There is value to a seller when it comes to entering into an as-is transaction and stating that the seller has NOT made any representation or warranty, all such representations or warranties are disclaimed, the buyer is NOT relying on any representation of the seller, and that the buyer is relying on its own inspection of the property. This shifts the onus to the buyer to undertake the inspection or due diligence it needs to take relating to the property it wants to buy.
With respect to commercial property transactions:
The doctrine of caveat emptor, which Florida courts continue to apply, “places the duty to examine and judge the value and condition of the property solely on the buyer and protects the seller from liability for any defects.” There are, however, three exceptions to this doctrine, including: “1) where some artifice or trick has been employed to prevent the purchaser from making independent inquiry; 2) where the other party does not have equal opportunity to become apprised of the fact; and, 3) where a party undertakes to disclose facts and fails to disclose the whole truth.”
Florida Holding 4800, LLC v. Lauderhill Mall Investment, LLC, 46 Fla. L. Weekly D785b (Fla. 4th DCA 2021).
These three exceptions to caveat emptor, or the doctrine of buyer beware, are not easy to prove because it places a burden on a buyer to prove an active effort from the seller to conceal a material fact to skirt around the as-is language. Again, this is not an easy burden to prove.
By way of example, in Florida Holding 4800, the buyer purchased commercial property and sued the seller after discovering roof leaks, HVAC issues, and mold. The lawsuit was predicated on the seller’s misrepresentation or concealment of the condition of the property. The problem was that the buyer purchased the property as-is and contractually agreed there were no representations or warranties from the buyer. The trial court granted summary judgment in favor of the seller because of caveat emptor’s application to commercial transactions.
The appellate court affirmed the trial court because there was no evidence that the “Seller’s actions prevented it from conducting a thorough inspection of the property or that, but for Seller’s conduct, Buyer would have discovered that the roof was defective.” Florida Holding 4800, supra. The appellate court explained:
Unable to establish an exception to caveat emptor, Buyer is left with the PSA’s [purchase sale agreement] express language providing that Buyer was purchasing the property “based solely on Buyer’s own inspection, investigation and evaluation,” and that Seller made no representations regarding the property’s condition, or if it did, Buyer agreed it was not relying upon such representations. By these very terms, Buyer waived any claim of fraud on the undisputed material facts in this case.
Florida Holding 4800, supra.
As you can see, the doctrine of caveat emptor has teeth. Likewise, specific language in as-is transactions has teeth and it is important to include this disclaiming language in as-is transactions, even if the transaction does not concern real property.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.