When an Arizona Real Estate Contract Contains an “As Is” Clause

By April 28, 2020 Real Estate
When an Arizona Real Estate Contract Contains an “As Is” Clause

Where it comes to sales and purchases, there are “as is” clauses, and there are “as is” clauses. Which is to say, the reach of an “as is” clause will depend on the legal context in which it is used. As one might expect, real estate law is an area in which the “as is” clause runs into some elements that narrow its scope.

In the broadest sense, as Black’s Law Dictionary defines it, an “as is” clause is:

“A clause stating that an item is bought with no warranty. The buyer takes the item as it is with any apparent or nonapparent faults.”

And this is what some sellers of real estate intend to achieve by including such a clause in contracts drawn up for transactions. They want to disavow any problems a purchaser might discover once the deal has gone through—and from the liability that comes with them. As such, the “as is” clause acts as a sort of notice that the seller is making no promises to make repairs to the property or to provide any warranties on the property itself or any functionalities found on its premises before the sale takes place. The buyer, in other words, must be content with the property in the condition it was in when they chose to make their offer.

Yet the Arizona Court of Appeals has taken umbrage with such a freewheeling interpretation of an “as is” clause in this context. In a 2001 case called S Development Co. v. Pima Capital Management Co., the Court declared that, notwithstanding the inclusion of an “as is” clause in the purchase documents, the seller of a property may not disclaim their common law duty to disclose defects of which they are aware and which are material to the purchase. An “as is” clause provides no blanket coverage to a seller of a property. They must be honest and engage in fair dealing.

The only way for a seller of a property to avoid liability for a material defect in a parcel of real property is to inform the buyer, in writing, and to permit the buyer to perform their own pre-purchase inspection. For their part, the buyer should make sure to hire a qualified inspector and be thorough in their inquiries into the property’s condition.

Naturally, the best course of action when encountering an “as is” clause—either in purchase documents or in a dispute—is to consult with a qualified attorney. Provident Law’s real estate attorneys have experience with exactly this sort of issue. Moreover, if you’re looking to purchase real estate in Tempe or anywhere else in the state of Arizona,we stand ready to help. We structure, negotiate and document a variety of real estate and financing transactions, such as leases, purchase and sale agreements, loans and development agreements for a variety of commercial and residential projects. Contact us for more details.

Christopher J. Charles is the founder and Managing Partner of Provident Law ®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS ® (the “AAR”). Mr. Charles holds the AV ® Preeminent Rating by the Martindale-Hubbell Peer Review Ratings system which connotes the highest possible rating in both legal ability and ethical standards. He serves as an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions.

Christopher is a licensed Real Estate Instructor and he teaches continuing education classes at the Arizona School of Real Estate and Business. He can be reached at Chris@ProvidentLawyers.com or at 480-388-3343.