“As-is” clauses in Residential Purchase Agreements

     NRS 113 requires at least 10 days before residential property is conveyed to a purchaser, the seller must complete the Sellers Real Property Disclosure Form.  Many buyers (and maybe even some agents) seem to think that by selling the property “as is” they are not obligated to disclose any material adverse conditions of the property since they mistakenly believe the clause shifts the responsibility for the condition of the property to the buyer.  While the statute requiring disclosure does not prohibit a seller from selling the property “as is”, the seller is still required to accurately complete the disclosure.

     Numerous state courts have upheld this analysis.  In  Syvrud v. Today Real Estate, Inc., 858 So.2d 1125, 1130 (Fla. 2d DCA 2003), the Florida court concluded that “the fact that this house was sold “as is” does not make summary judgment appropriate. The duty to disclose known defects …continues to exist for a home sold as is.”  In The S Development Co. v. Pima Capital Management Co., 201 Ariz. 10, 16, 31 P.3d 123, 129 (Ariz.App.2001), the Court held that a vendor must disclose latent defects in property that are known to the vendor, notwithstanding the existence of a burden-shifting “as is” clause or disclaimer of warranties.  In addition, in Richey v. Patrick, 904 P.2d 798, 803 (Wyo.1995) the court stated that “in the case of an actual misrepresentation or fraud, an “as is” clause will not relieve the seller of liability”.

    Similarly, Licensees have disclosure obligations. NRS 645.252 requires agents to disclose “any material and relevant facts, data or information which the licensee knows, or which by the exercise of reasonable care and diligence should have known, relating to the property which is the subject of the transaction.”  “As is” language cannot be used in any way to alter this obligation and a licensee should never rely on an “as is” clause to shield him or her from nondisclosure liability. Nevada Law and Reference Guide, Fourth Edition, 2014, Section IV.  Numerous other jurisdictions agree with this interpretation.

     So, what is the legal effect of “as is” disclaimers?  When a seller lists a home “as is,” it means he can’t or won’t negotiate with the buyer over any fixes or credits. The buyer can get an inspection and make an effort to know what problems there might be, but she’s agreeing to take it without repairs.  Nevertheless, sellers may not ‘contract’ out of their duty and buyers have a right to rely on the disclosure statement.

PRACTICE POINTER:  Buyers confronted by a seller who insists on an “as is” clause while attempting to avoid disclosure should be suspicious. In such a situation, the best course of action for the buyer may be to walk away. Not every deal can or should be made. On the other hand, an “as is” clause combined with full disclosure by the seller may not be a problem so long as the buyer realizes that the he or she bears full responsibility for due diligence and should thoroughly inspect the property. Whenever a seller wants to include an “as is” clause in a sales contract, the buyer should respond by including a provision to the effect that such a clause does not relieve the seller of the obligation to disclose material conditions and defects. If the seller balks, then it may be time for the buyer to look elsewhere for a deal.

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