Exclusion of warranty when buying real estate? You better watch out!
Exclusion of warranty when buying real estate? You better watch out!

At the end of May 2023, the Austrian Supreme Court once again had to decide a case involving a hidden defect in an apartment purchase agreement (OGH 23.5.2023, 1 Ob 79/23h). The issue at hand was the warranty exclusion regarding mold infestation. This case is a good example for the exclusion of warranty when buying real estate.

The case: Warranty exclusion for mold infestation in the closet space?

The plaintiffs purchased a like-new apartment with a closet space. Subsequently, it was discovered that insufficient insulation during construction led to severe mold infestation due to a thermal bridge. The buyers then sued the seller for warranty exclusion and damages.

Included in the purchase agreement was the following clause:

"The buyers have thoroughly inspected the object of the contract before signing the agreement and are therefore aware of its type, location, and external condition. The handover and acceptance of the purchased item occur in its existing actual condition, without the seller being liable for a specific construction or maintenance condition of the property [...] or any other specific actual property or condition of the property."

It was decided by the appellate court that the claim was justified in principle. The mentioned clause only excludes warranty for visible defects, i.e., defects that are recognizable with careful inspection. Hidden defects, those not visible with careful inspection, are not covered by the warranty exclusion. In this case, the Supreme Court confirmed the appellate court's opinion on the warranty exclusion for mold infestation.

Numerous similar cases in the past

In addition to the present case regarding warranty for mold infestation, the Supreme Court had dealt with numerous similar clauses in the past. From these cases, the following conclusion can be drawn: If the clause indicates that the buyer has inspected the apartment and in this context, warranty is excluded, hidden defects are generally not excluded from the warranty. Especially in real estate transactions, the wording of the warranty exclusion is crucial.

Conclusion and practical tip regarding the exclusion of warranty when buying real estate

Whether there is a right to warranty for mold infestation depends on the provision in the purchase agreement. It is therefore worthwhile to have a real estate contract drafted and reviewed by a professional. We highly recommend that parties who speak English choose a lawyer (or notary) fluent in English. Furthermore, it is strongly advised to select a legal professional willing to draft a bilingual purchase agreement, ensuring a clear understanding of all contract clauses.

Do you have further questions in real estate law?

If you have additional questions regarding warranty for mold infestation or would like us to draft or review your purchase agreement, feel free to visit our services in the real estate law sector and contact us at office@geuer.at or by phone at +43-1-4380072. We can also draft a bilingual agreement, ensuring you understand all clauses. Giving you peace of mind against unforeseen surprises in the future.

We look forward to your inquiry.


Homepage of the Austrian Supreme Court (German)

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