Warranty Against Eviction: What it is, Examples, and When it Applies

Before formalizing any negotiation, you should know what warranty against eviction, a right for the buyer and a duty for the seller. It is a legal concept that serves to protect any agreement involving the transfer of ownership of an item.

The right to be compensated for any encumbrance on the item, or to guarantee its peaceful enjoyment, is a prerogative of the buyer. For their part, the seller is legally obliged to deliver the item under the agreed-upon conditions, and both parties should be aware of this.

What does warranty against eviction mean?

According to the Federal Civil Code, warranty against eviction, implies that the seller of an asset is responsible for any eviction suffered. Of course, the eviction must be suffered by the buyer, who is deprived of all or part of the acquired asset due to any circumstance or third party.

In Spain, the warranty in case of eviction is considered an implied clause in all negotiations, especially sale and purchase agreements, which involve the transfer of ownership. In other words, even if the contracting parties do NOT stipulate anything about eviction, it is presumed to be the seller's responsibility.

However, we must clarify that this obligation can also be waived, meaning it is a stipulation that allows for an agreement to the contrary. This occurs in some cases where the buyer expressly waives their right to warranty in case of eviction, but is unaware of a hidden defect.

In this case, bad faith on the part of the seller is presumed, and they will immediately be obliged to remedy the defect in the asset promptly. Thus, the waiver of the warranty will be deemed not stipulated, and this right will be enforceable against the seller, requiring them to return the full price received.

How does it work?

The warranty against eviction applies in sale and purchase circumstances, and works when the following conditions are met:

Deprivation of possession

In this case, the buyer is deprived, totally or partially, of the enjoyment of the acquired item.

Final judgment

The deprivation may potentially be a consequence of a final judgment that recognizes a third party's prior preferential right over the asset.

Valid sales contract

This condition applies provided there is a prior existence of a sales contract valid between the buyer and seller, prior to the new negotiation.

Notification to the seller

Under this condition, the buyer is required to notify the seller about any claim that could lead to eviction. In any case, the buyer will always have the right to demand legal indemnification, and these mechanisms apply to the purchase of any asset.

‍How many types of eviction are there?

In Spain, there are two types of eviction:

Total eviction

This occurs when the buyer loses total control or possession of the sold asset, and can claim against the seller for the deprivation of their right. In other words, the seller is obliged to pay the price received, plus interest, any legal costs, rents, etc.

Partial eviction

This situation occurs when the eviction is partial, meaning that not the entire sold asset is lost, but only a part. For example, in the sale of an assembly plant whose machinery is collateral for a loan, the plant itself is not lost, but the equipment is.

In both cases, the buyer's right to be compensated by the seller immediately arises, and the seller must reimburse the total price received. Let's remember that this is a guarantee that operates even if the parties have not stipulated it in their sales agreement.

When does eviction apply?

In Spain, eviction applies when any of these conditions are met:

When the buyer cannot exercise possession

We are referring to total or partial possession of the asset recently acquired, and a third party claims a superior right over it. This disturbance of their property right is a requirement for the operation of the warranty of title.

When a final judgment exists

In these cases, a court has ruled in favor of a third party who presumably demonstrated a superior right to the disputed asset. It is presumed that a judicial proceeding initiated by an interested party seeking to prove their right to the asset preceded this.

By virtue of a right predating the purchase

This may or may not be accompanied by a final court judgment, as there is a third party claiming a preferential right that existed previously. This occurs when the seller alienated the asset prior to the new transaction, which could imply an act of bad faith on the seller's part.

What requirements must be met to claim warranty of title?

Because it is a legal concept presumed to be implicit in all transactions, especially sales, the buyer has the right to demand it. However, to claim the warranty of title, the following is required:

• That the buyer is totally or partially deprived of the newly acquired asset.
• The deprivation of this right must be a consequence of a final judgment upholding the claim of the third-party plaintiff.
• The eviction must stem from a right that predates the execution of the sales contract.

Who is liable for eviction?

The warranty of title is an obligation that will always fall solely on the seller. The seller is the only one obligated to provide the warranty, provided the seller demands it.

When does the warranty of title expire?

The period to claim the warranty of title The Spanish Civil Code, Article 1964, indicates a 15-year statute of limitations. This period begins when the buyer suffers eviction or the loss of the acquired asset occurs.

After this period, no judicial claim can be made, as it is a legal mandate to which contracting parties must adhere. This is something that those involved in a purchase-sale negotiation should especially keep in mind.

Difference between Warranty Against Eviction and Hidden Defects

The difference between these two legal concepts lies in the fact that the warranty against eviction guarantees the buyer will not be dispossessed of their property. Hidden defects, however, can refer to non-obvious damages in the asset that affect its functionality or value.

It is worth noting that defects are a type of imperfection or damage, but they can also be an alteration of the quality or characteristics of the item. Here, we must exclude flaws that can be identified during a routine inspection prior to delivery of the item.

We should also highlight the buyer's level of knowledge. For example, if the buyer is an expert or mechanic and fails to detect a hidden defect, it is assumed they should have foreseen the damage due to their expertise, and thus the seller might not be liable for the damage.

Example of Warranty Against Eviction

A classic example of warranty against eviction, can occur when purchasing a property if, after acquisition, something previously unknown comes to light. We might be talking about the seller not having a clear title due to a mortgage they forgot to mention.

This, of course, leads to the immediate loss of the property acquired by the buyer, thus constituting a case of warranty against eviction. In this scenario, the seller is obliged to return the full price received for the property, at least until the mortgage is settled.

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Conclusion

In Spain, any purchase-sale negotiation is legally protected and guaranteed because of the legal concept of the warranty against eviction. This is a right that protects the buyer from any disturbance to their legitimate right of ownership, as they are considered a good-faith buyer.

However, it's important to remember that the buyer could eventually waive this legal protection, leaving them at the seller's discretion. This waiver, of course, has an exception and applies when the seller's bad faith is demonstrated after the negotiation has been formalized.

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