Buying a home involves a lot, and one of the buyer's main responsibilities is to conduct a thorough investigation of the property. This is also known as the duty to investigate and can have major legal implications. In this blog post, we will discuss a buyer's duty to investigate, including the legal aspects and potential risks, using relevant examples.
Buyer's duty of inquiry
The duty to investigate means that the buyer has a duty to carefully inspect the property and gather information about its condition and features. This includes not only the physical properties, but also legal aspects such as title deeds, easements, zoning regulations, the status of an association and any building restrictions related to the property.
If a buyer neglects his duty to investigate, there can be several legal consequences. In many cases, it is assumed that the buyer knows (or could have known) the characteristics of the house purchased if he had properly performed his duty to investigate. Therefore, in the model purchase agreement, the buyer agrees to the condition of the home as purchased. Therefore, any issues that surface after the transfer are almost always the responsibility of the buyer, such as:
Example 1: Hidden construction defects
Suppose a buyer buys an old house without performing a structural inspection beforehand. After the purchase, the buyer discovers that the house has serious structural defects, such as foundation problems. Because the buyer failed to conduct a structural inspection, he may not be able to file a claim against the seller or other parties involved to recover the cost of repairs.
In 2020, there was an interesting ruling by a judge that the buyer's duty to investigate actually overrides the seller's duty to report in some cases. This may mean that even if the seller knew about a defect, the buyer should have made more efforts to actually investigate it as well.
Another interesting ruling comes from 2021, in which a buyer (assisted by a buying broker) held a seller liable (assisted by a selling broker) because of foundation problems. Regardless of various signs that either the selling broker or the seller knew about the foundation problems, the court nevertheless ruled that the buyer breached the duty of investigation by failing to have a structural inspection performed.
Example 2: Hidden legal disputes
A buyer purchases a home without researching any legal disputes that may affect the property. After the purchase, the buyer discovers that the property is involved in an ongoing dispute over an adjacent piece of land. Because the buyer neglected their duty to investigate, they may face legal action and financial consequence from the dispute.
Fortunately, in legal conflicts, the seller's duty of notification usually weighs a lot more heavily than in the previous examples. For example, this ruling established that ongoing conflicts within the VvE are a valid reason (error) to dissolve the purchase agreement free of charge.
When buying a new home, it is important that as a buyer you take the duty of investigation seriously. Conducting a thorough investigation into both the structural and legal aspects of the home is important to avoid problems later on. It is therefore always advisable to include a structural inspection in the offer when you buy a property, this way you can very easily fulfill the effort obligation for the obligation to investigate. Last tip: plan this inspection before you sign the purchase agreement, this way the seller can move on quickly if the inspection gives you reason to withdraw the offer!