Tag Archives: as-is

CAVEAT EMPTOR (“BUYER BEWARE!”) EXCEPTIONS

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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.

 

DID I JUST BUY THE MONEY PIT?

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You bought a house.  Congratulations! You are all excited.  You move in, get settled, and then the dreadful happens.  You discover that the new house you bought contains water intrusion or other significant construction defects.   You begin to think about the money pit you just bought; hilarious movie, by the way, so I digress with a funny scene from the movie:

 

Back to the issue.  What do you do with the perceived money pit that you know or anticipate will cost you substantial sums to repair.  First, assuming this was not new construction, you pull up the seller’s disclosure to see whether the seller (former owner) disclosed any of the water intrusion or construction defects.  The seller did not.  You believe the seller knew or reasonably should have known of these construction defects. How could they not?  So you consult a lawyer (always a good first step) to explore what is known as the Johnson v. Davis line of cases that stand for the proposition that a seller has a duty to disclose known defects with the house they are selling. See Johnson v. Davis, 480 So.2d 625 (Fla. 1985).

 

A new case, Bowman v. Barker, 40 Fla. L. Weekly D2091b (Fla. 1st DCA 2015), bolsters a buyer’s claims against a seller for not disclosing known defects in their house.  In this case, the sellers apparently purchased a dilapidated house (cheaply) and renovated the house with the intent on flipping the house to another buyer.  The house was sold.  Defects were not disclosed.  After the sale, the buyer discovered numerous construction defects.  The buyer sued the seller, amongst others, for failing to disclose these defects that the buyer contended the seller knew about or should have reasonably known about.

 

The First District explained:

 

The duty to disclose known defects under Johnson v. Daviscontinues to exist for a home sold “as is.” The sellers do not dispute this principle. Despite selling this house “as is,” the sellers had a duty to disclose what they knew about its condition, and they undertook to make disclosures to Appellant [buyer] about the condition of the house. The record demonstrates triable issues of fact about what that condition was, what the sellers knew about it, what disclosures were made, and whether those disclosures were accurate.

 

This means the buyer is able to let the trier of fact (jury or judge) determine the issue of whether the seller knew of the construction defects but failed to disclose them to the buyer.  This is a good case for a buyer since it supports the argument that these are issues to be determined by the trier of fact, putting pressure on the seller based on how the trier of facts may interpret the facts knowing the house they just sold contains numerous construction defects. For instance, in this case, the First District noted: “This evidence raises a question of fact about the appellees’ [seller’s] knowledge, as well as questions about their credibility and the plausibility of their denying knowledge of the property’s substantial defects and what repairs it needed.”

 

Consult an attorney if you purchase a house and discover construction defects, especially if you believe you just bought a money pit.  An attorney can assist you with potential recourse under the law.  

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.