 2011. In the first case, where the area deficiency amounted to 17 m2 of a property sold as being 113 m2, the Western High Court stated that "The area deviation is not in the nature of being a physical defect in the house."
In the second case, the area shortfall amounted to 28 m2 of a property sold as being 150 m2. Here, the Western High Court stated that this was a actual shortage, and continued:
However, this defect cannot be considered to be a defect that has such a relationship to the physical condition of the building that it falls under section 2(1) of the Act. It must be emphasized that the physical condition of the property as such is as assumed, and that the buyer therefore has no right to change this condition. The defect, however, is that the property cannot be described as having a living space as stated in the sales list and thus cannot be resold as such.
The Western High Court thus shows, unlike the Eastern High Court, that it is aware of the distinction between physical and factual defects.
The two judgments from the Western High Court thus stood in stark contrast to U 2010.343 Ø. This was also the main reason why the two judgments were brought before the Supreme Court, as an untenable difference had arisen between the case law of the Eastern and Western High Courts.
With two judgments of August 30, 2013, the Supreme Court upheld the judgments of the Western High Court from 2011, thereby clarifying the legal position to a significant extent.
The Supreme Court's reasoning in the two cases is essentially identical.
The concept of deficiency
In one case, the Supreme Court initially had to decide whether a lack of living space was a legally relevant deficiency at all. The Supreme Court stated the following:
"There is, among other things, a defect in an item of sale if the seller has provided incorrect information,
which has had an impact on the buyer's assessment of the object. It was stated at the time of the sale of the property that the living area was 113 m2, but a subsequent measurement has shown that the area is only 95.7 m2.
This is a not insignificant area deviation, and the size of the living area usually has a large
importance in determining the price of a family home. There is no basis for assuming that it
The situation is different in the present case, and the Supreme Court therefore accepts that the incorrect
information about the property's living area constitutes a deficiency.”
Act on consumer protection in the transfer of real estate, etc.
In both cases, the Supreme Court was then required to decide whether land shortages fall within or outside the scope of the Consumer Protection Act. The Supreme Court ruled unanimously in both cases:
“According to Section 2(1) of the Act, a buyer of real estate cannot, as a rule, claim against the seller that the physical condition of a building is defective if the buyer receives from the seller
has received a condition report and information about change of ownership insurance.
It follows from the purpose of the provision that sellers should not be exempted from
liability with regard to matters that are generally not covered in a condition report, and
which the buyers cannot insure themselves against. It is not assumed that the building expert's
The survey must include a check of the living space of the property.
Incorrect information about the living area of a property cannot be considered a defect that has
such a relationship to the physical condition of the building that it is covered by section 2(1) of the Act. There
It must be emphasized that the physical condition of the property as such is as assumed.
The Supreme Court therefore accepts that the (buyer) of the property is not prevented from making a claim against the (seller) as a result of the provision in question.”
Discount on the purchase price
In both cases, the Supreme Court subsequently imposed a reduction in the purchase price of DKK 50,000 and DKK 150,000, respectively. The Supreme Court states, among other things:
"When deciding whether a buyer in a situation of deficiency is entitled to a reduction in the purchase price,
The starting point is whether knowledge of the relationship would have led to the purchase price being
has become lower. The assessment of this must be made taking into account the size of the impairment on
the time of the transaction – absolutely and in relation to the purchase price – as well as the nature of the relationship relied on.”
The Supreme Court has now ruled once and for all that land defects are not covered by the seller's exemption from liability in the Consumer Protection Act. This is also the logical result, as it maintains a more reasonable balance between buyer and seller than would be achieved by the opposite result.
However, the Supreme Court did not rule on the question of whether the buyer in one case could claim compensation under the rules on warranty or fault. The clarification of this legal issue must therefore await legal developments.
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