Defects and disclosure

Energy performance certificates were introduced at the beginning of 2010. They are important for legal action related to real estate, but, as they have only existed for a short time, they are still not widely known about. It is therefore worth having a look at the impact of this amendment on the Construction Law

What is an energy performance certificate? This is a document that specifies the amount of energy required to satisfy the various needs connected with building maintenance and also details the possible improvements to the energy efficiency of a building. It is usually issued for new projects and also when a given building is planned for sale or lease. The certificate provides information on the energy demand of a building, which helps to determine the cost of its maintenance. However, it does not unambiguously state whether a given building is energy-efficient or not, but does indirectly help to forecast the share of the future costs of energy in the building's maintenance. Under the amended Construction Law, if a building is sold, the seller has to provide the purchaser with an energy performance certificate under which the subject of the agreement will be transferred. In the case of a lease agreement, the lessor has to provide the lessee with an energy performance certificate. In both cases the document cannot be issued by the owner of the building or premises.

Breaching the regulations
First, we must conclude that in both the above cases the amended Construction Law does not allow any leeway but instead imposes the obligation to provide or make available the energy performance certificate. Although failure to do so will mean breaching the law, the amended Construction Law does not provide for any sanctions for such a breach. If the content of the legal action, i.e. the purchase or lease agreement, is drawn up correctly and in the proper form (a notarial deed for transferring the title to the property and the owner's title to premises - 'spółdzielcze prawo do lokalu'), then there will be no grounds to claim that the lack of an energy performance certificate places the agreement in breach of the law and therefore - pursuant to the provisions of the civil code - invalid. However, the consequences of breaching the law by failing to provide or make available energy performance certificates remains little known in the light of current regulations.
If an energy performance certificate has been provided upon the sale or lease of a building or premises but contains false information regarding the amount of energy, this constitutes a physical defect under the provisions of the civil code regarding the statutory warranty for faults.
An energy performance certificate that provides false information on the amount of energy required to satisfy the various needs relating to building maintenance entails that the subject of the agreement lacks the characteristics that the seller or lessor has guaranteed to their contractor, which - pursuant to the civil code - may constitute a physical defect of the sold or leased property.
Therefore, in the case of a sale, the purchaser would be entitled to rescind the agreement or to claim a price reduction in a proportion equal to that in which the value of the building or premises was falsely given in the energy performance certificate, by calculating the value after taking account of the existing defects. In the case of the lease of a building or premises, the lessee will be entitled to rescind the lease agreement or to claim an appropriate rent reduction.

The importance of being earnest
In order to preserve and execute the rights under the statutory warranty for physical defects, it is necessary that the purchaser or lessee notifies the seller or the lessor about the defect within one month of its disclosure and, in the event that the examination of a given building is a common practice for a given type of relation, within a month of the lapse of the period during which - after all the due diligence has been carried out - such a defect could have been disclosed. Failure to perform such due diligence translates into a loss of rights under statutory warranty.
In the case of a sale transaction between commercial entities or individuals, the purchaser may lose its rights under statutory warranty if it has failed to examine the property at the proper time and in the correct manner and has also failed to immediately notify the seller about the disclosed defect. If a defect was subsequently disclosed the purchaser may lose its rights under statutory warranty if it has failed to notify the seller immediately after discovering it.
Similar rules apply to the rights of the lessee towards the lessor of a building or premises. Notwithstanding the right to rescind the agreement or to claim a price reduction, the purchaser and the lessee may also claim redress for damages suffered due to the defect.
The rights under the statutory warranty for physical defects expire after one year, and, as regards the defects of building, count from the date when the property was handed over to the purchaser.
Therefore, the rights of the purchaser or lessee of premises expire one year after handing over the premises and the rights of the purchaser or lessee of a building expire three years after the handing over of the building.
The rational conclusion to all this is that both of the parties to sale or lease transactions of buildings or premises should bear in mind the energy performance certificate and its importance for real estate transactions. Purchasers and lessees may demand to see the certificate and check its reliability, and if it provides false information, then they have the right to claim a reduction in the sale price or rent, or even rescind the agreement altogether and claim compensation.
Tomasz Kurek, advocate, partner and head of the real estate and construction department, CMS Cameron McKenna