Sale of Real Estate with a Hidden Defect: When Is the Seller Obligated to Disclose?

By: Adv. Michael Lev

Sale of Real Estate with a Hidden Defect: When Is the Seller Obligated to Disclose?

A new ruling of the Peace Court in Be’er Sheva sheds light on the limits of the duty of disclosure of real estate sellers. In the case before us, the urban magistrate court ruled in a buyers’ claim who argued that the apartment sellers concealed from them a defect in the roof that caused flooding. The ruling, case no. T.A. 40387-07-20, establishes important principles regarding the scope of the duty of disclosure in real estate sales.

Apartment Purchase and Flooding: The Facts

The plaintiffs purchased a ground-floor apartment from the defendants on July 10, 2019 in exchange for 3.1 million shekels. The problem emerged after the rainy season, when the roof began leaking rainwater. According to the plaintiffs’ claim, the flooding originated from a defect in the roof tiles, which the defendants knew about and concealed from them in violation of the law.

The defendants denied these claims and argued that the damage was caused by renovation work the plaintiffs themselves carried out after the purchase and during which they damaged drainage — which was caused by a tile wash. In their claim the plaintiffs sought compensation of 300,000 shekels, or alternatively, 278,290 shekels.

The Duty of Disclosure and Prior Knowledge: The Legal Principles

In our office we encounter time and again clients who struggle with hidden defects that came to light only after property acquisition. It is important to be aware that the duty of disclosure in real estate sales is not a total obligation. It relates only to defects that the seller actually knew about. As the court established: “It is not sufficient for plaintiffs to prove the existence of a defect; they must also prove that the defendants knew about the defect.”

This principle rests on a fundamental assumption: no one can be held responsible for things they did not know existed. The duty of disclosure relates only to actual knowledge of the seller, not to knowledge that was incumbent upon them to acquire or knowledge they were supposed to check. This is the essential test that could affect the entire course of such a claim.

The Evidentiary Challenge: Why the Plaintiffs Failed

In the case at hand, the plaintiffs failed to meet the burden of proof. The court found that they had not proven that the defendants knew about the defect in the roof. This is a finding of great importance for anyone filing a similar claim. Proving the existence of damage is insufficient. You must also prove that the seller knew about it beforehand.

The magistrate found that the plaintiffs had not discharged the duty of disclosure, nor the duty of good faith. Similarly, it was decided that section 16 of the Sale Law, dealing with selling property with hidden defects, does not apply here. The reason is simple: the plaintiffs had no prior knowledge of the defect.

Legal Conclusions and the Practical Way Forward

This case highlights one thing clearly: thorough examinations before purchase are vital. In our office we encourage our clients to conduct comprehensive engineering inspections, particularly when dealing with ground-floor apartments with a roof. A deep inspection of the roof and drainage systems is of the highest importance. The more work is done before signing, the smaller the risk of unpleasant surprises afterwards.

On the other side, sellers can rely on this ruling as a defense against claims about hidden defects, provided they truly did not know about them. But this is an important point: if you knew about the defect, the duty of disclosure applies with full force.

Lessons for Real Estate Buyers

This case teaches us about the need to document the precise state of the property before purchase. We advise our clients to pay special attention to comprehensive engineering inspections, particularly in critical areas such as the roof and drainage. Ask the sellers direct questions about problems that occurred in the building in the past.

It cannot be taken for granted that disclosure of a defect after the purchase will automatically lead to compensation. As proven in this case, the buyer bears a heavy legal burden: they must prove both the existence of the defect and the seller’s prior knowledge of it.

Common Questions

Is a real estate seller obligated to disclose every defect they know about?

Yes, that is correct. A seller is obligated to disclose every defect they know about and which could affect the buyer’s decision or the value of the property. However, keep in mind: the obligation is limited only to defects the seller actually knew about.

What happens when a hidden defect is discovered after the purchase?

The buyer needs to prove two things: the existence of the defect and the seller’s prior knowledge of it. Proof of the defect alone is not sufficient to obtain compensation.

How to protect yourself from hidden defects?

Conduct thorough engineering inspections before signing the contract. Ask the sellers direct questions and record the answers in writing. It is also worth including explicit liability clauses in the purchase contract.

When does section 16 of the Sale Law apply?

The section applies when property was sold with a hidden defect that the seller knew about and concealed. If there is no prior knowledge on the part of the seller, the section does not apply.

For consultation on real estate sales and hidden defects, contact the office today.

These words do not constitute legal advice. For advice tailored to your specific circumstances, contact our office. Tel.: 072-2428822 or visit: https://lt-law.co.il/delivery-delay/