"As Is" Real Estate Contracts
An "as is" clause in a real estate purchase and sale contract does not insulate the transferor or seller from the duty to disclose defects or the requirements of California Civil Code 1102 et seq. "As is" language serves to give notice of patent defects and means that the buyer accepts the property condition which it is reasonably observable by him or her. Also, "as is" language in a real estate sales contract does not protect a seller from liability for fraud or misrepresentation.
In California, sellers of residential real estate have a legal duty to disclose any facts materially affecting the value or desirability of the property that are known or accessible only to the seller and not known to or within reach of the diligent attention and observation of the buyer. (California Civil Code Section 1102 et seq.) Notwithstanding, sellers are not liable for latent defects in property of which he or she did not know about and had no reason to believe existed.
Transferors of residential real estate must provide purchasers with a Real Estate Transfer Disclosure Statement ("transfer disclosure statement"). Any attempt to waive this requirement is void as against public policy. This requirement applies to a sale, exchange, installment land sale contract, lease with an option to purchase, any other option to purchase, or ground lease coupled with improvements. Delivery of the transfer disclosure statement must be by personal delivery or by mail to the prospective transferee.
The transfer disclosure statement form includes the transferor's disclosure of information regarding all of the following:
- The physical condition of the property;
- The existence of hazardous materials or dangerous conditions;
- Encumbrances on the property, including any encroachments;
- Easements or other matters which may affect the other party's interest in the property; and
- Lawsuits against the seller threatening to affect or affecting the property.
Transferors of residential property must also disclose to potential buyers, if applicable, that the property is in a natural hazard area, that the property is subject to a lien created under the Mello-Roos Community Facilities Act, or is subject to an assessment lien collected in installments to secure bonds issued pursuant to the Improvement Bond Act of 1915. In addition, cities or counties may require that sellers or their agents deliver to purchasers the Local Option Real Estate Transfer Disclosure Statement as set forth in the California Civil Code.