“As-is” clauses are one of the most common (and most commonly misunderstood) concepts in real estate. In this article we provide a basic definition of “as-is” clauses and discuss how they impact real estate transactions.
A Word About Contracts
Contracts are important. In fact, it’s no exaggeration to say that contracts are what make our civilization possible.
From the career of your favorite NFL player to infrastructure works, and movies, lots of important things happen thanks to contracts.
This includes, of course, commercial real estate. Contracts establish the responsibilities of each party when a real estate transaction takes place.
Contracts regulate responsibilities using clauses, which are sections of a contract that specify the conditions under which the contract is legally enforceable
What Is an “As-Is” Clause?
One way to manage the responsibilities of the parties involved in a real estate transaction is by including an “as-is” clause in a contract.
Under an “as-is” clause, the buyer of a property acknowledges that they accept the property in its current condition without any warranties on the part of the seller.
While this sounds quite straightforward, it’s important to keep in mind that an “as-is” clause does not relieve the seller of their duty to disclose to the buyer known facts or defects that could affect the value of desirability of the property.
The interpretation of “as-is” clauses may vary from state to state. However, California courts have determined in past rulings that “as-is” clauses do not insulate the seller from liability for nondisclosure of known material facts about the property.
If you are a seller, a good general rule is to disclose in writing and as early as possible any detail you suspect may affect the value of a property. If you are a buyer, be mindful of the basic facts about “as-is” clauses. In any case, always seek the assistance of a lawyer before entering into a contract.
About SoCal CRE Team
At SoCal CRE Team, we specialize in finding commercial real estate solutions in Southern California for developers, investors, landlords, and tenants.
If you are interested in a free commercial real estate evaluation, or have a commercial real estate inquiry, contact us today by telephone (714) 456-0500 or email gary@ashwillassociates.com. We’ll be happy to offer guidance and answer all your questions.
Disclaimer: This material is for general information and educational purposes only. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.
