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Exceptions to real estate AS-IS contract

| Dec 11, 2019 | Real Estate |

Are all AS-IS contracts enforceable? 

The recognized purpose of an as-is clause in a contract for the purchase of property is to state clearly the full responsibility of the buyer to assess the bargain and to accept the risk that its assessment may be wrong. See Prudential Ins. Co. of Am. v. Jefferson Assocs., 896 S.W.2d 156, 161 (Tex. 1995). In the typical as-is clause scenario, “[t]he seller gives no assurances, express or implied, concerning the value or condition of the thing sold.” Id. The as-is clause in that typical scenario negates any claim by the buyer that an action by the seller in the transaction caused damages to the buyer. See id. 

The Texas Supreme Court expressly recognizes, however, that not all as-is clause scenarios are typical and not all as-is clauses are enforceable. See id. at 162. The Texas Supreme Court has identified a number of situations that render an “as-is” clause unenforceable. See id. The most recent binding precedent continues to embrace these exceptions. See Van Duren v. Chife, 569 S.W. 3d 176, 185-86 (Tex. App. – Houston [1st Dist.] 2018, no pet.). Specific conduct in a case can establish two of the recognized exceptions, considered “counter-defenses” to an as-is clause, and render the as-is clause in a Home Contract unenforceable. See Procter v. RMC Capital Corp., 47 S.W.3d 828, 834 (Tex. App. – Beaumont 2001, no pet.). The seller in contract may be in breach of contract

“When sellers secure an agreement to an as-is clause through false assurances about the value or condition of the thing being sold or by the concealment of the information as to its value or condition, the as-is clause does not bar claims against the sellers.” Van Duren, 569 S.W.3d 185 (citing Prudential, 896 S.W.2d at 161-62). In one case on file, the Defendants secured the Home Contract through false assurances about the condition of the Home. Specifically, prior to the buyer entering into the Home Contract, Defendants falsely assured the buyer concerning the likelihood of the Home to flood. In that one particular case, the seller represented to the buyer that the Home had only flooded once before and identified that single prior flood as the unique and historic flooding event of Hurricane Harvey. As the buyers later discovered, however, the Home had flooded on more than the one occasion of Hurricane Harvey.

“Buyers are also not bound by an as-is clause if they have a right to inspect the property but the sellers impair or obstruct the exercise of this right.” Van Duren, 569 S.W.3d at 186 (citing Prudential, 896 S.W.2d at 162).

If you have questions about an as-is contract, please call an attorney Board Certified in Residential Real Estate law at The Weaver Law Firm. You can call 713-572-4900

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