According to the law on real estate and rented housing brokerage, the broker agency must perform the brokerage in a professional manner and with due care, adhering to good broker practices and taking the best interests of the client and the client's counterpart into account. The practical importance of the demand for professional and careful action is emphasised at the time when the broker is introduced to the target of the sale and when presenting the buyer with information on the target. When presenting the target, the broker agency must provide the buyer with all information that it holds or should hold that may affect the decision to purchase the target.
The counterparty's best interests must be taken into consideration, in particular when providing information on the target and other matters affecting the agreement. The broker must provide this information objectively, including information that may be disadvantageous to the seller.
The broker's duty to discover
On its own initiative, the broker agency must acquire the data regarding the target from various sources, including the client, the housing company's house manager and the relevant authorities. Good broker practices require that the broker agency also familiarise itself with the target in order to reveal issues which may affect the decision to purchase. If the broker agency has reason to believe that the information it has acquired is insufficient or incorrect, the law stipulates that the broker agency is under an obligation to verify the correctness of the data. The duty to discover is also valid if the received data is no longer up-to-date at the time of concluding the deal.
The housing manager's certificate is an important source of information
According to the decree on housing companies, the housing manager's certificate must include information on significant repairs or modernisations that the housing company has agreed on or which are otherwise definitely known, or any other commitments that the company will be liable for. In May 2000, the housing manager certificate issued by the Finnish Real Estate Federation, and in October 2001, the KH card concerning the content of the housing manager certificate, were renewed. Following these reforms, the housing manager must also find out about future modernisations and major repairs that have not yet been decided at a General Meeting, but of which the housing manager or the housing company's board are aware. Housing manager certificates issued since 1 October 2001 must meet the requirements stipulated on the KH card. The most recent version of the KH card was published on 6 March 2008 (KH 02-00396).
Neglecting the duty to discover and the broker's liability
The broker agency may be liable if it has neglected to meet its duty to discover and disclose any information held pertaining to this liability. The ruling of the Supreme Court 1995:150 concerns the broker's duty to discover in relation to a case of water damage. In this particular case, the seller had told the broker that the property had previously suffered water damage and that the housing company had been provided with building material to repair the damage. The seller had not told the broker how the water damage had been repaired, nor had the broker inquired about it from the seller. Under these circumstances, the Supreme Court found that the broker should have contacted the housing company's board or housing manager to inquire about the water damage. They could easily have provided the broker with the correct information. The broker had also failed to inform the buyer about the water damage. The Supreme Court found held that the broker had neglected its duty to discover, and the broker agency was ordered to compensate reasonable costs caused by the repair work to the buyer.
In a decision made by the Consumer Complaint Board, it was found that the broker should have determined the meaning of the entry "façade renovation plan initiated" in the housing manager certificate. The broker was found to have neglected its duty to discover and disclose information to the buyer by failing to mention the planning of a façade renovation in the real estate brochure (31 May 2005, 04/81/707).
In another decision by the Consumer Complaint Board, the sales brochure compiled by the broker agency did not mention the repair of the service water and sewage plumbing. The Board found that, although the information in the housing manager certificate was lacking, it was obvious that there was going to be a service water and sewage plumbing repair in the housing company, based on the information that was provided on the certificate. Since the matter was mentioned in the housing manager certificate, the broker agency, in accordance with good broker practices, should have included that information in the sales brochure. The broker agency should also have attempted to find out when the repair work was going to be performed and what costs the repair would generate for the buyer. The Board found that the broker agency had neglected its duty to discover and disclose information, due to which the buyer was entitled to compensation for the damage caused by the actions of the broker agency (9 August 2005, 04/81/1396). In the grounds for decision no. 356 issued by the Helsinki Court of Appeal, it is stated that the broker has fulfilled its duty to discover if it has verified the correctness of the housing manager statement with the housing manager concerning, among other things, planned renovations. The Court found that the broker, when performing its broker tasks, had not been aware of the forthcoming plumbing repair work in the building. Therefore, the broker could not have disclosed such information to the buyer. According to the Helsinki Court of Appeal, the broker's legal duty to disclose cannot be considered so extensive that the broker should foresee any possible or even likely future decisions of the housing company.
Avoiding liability
The grounds presented in the aforementioned decision by the Helsinki Court of Appeals cover how liability can be avoided: the broker is under an obligation to disclose to the buyer any relevant and correct information on remodelling work that has been decided upon or that is under planning by the housing company, and that is financially or otherwise relevant to the buyer and available at the time of purchase.
Tomi Eloluoto
