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“As Is” Is Not “As-Is” When It Comes To The Sale Of Residential Real Property

As part of a real estate transaction, you may be presented with a contract that contains an “as is” clause. An “as is” clause typically contains language expressing that the buyer is purchasing the property “as is” and that the buyer is accepting the condition of the property notwithstanding its condition.

As-is clauses are common in commercial real estate transactions. The question often arises whether a residential seller can rely upon an as-is clause in a contract to sell residential real property.

The Florida Fourth District Court of Appeal in Lorber v. Passick as Trustee of Sylvia Passick Revocable, 2021 WL 3891004 (Fla. 4th DCA 2021), recently held that an as-is clause cannot be used to defeat the seller’s common law obligation to disclose latent effects in residential real property. The court drew the clear distinction between commercial real estate and residential real estate on this important issue. The court distinguished its prior opinion in Florida Holding 4800 , LLC v. Lauderhill Mall Investment, LLC, 317 So. 3d 121 (Fla. 4th DCA 2021), which involved a commercial real estate transaction. In that case, a buyer executed a real estate sales contract for the purchase of a commercial property that contained an “as is” clause after the seller allegedly made a fraudulent misrepresentation about the condition of the property. The Fourth District Court of Appeal held that even if the seller made fraudulent misrepresentations concerning the condition of the property, the “as is” clause contradicted those representations and negated the buyer’s claims for damages.

However, the same does not hold with respect to real estate contracts for the sale of a residential property. In Lorber, the Fourth District Court of Appeal clarified its opinion in Florida Holding 4800 and held that it's ruling only applied to the sale of commercial properties. The court reversed summary judgment in favor of the seller, holding that the inclusion of an “as is” clause in a contract for the sale of residential property does not negate or limit the buyer’s right to recover damages on a fraud in the inducement claim potentially. This is because, under long-standing bedrock Florida law, a residential real property seller, as well as a seller’s broker, has a duty to disclose any facts materially affecting a residential property’s value, even if the defect is physically observable and could have been identified if the buyer exercised reasonable diligence. This duty imposed upon sellers of residential property in Florida cannot be limited or waived by including an “as is” clause in a real estate contract.

Consultation with legal counsel is important before you enter into any sales contracts containing an “as is” clause. You may unknowingly be waiving your rights to recover money damages if it turns out that you were induced to enter into the transaction by fraudulent representations. Rosenthal Law Group can assist you with your real estate contract litigation questions.