Current Case Law – Seller's liability for known defects of a building not disclosed to the buyer, despite a warranty exclusion

1. On statutory warranty law:  

It should be noted that, under statutory law – which can, however, be contractually modified (see below) – the seller of a property is liable for,  

• the purchased item having the agreed-upon or ordinarily assumed characteristics;  
• the purchased item being usable according to its description, the nature of the transaction, or the agreement made¹.  
• Whether the purchased item conforms to the contract is also determined by the characteristics the buyer can expect based on the seller's statements, particularly in advertising².

The seller is also liable under warranty,  

• if they attribute characteristics to the purchased item that it does not possess, or that are to be considered "tacitly agreed upon" either explicitly or by the nature of the transaction,  
• if the seller conceals unusual defects or encumbrances of the purchased item, or
• if the seller falsely claims that the purchased item is suitable for a specific use or is free from ordinary defects and encumbrances³.

However, the warranty is excluded if the defects of the purchased item are "obvious" or if encumbrances on the purchased item (e.g., easements, real burdens) are apparent from public records (e.g., the land register).  

In this case, the seller has no warranty obligation, except in the event of fraudulent concealment of the defect, or in the event of an express assurance that the item is free from all defects and encumbrances.⁴.  

However, for debts and arrears attached to the purchased item, the seller must always provide a warranty under statutory law.⁵.  

2. Contractual Disclaimer of Warranty:

It is generally permissible⁶, to exclude the seller's warranty obligation in whole or in part in the purchase agreement. A contractual exclusion of warranty reaches its limit where, in an individual case, it violates good morals or mandatory law, such as against the Consumer Protection Act, the Energy Performance Certificate Presentation Act, or against § 37 para 4 WEG 2002.  

Furthermore, according to case law, disclaimers of warranty are often to be interpreted restrictively⁷ or are overridden by implicitly warranted characteristics.  

3. An interesting case that went all the way to the Supreme Court:  

I will now report on a recent case: Here, the buyer of a condominium unit asserted warranty claims against the seller for extensive water and moisture damage to the common areas of the property – the basement – despite a contractual exclusion of warranty, and ultimately prevailed in court. In this specific case, the seller had not disclosed to the buyer the extensive moisture damage, which was known to him, before the contract was concluded. The buyer could only discern that the property had 'damp plaster and a few fallen tiles'.  

The Supreme Court ruled as follows: Even if the buyer was aware of superficial moisture in the basement, this does not mean that the handover of the property with such (extensive) moisture (water) damage, extending over the entire basement of more than 1000 m², would be in conformity with the contract. Therefore, the buyer is entitled to payment of the share of the renovation costs corresponding to their acquired co-ownership interest. The fact that the damage is covered by an insurance policy from the insurer does not reduce the seller's liability.  

At the same time, the Supreme Court refers to its consistent jurisprudence on contract interpretation: According to this, a warranty exclusion contained in the purchase contract can be attenuated or limited by implied assurances arising from the conduct of the contracting parties – such as how the seller presented the property to the buyer, from their statements in word and writing, and from other acts or omissions.  

Here, the Supreme Court ruled that the buyer's knowledge of damp plaster and a few fallen tiles did not yet mean that the buyer intended to consider the unrepaired pipe damage and the saturation of the floor structure throughout the entire basement as being in conformity with the contract⁸.  

Given that the enormous pipe damage and the saturation of the floor structure throughout the entire basement – unlike other defects – had not been explicitly mentioned in the purchase contract, the buyer was entitled to conclude that such a serious defect did not exist. Accordingly, the contractual waiver of warranty did not extend to the absence of the implicitly, though conclusively, assured characteristic of a proper condition⁹.  

OGH 23.9.2025, 5 Ob 200/24h

Note: At first glance, the statement that the fact that the damage is covered by an insurance policy from the insurer does not reduce the seller's liability to the buyer is surprising; however, this is consistent with previous jurisprudence¹⁰. However, the seller will be able to demand from the individual condominium owners the surrender of the insurance benefit that would otherwise accrue to him, based on the law of unjust enrichment (§ 1041 ABGB).  

Footnotes

¹ Section 922 para 1 ABGB.

² Section 922 para 2 ABGB (in a highly abridged version).

³ Section 923 ABGB.

⁴ Section 928 sentence 1 ABGB.

⁵ Section 928 ABGB.

⁶ OGH SZ 61/162; 1 Ob 670/88; 7 Ob 562/94; 6 Ob 138/98g; 2 Ob 176/10m; 9 Ob 50/10h; 8 Ob 7/10b; RIS-Justiz RS0018564.

⁷ OGH SZ 61/162; 6 Ob 653/86; 8 Ob 654/86; 9 Ob 3/09w; 9 Ob 50/10h; 8 Ob 7/10b; 1 Ob 38/14s; 2 Ob 176/10m; 7 Ob 28/13p; 6 Ob 125/14x; 9 Ob 45/17h.

⁸ This contrasts with jurisprudence that presumes the buyer's knowledge of the defect – and therefore denies warranty claims if the outward appearance of the object suggests an "internal" defect, even if its cause, effect, and extent are not discernible to the non-expert buyer (OGH 1 Ob 14/13k), e.g., due to faulty moisture insulation (OGH 6 Ob 390/97; 7
Ob 97/55, HS 1809).

⁹ OGH RS0018523 [T10].

¹⁰ OGH RS0081373 (purpose of Section 67(1) of the Insurance Contract Act).