A home warranty insurance is an insurance which covers against hidden defects on a property that are not listed in the building inspection report or the electric installation condition report in connection with a property transaction. Consequently, it is defects which the buyer is not familiar with at the time of completion.
The buyer must arrange that a home warranty insurance is taken out.
It is a condition for taking out a home warranty insurance that a building inspection report and an electric installation condition report have been prepared by the seller.
This also means that a home warranty insurance does not cover any defects listed in the building inspection report as well as any defects covered by other insurances.
Consequently, a home warranty insurance does not cover any defects etc. stated in the building inspection report but, on the contrary, hidden flaws and defects arisen prior to the transfer of the property.
There are two kinds of home warranty insurances: one with standard cover and one with extended cover. Not all insurance companies offer extended cover.
The seller will be liable for a period of 10 years for any damage, flaws, and defects on the property prior to the sale.
If a building inspection report, an electric installation condition report, and an offer for a home warranty insurance are presented to the buyer by the seller in connection with a contract of sale, the 10-year liability period for the seller will lapse.
It is important that the offer for a home warranty insurance is presented by the seller either before the contract signing or in connection with the signing at the latest.
In the event that you as buyer choose not to take out a home warranty insurance, the buyer will not be able to raise any subsequent claims against the seller in relation to hidden flaws and defects due to the fact that the seller has disclaimed liability by offering the buyer a home warranty insurance.
Therefore, it is you as buyer who decide whether to take out a home warranty insurance or not.
We recommend that a home warranty insurance is taken out.
You are not obligated to choose to the home warranty insurance offered by the seller, and you may therefore obtain other insurance offers which are more suited for your needs and requests.
However, the seller must always offer to pay half of the premium for the home warranty insurance offer obtained by the estate agent.
This means that if the offer from the estate agent amounts to DKK 8,000 the seller must pay half of this, i.e. DKK 4,000, even if you should choose a more expensive insurance, e.g. to a total amount of DKK 12,000. In such case, the seller is to pay DKK 4,000 and you are to pay DKK 8,000.
In connection with purchase of real property the buyer has a statutory right of cancellation.
In case of cancellation of a purchase the buyer will have to pay one percent of the purchase price to the seller.
Cancellation of a property purchase is subject to a deadline of six weekdays from the conclusion of the transaction. Within this deadline of six weekdays, the buyer must notify the seller or seller’s representative (typically seller’s estate agent) in writing that the right of cancellation is exercised.
Electric installations are not a part of the building inspection report but are included in a specific report, i.e. the electric installation condition report. This report is prepared on the basis of an examination of the property’s electric installations. Just like the building inspection report, only the visible and accessible installations are examined, and therefore it is not a guarantee against illegal installations or hidden flaws and defects. The report is prepared by a certified electrician and is valid for one year.
Contrary to the building inspection report and the electric installation condition report it is mandatory that the property has a valid energy label when it is put up for sale.
An energy label report contains a building expert’s evaluation of the property’s energy efficiency level and the expert’s suggestions as to which measures may be considered to reduce the energy consumption in the house. The house will be rated by the expert on an overall basis at a scale of A to G, where A is the best.