Consumer Sales and Guarantees Directive, Article 3 Consumer Sales and Guarantees Directive, Article 5

When a buyer as an investor purchases real estate property and he later finds out after the conclusion of the contract that the building permit does not exist, it can be considered  a lack of conformity of the real estate. Yet, since he is an investor, it was expected of him to explore documentation. Since the investor, as a buyer, should have known that the building permit was not issued, he does not have any rights arising from the fact that the material defect exists.

The subject of the dispute is the plaintiff's claim for damages due to material and legal defects of the property. The lawsuit is based on the allegation that the defendant sold him a property with illegally constructed facilities, for which no location and construction permit was issued, and with illegally constructed connections, due to which he paid higher amounts of utility and water contributions than expected, which is considered  a restriction of public law. All of the above, along with the fact that he bought from the defendant real estate with facilities with a total volume of 2,837.49 m3, and a new building volume of 4,484.00 m3, led to the plaintiff finally claiming from the defendant compensation for damages regarding higher paid water and communal contribution in the amount of HRK 161,234.21, of which the amount of HRK 153,224.46 refers to higher paid communal contribution (2,837.49 m3 x HRK 54.00), and HRK 8,018.75 to higher paid water contribution (2,837.49 m3 x HRK 2,826).

The legal issue on which The First and Second Instance Courts disagreed was as follows: Is the lack of a building and location permit a material and legal defect of the sold real estate which consists of land with a building?

With regard to the Croatian legislation on building and the trust in the information given from the land register, the Court considers whether the buyer could have known of the defect.

The lack of a construction permit represents a material defect of real estate in terms of the provision of Art. 401. st.1. (3) of the Obligations Act (OA), because the real estate does not have the property and characteristics that are explicitly or tacitly contracted or prescribed. According to the facts of the case, this is construction land in the business zone purchased for the purpose of construction of new buildings and adaptation of existing buildings for which the investor, in terms of the provisions of Art. 27 of the Construction Act (OG numbers: 77/92, 82/99, 26/93, 29/94, 33/95, 91/96, 52/99), was obliged to obtain, before the start of construction, the construction (building) permit, meaning it is a defect prescribed by law, yet despite this, The First Instance Court rightly rejected the claim.

Regardless of that, in relation to the responsibility for material defects, it is necessary to point out that according to the provision of Art. 402. Paragraph 1. of the Obligations Act (OA) a seller is not liable for defects if at the time of the contract they were known to the buyer or could not remain unknown to him. In this case, those defects are such that a person with average knowledge and experience of the same profession of the buyer could easily have noticed them during the usual inspection.

The plaintiff as an investor was able to inspect the collection of documents, catastro, or competent building permits regarding whether a building permit was issued for the constructed buildings, all the more so because he was aware of the manner in which the defendant acquired ownership of the real estate in question and the defendant handed him all the documentation at his disposal. Therefore, both his failure to be interested in the legality of the construction and the fact that these deficiencies could not have remained unknown to him both during the negotiations and at the time of the conclusion of the contract are to the detriment of the defendant.

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This case sets an example for other cases where there is a difference between legal and material defects.