Housing is among the preferred assets for investment in recent years. The quality of the construction is one of the main issues considered when acquiring an apartment now that there is such a wide choice. Therefore, we will focus on some of aspects of the construction warranty under the Spatial Development Act (SDA) discussed in the relevant court practice.
What does the construction warranty grant?
Any builder shall perform the construction works in compliance with the construction documents issued, the regulatory requirements for construction works as well as with the rules for execution of the construction works. They shall also use materials, items, products, facilities, equipment in conformity with the basic requirements for construction works and shall comply with the technological requirements for their use. The fulfillment of these obligations shall ensure the normal use and functioning of the site once the construction works are completed.
The applicable law provides for two types of liability of the builder in order to protect the rights of assignors – construction warranty and the liability for defects.
The construction warranty obliges builders to grant certain qualities and characteristics of the construction works for a certain period of time called warranty period. Builders shall repair and remedy all defects found during this warranty period, i.e., in the period between the commissioning of the construction works until the expiry of the warranty period. It does not matter if the defect existed at the time of the handover of the construction works or it appeared after that.
The liability for defects of construction works is regulated by the Obligations and Contracts Act (OCA). The relevant rules provide that if the constructions works have some defects assignors could require the construction works to be repaired, remedy for the expenses for the repair of the defects, if assignors repair them themselves, or ask for a discount of the price. The provisions for this liability apply only in case the defects were at hand at the time of the handover of the construction works. If the defects are apparent, i.e., they could be easily seen during the inspection of the works, assignors shall exercise the rights above upon the handover of the constructions works. In case of hidden defects assignors could exercise them within five years as of the handover the construction works.
What are the terms of the construction warranty?
Assignors and the builders define the warranty period in the construction agreement concluded between them. However, the terms shall not be shorter than the warranty periods as established in Ordinance No 2 as of 31.07.2003 for commissioning of construction works in the Republic of Bulgaria and the minimum warranty periods for completed construction and assembly works, facilities and construction object (“the Ordinance”). The following warranty periods are among the important ones related to the sale and acquisition of newly constructed buildings:
- For newly constructed buildings and facilities – 10 years;
- For overhaul and reconstruction of existing building structures and facilities – 8 years;
- For reconstructed building structures and facilities after accidents – 8 years;
- For waterproofing, thermal insulation, soundproofing and anti-corrosion works on buildings and facilities – 5 to 7 years depending on the surroundings;
- For all other construction, assembly and finishing works – 5 years;
- For the internal installations of buildings – 7 years, and in case of repair and reconstruction – 5 years;
- For completed installation of machinery, equipment, installations in industrial sites, systems for control and measurements and automatics – 5 years.
The warranty periods commence as of the date of commissioning of the construction site.
When can we rely on the construction warranty for defects?
The right to claims on the basis of the construction warranties arises when the following conditions are satisfied:
- Identified defects or damages no matter whether they have existed upon the handover of the construction site or they occurred later;
- The construction site was used in conformity with the instructions for proper storage and proper use during the warranty period;
- Notice to the builder regarding the identified defect made within the warranty period.
Is the builder liable for the defects I found?
Rarely does anybody purchase housing directly from the builder and to make it more complicated the warranty period is usually stipulated in the construction agreement concluded between the builder and the investor from who you purchase your apartment. Therefore, one may ask: “Could I claim the repair of the defects within the warranty period directly from the builder although I am not a party to an agreement with him?”
There are two interpretations of this issue. The first one states that since you are not party to the construction agreement you could not rely on the warranty agreed with it. Therefore, the investors resort to various legal techniques to provide the purchasers with the benefits of the construction warranty.
According to the other opinion, the legal ground for the construction warranty is not the construction agreement but the respective provisions in the SDA. Therefore, any person who suffers any damages from the defects or as a result of the defects of the construction works shall be entitled to remedy from the builder within the warranty period. I.e., the purchaser of an apartment in a building shall also be entitled to all claims granted within the warranty period.