Appeal court cuts property company’s payment by 1.9 million krónur

Iceland’s Court of Appeal has reduced by more than 1.9 million krónur the amount a property company must pay a man who sold it a house in Mosfellsbær. The ruling, reported by mbl.is, says the company must pay nearly 9.2 million krónur in remaining purchase money, plus default interest, after accounting for payments already made. A district court had ordered it to pay more than 11 million krónur.

The company must also pay the seller 3.5 million krónur in legal costs for proceedings at both court levels. The Court of Appeal issued its ruling on Thursday.

The case concerned the settlement of the company’s purchase of the property in February 2022 for 149.7 million krónur. The house was handed over when the purchase agreement was signed on February 25. Under the agreement, the seller was to finish electrical and plumbing work before the deed was due to be completed on May 25. The buyer otherwise agreed to accept the property in its existing condition, subject to the terms in the contract.

The company did not make all payments on time. When it paid 9 million krónur in October 2022, it said it was withholding further money because of alleged defects. The seller later sued to recover the outstanding balance. Two court-appointed assessments put the cost of defects at nearly 8.5 million krónur.

The Court of Appeal rejected some of the company’s claims, finding that it had seen or should have seen certain defects during its inspection before the purchase. The court considered the company’s experience in property transactions. It did find that other agreed work had not been completed, mainly electrical and plumbing work, as well as preparation of as-built drawings, installation of a garage heater and repair of a leak from the snow-melting system in the outdoor steps. The court excluded the cost of installing electrical outlets and switches because that work was not required at the agreed construction stage.

The district court had rejected the company’s counterclaims, finding that it had waited too long to raise the defects. The Court of Appeal instead measured the notification period from May 25, when the outstanding work was due to be finished. The company’s first complaints came four months and 15 days later. Given that the property was a new build and the seller was expected to complete the contracted work, the court found the company had not lost its right to raise those defects. Its counterclaims were set at 1,903,990 krónur.