THE “AS IS” CLAUSE
By Former Law Clerk, Mr. Ghasri

Mr. Buyer enters into a purchase and sale agreement for an office building. The purchase and sale agreement contains the typical “as is” provision. Does the as is provision reduce Mrs. Seller’s obligations concerning disclosures?

A sale [or lease] of real property “as is” means that the property is sold in its existing condition, and use of the phrase as is relieves the seller from liability for patent defects in that condition. However, this clause does not shield the parties from all liability.

In a recent case, Manderville v. PCG&S Group, Inc., the California Appellate Court confirmed that a party to a contract with an as is clause must still make disclosures which effect the desirability of entering the transaction and the condition of the subject property. These disclosures apply to what the seller knows or should know.

In Manderville, the buyers wanted to acquire a large lot to subdivide and build homes. Via a multiple listing service, they found a parcel that stated it could be split. The buyers purchased the property through a standard real estate agreement that contained an as is clause. After escrow closed, the buyers learned that their lot could not be split. The buyers sued claiming misrepresentation in connection with the splitability of the lot. The Appellate Court held that the as is clause does not protect the seller or the broker from liability for misrepresentation if the broker or seller fails to fully disclose all he/she knows about the property or the desirability of entering into the transaction.

As a seller or landlord entering into a contract with an as is provision, disclose what you know about the condition of the property and the desirability or lack thereof of entering into the transaction. Failing to follow this disclosure requirement, even with an as is provision, may subject a seller or landlord to liability.

This newsletter is published for the interest of friends, clients and prospective clients of the Law Offices of Jeffrey L. Marcus and should not be relied upon or considered as legal advice.

*Mr. Ghasri was a law clerk at the firm in 2007. He has since graduated from UCLA School of Law.