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THE AS-IS CLAUSE : THE SELLER DISCLOSURE ACT CHANGES THE GAME

Many House Sellers believe that an “as is” clause will protect them from all legal liability if the Buyers subsequently discovery any undisclosed defects or faults in the purchased House. This belief is not unfounded; the “as is” clause does indeed transfer the risk of loss from a House defect to the Buyer in many cases.

The Michigan Seller Disclosure Act (the “Act”) dramatically impacts this calculation. The Act changed the residential house sale rules from “Buyer Beware” to the limited Seller Disclosure required in the Seller Disclosure Statement (the “Statement”). Sellers are now legally required to make no less than 59 distinct disclosures about their House in the Statement, and perhaps more if explanations are required.

While some disclosures have more potential impact than others, each of these revelations nonetheless presents an opportunity for Buyers to complain about the erroneous information they were given as to each single inquiry on the Statement. The “as is” clause will not protect the Sellers if they knew or had good reason to know their answers on the Statement were false, unless the Buyers are able to discern that falsity for themselves upon reasonable inspection of the House.

This limitation has broader implications than most Sellers might realize. In once case (entitled Meyer v Underwood) the Sellers actually disclosed the water intrusion in the House but did not disclose the entire extent of that intrusion. While the Sellers undoubtedly believed this disclosure was all that was required, the appeals court ruled that the Sellers’ failure to make full disclosure was sufficient to require a trial of the dispute.

There is a big difference between a House defect which would be obvious to the Buyer upon inspection (e.g., a hole in the roof) and one that could be known to the Seller only through years of living at the House (e.g., annual water leakage in the basement). Sellers are well advised to avoid placing undue reliance upon the impact and extent of the “as is” clause in their Purchase Agreement.

Caution: This article provides general information and is not legal advice.
You should contact Lambert Law if you seek specific legal advice regarding the topics discussed above. 

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