Seller's Disclosure Obligations in "AS IS" Real Estate Transactions
In a real estate transaction, good faith is a factor that can make or break the transaction. Even when the property is being sold “As Is", the seller has an obligation to provide truthful and complete information regarding the condition and details surrounding the property in question or the real estate transaction could be deemed fraudulent. It is the duty of the seller to disclose material regarding the
- Physical condition of the property;
- Existence of hazardous materials or dangerous conditions;
- Encumbrances on the property, including encroachments;
- Easements or other matters which may affect the buyer or investor’s interest in the property; and
- Lawsuits against the seller threatening to affect or affecting the property.
The existence of an “As Is" clause in a real estate transaction does not remove the seller’s legal duty to disclose the above information, nor does it protect them from subsequent legal action from other parties to the real estate transaction in the case of fraud.
Civil Code §§1102 states that “As is" language serves to give notice of patent defects and means that the buyer accepts the property in the condition in which it is reasonably observable. If augmented by language indicating that the buyer is relying on his or her own inspection of the property, it could then relieve the seller of the duty to inspect for defects or to disclose matters that the seller should know but does not. That being said, it is important to keep in mind that the benefits of Civil Code §§1102 are not waived solely by a buyer’s acceptance of the included “As Is" language in the purchase agreement, and the seller remains liable for any failure, whether negligent or intentional, to reveal known concealed defects not apparent from an inspection of the property. The seller remains liable for any failure to reveal known defects not apparent from the buyer’s inspection of the property.
If you intend to buy or sell an “As Is" property in the state of California, sit down with an attorney licensed to practice law in California to ensure a smooth transaction.