BUYERS ASSUME RISK IN “AS-IS” REAL ESTATE CONTRACTS

THE MEANING OF AN “AS IS” AGREEMENT IN REAL ESTATE

When buyers of real estate in Texas contract to buy a property “as is,” they agree to make their own appraisal of the bargain and to accept the risk that they may be wrong. Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995); Van Duren v. Chife, 569 S.W.3d 176, 185 (Tex. App.-Houston [1st Dist.] 2018, no pet.).

The sellers give no express or implied assurances as to the value or condition of the thing sold. Prudential, 896 S.W.2d at 161.

LEGAL EFFECT OF A VALID “AS IS” CLAUSE

An enforceable as-is clause thus negates the elements of causation and reliance on claims relating to the sale. Id.; see Williams v. Dardenne, 345 S.W.3d 118, 124 (Tex. App.-Houston [1st Dist.] 2011, pet. denied) (“[A] valid `as is’ clause negates the elements of causation and reliance for DTPA, fraud, or negligence claims relating to the value or condition of the property.”); Welwood v. Cypress Creek Estates, Inc., 205 S.W.3d 722, 726 (Tex. App.-Dallas 2006, no pet.) (“In general, a valid `as is’ agreement negates the element of causation necessary to recover on claims regarding the physical condition of the property.”); Cherry v. McCall, 138 S.W.3d 35, 40 (Tex. App.-San Antonio 2004, pet. denied) (“Because the [buyers] contracted to accept the property `as is,’ they cannot, as a matter of law, prevail on their breach of contract claim.”).

WHEN IS AN AS-IS CLAUSE ENFORCEABLE?

An as-is clause generally is enforceable if it was a significant part of the basis of the bargain, rather than an incidental or boilerplate provision, and was entered into by parties of relatively equal bargaining position. Prudential, 896 S.W.2d at 162; Bynum v. Prudential Residential Servs., 129 S.W.3d 781, 789 (Tex. App.-Houston [1st Dist.] 2004, pet. denied).

WHEN AN “AS-IS” CLAUSE MAY NOT BE ENFORCED

Two scenarios may render a valid as-is clause unenforceable. Van Duren, 569 S.W.3d at 185.

The first involves fraudulent inducement. Prudential, 896 S.W.2d at 162; Bynum, 129 S.W.3d at 788. When sellers secure the buyers’ agreement to an as-is clause through false assurances about the value or condition of the thing being sold or by the concealment of information as to its value or condition, the as-is clause does not bar claims against the sellers. See Prudential, 896 S.W.2d at 161-62; Williams, 345 S.W.3d at 124-25.

Buyers also are not bound by an as-is clause if the sellers impair or obstruct the buyers’ right to inspect the property. See Prudential, 896 S.W.2d at162; Bynum, 129 S.W.3d at 788-89.

WHO BEARS THE BURDEN OF PROVING THAT AN “AS IS” CLAUSE IS NOT ENFORCEABLE?

Buyers challenging the enforceability of an as-is clause bear the burden of presenting evidence as to at least one of the above-described exceptions. See Santibanez v. Diron, No. 01-16-00231-CV, 2017 WL 343609, at *3 (Tex. App.-Houston [1st Dist.] Jan. 24, 2017, no pet.) (mem. op.).

*READ MORE AT MY AUGUST 202 ARTICLE ON “AS IS” REAL ESTATE CONTRACTS