The term “as-is” is regularly used in a purchase and sale agreement to indicate that the seller makes no warranties or representations about the property’s condition. It is intended to relieve the seller from liability for failing to disclose a material defect in the property that is not known to the buyer. Hence, the effect of an “as is” provision for the sale of the real property is that the buyer accepts the property in the condition that is visible or observable by him. Shapiro v. Hu, (1986) 188 Cal. App. 3d 324; Katz v. Department of Real Estate, (1979) 96 Cal. App. 3d 895, 901. In other words, the seller will not make any repairs, nor offer any credits for potential defects that are on the property.
There tends to be a common misconception that an “as-is” provision completely shields the seller from making required disclosures. However, the state of California requires a seller to disclose any facts that materially impact the value or desirability of the real property that may not be apparent through a buyer’s inspection of the property. Thus, a buyer’s acceptance of an “as is” provision in the purchase and sale agreement does not waive the benefits of Civ. Code § §1102, et seq. relating to required disclosure for the transfer of residential property.
The “as is” clause only protects the seller as to unknown facts, not for nondisclosure or misrepresentation of materials facts known to the seller. Moreover, the “as is” clause, like any other exculpatory clause, does not relieve the seller or its agent from liability for intentional misrepresentation, active concealment or other types of intentional fraud. Cal. Civ. Code § 1668; Manderville v. PCG & S Group, Inc., (2007) 146 Cal. App. 4th 1486.
Accordingly, if the seller fails to disclose a known defect or intentionally misrepresents a defect on the property, the seller will be liable to the buyer. On the other hand, if the seller genuinely was not aware of the defect on the property, the “as is” provision will protect the seller from liability for not disclosing to the buyer.
Some examples of defects on the property that must be disclosed if known include, but are not limited to:
● Structural defects;
● Issues with the foundation;
● Harmful chemicals;
● Asbestos; and
● Faulty roof
One way to think of the “as is” is that it means that the buyer is purchasing the property in its present condition – whatever that condition may be. That does not mean seller gets to conceal the present condition or to mischaracterize the present condition in any way. Buyer is entitled to know about the material condition and then decide for themselves whether they want to purchase the property in that condition. In any event, it is essential that a buyer conduct their own due diligence so that they can do their best to discover the present condition of the property to determine whether they want to purchase it in that condition.
Also, often times after the buyer discovers the true as is condition of the property, the buyer will make a request for repair prior to closing escrow and waiving their contingencies. If seller refuses to make the repairs then buyer can back out if they do not like the “as is” condition.
At Schorr Law, we have extensive experience dealing with residential and commercial sales or purchases. To see if you qualify for a free 30-minute consultation regarding your matter, please contact us by phone, email, or send us a message through our contact form.