Concept & Casuistry

What are latent defects and what types of issues commonly arise in Mallorca and Ibiza?

Latent defects are serious defects that already existed when the property was transferred but could not reasonably have been detected through an ordinary inspection and which significantly affect the property’s intended use or value. Not every defect constitutes a latent defect in legal terms. Only those meeting the requirements established by the Spanish Civil Code give rise to the seller’s liability under the statutory warranty for latent defects.

Article 1484 of the Spanish Civil Code provides that the seller is liable for hidden defects that render the property unfit for its intended purpose or diminish its usefulness to such an extent that, had the purchaser been aware of them, they would either not have purchased the property or would have paid a lower price.

In Mallorca and Ibiza, claims frequently arise in relation to structural damp, water ingress, defective waterproofing, roof defects, concealed plumbing or electrical installations, ground settlement and latent construction defects that only become apparent after the property has been occupied. Similar issues may also arise in rural properties or renovated historic buildings, where certain defects remain hidden at the time of the sale.

However, the seller is not liable for defects that are visible or could reasonably have been identified during a normal inspection, nor for defects that a purchaser with particular professional expertise or technical knowledge should have detected, pursuant to Article 1485 of the Spanish Civil Code.

Remedies & New Builds

What legal remedies are available to the purchaser? What about newly built properties?

The Spanish Civil Code regulates the seller’s liability for latent defects in Articles 1484 to 1499. In particular, Articles 1486 and following grant purchasers two principal remedies:

• The rescission action (acción redhibitoria), which enables the purchaser to terminate the sale where the defect is sufficiently serious.
• The price reduction action (acción quanti minoris), under which the purchaser retains ownership of the property but seeks a proportionate reduction in the purchase price.

The choice between these remedies depends on the seriousness of the defect and the particular circumstances of each case.

Time Limits

Time limits for bringing a claim: caducity versus limitation

One of the most important aspects of latent defect claims is the applicable time limit.

Article 1490 of the Spanish Civil Code provides that actions relating to latent defects must be brought within six months from the date on which the property is delivered.

Although the provision states that such actions “shall lapse” rather than expressly referring to caducity, the Spanish Supreme Court has consistently held that this six-month period constitutes a period of caducity, not a limitation period. This has been firmly established since the landmark judgment of 30 April 1940 and subsequently reaffirmed, among others, in Supreme Court Judgments No. 478/2010 of 8 July and No. 755/2012 of 30 November, all of which confirm the nature of the time limit established by Article 1490 of the Civil Code.

This distinction is particularly important:

• A period of caducity cannot be suspended or interrupted by sending formal notices or making out-of-court claims against the seller. Once the six-month period has expired, the statutory remedies for latent defects lapse.
• A limitation period, by contrast, may be interrupted or suspended in the circumstances provided for by law.

Where the purchaser can prove that the seller knew of the defect and deliberately concealed it, remedies other than those specifically relating to latent defects may also be available, including claims based on fraud or damages, which are subject to the ordinary statutory limitation regime.

“As Is” Clauses

“As is” sales and the waiver of liability for latent defects

In property transactions in Mallorca and Ibiza, it is common for the public deed of sale to include clauses stating that the purchaser acquires the property as a specific asset (“cuerpo cierto”), in its current physical and legal condition, acknowledging and accepting its actual state. In some cases, purchasers also expressly waive the statutory warranty for latent defects provided for in Articles 1484 and following of the Spanish Civil Code.

These clauses are based on the principle of freedom of contract and are, as a general rule, legally valid.

For this reason, it is essential to examine carefully the scope and effect of such provisions before signing the deed of sale, as they may significantly restrict the purchaser’s legal remedies should defects emerge after completion.

Limits of the Waiver

Waivers have limits: fraud and bad faith on the part of the seller

The exclusion of liability for latent defects is not absolute.

Article 1488 of the Spanish Civil Code provides that, even where the parties have agreed to exclude the seller’s liability, the seller remains liable if they were aware of the defect and failed to disclose it to the purchaser.

Furthermore, where the concealment of a defect has induced the purchaser to enter into the contract under a fundamental mistake, additional remedies may be available, including an action seeking the nullity of the contract on the grounds of mistake or fraud. In this respect, Supreme Court Judgment No. 509/2022 of 28 June emphasises that the success of such actions depends upon a careful assessment of the particular circumstances of each case, including the purchaser’s professional expertise and the level of diligence that could reasonably have been expected when inspecting the property.

Notarial Escrow

A notarial escrow as an additional safeguard

In certain property transactions, it may be advisable for part of the purchase price to be retained temporarily by means of a notarial escrow arrangement or another escrow mechanism.

This possibility is based on the principle of freedom of contract established in Article 1255 of the Spanish Civil Code.

Such an arrangement may serve to guarantee the rectification of specific defects identified after completion, cover the risk of previously identified latent defects or secure the seller’s compliance with other outstanding contractual obligations.

To avoid future disputes, the relevant contractual clause should clearly specify the amount retained, the duration of the escrow, the circumstances in which the funds may be released and the procedure governing either their return or enforcement.

Legal Advice

The importance of obtaining legal advice

Whether acting as seller or purchaser, obtaining specialist legal advice before entering into a property transaction can prevent complex litigation and considerably higher costs in the future.

A thorough review of the legal documentation, carefully drafted contractual provisions and the early identification of potential risks enable both parties to protect their legal position and substantially reduce uncertainty following completion of the transaction.

At Frau Legal, we advise private individuals, companies and investors on property transactions throughout Mallorca, Ibiza and the Balearic Islands, providing comprehensive legal assistance both during the negotiation and completion of property acquisitions and in resolving disputes relating to latent defects and other real estate matters.