Construction defects: How to proceed

A construction defect occurs when the actual and intended condition of a building do not match at the time of acceptance. A construction defect can be discovered either in the completed building or while it is still under construction. The agreements in the construction contract serve as a guide to the intended condition.

A defect exists when features or items are missing, or the building is otherwise unusable. This can apply to the entire building or to the renovation of individual components of a house or apartment. This is triggered either by the building contractor itself or by a subcontractor. The latter is the case, for example, if the construction company commissions another company to install the parquet flooring.

Building owners should not take construction defects lightly, regardless of whether the structure is a residential building, an investment property, or any other type of real estate. The fact is: In this case, the construction company has breached its contract.

For example, construction defects can make the building unusable—or at least not to the extent intended. Furthermore, defects inevitably lead to a reduction in the value of the property. For these reasons, you should always proceed with due diligence when constructing or renovating a building. Take the inspection and acceptance at the end of the construction process seriously—this is the only way to discover and report construction defects before it’s too late.

In the case of construction defects, either SIA Standard 118 or the Swiss Code of Obligations (CO) applies. The latter contains the legal basis in Title Eleven of the Swiss Code of Obligations under the subheading “Contract for Work and Services.” You can find out which of the two bases applies to your individual contract from the construction contract. If SIA Standard 118 is to apply, this must be explicitly stated in the contract. Otherwise, the CO applies by default. The legal texts specify the circumstances under which building owners and property owners can report a construction defect. The statute of limitations can also be found there.

If a building owner discovers one or more construction defects during acceptance, they must be reported immediately. If the contract is subject to SIA Standard 118, this is somewhat more flexible for defects discovered after acceptance – in this case, a property owner can report them at any time within the specified deadlines. Article 367, Paragraph 1 of the Swiss Code of Obligations stipulates that after delivery of the work, building owners must inspect it for defects “as soon as practicable in the normal course of business.” Any defects discovered must be reported immediately.

By the way: Building owners can report defects during construction. This is particularly useful if the defects are components that will be concealed during the further course of the project, making them undetectable.

The limitation periods may vary depending on the legal basis applicable in the individual case. In any case, building owners or property owners should address any construction defects as promptly as possible. The period for claims begins from the date of acceptance or handover of the project after its completion.

If SIA Standard 118 is applied, an acceptance procedure usually takes place. After completion of the construction, both parties review all important points together on site. If no defects are found, the construction is considered accepted, and the collaboration is terminated. In the case of minor defects, the construction company is given the opportunity to remedy them within a certain period of time. If the client subsequently discovers defects that were not discovered during the acceptance procedure, these can also be reported. SIA Standard 118 stipulates a period of two years for obvious defects and five years for hidden defects.

If the Code of Obligations applies instead, there is usually no joint acceptance procedure, but merely a handover. In this case, the client should subsequently inspect the structure for defects themselves. After handover of the structure, the limitation periods are similar: For movable structures, claims expire after two years, for immovable structures after five years (Article 371 of the Swiss Code of Obligations).

Special case: If construction defects were intentionally concealed by the construction company or its partners, the claim period is extended to ten years.

Building owners and property owners should not take construction defects lightly. If you intend to live in the house yourself after construction is completed, certain defects can even be dangerous. And even if the property is intended as an investment or rental property, construction defects represent a significant disadvantage. Ultimately, they reduce the value of a property. Tenants, for example, can demand a rent reduction, which in turn can cost the owner a lot of money.

Even if you can file a complaint yourself, it is usually worthwhile to consult a lawyer, as they know how to draft a complaint and can keep an eye on the statute of limitations. You should also consider having an expert present during the inspection or acceptance of the building.