"As Is" Clauses In Arizona Real Estate Contracts

Sellers of real estate in Arizona often want to include an "as is" clause in an effort to insulate themselves from liability from problems that may be discovered by the buyer after the transaction closes. Although an "as is" clause may be interpreted by a court as providing some indication that the property could be defective, and buyers should certainly be even more attuned to potential problems when an "as is" claue is present, such language does not give sellers free reign to hide and/or fail to disclose defects.

What is clear is that the use of “as is” is likely to be viewed as a disclaimer of warranties or other affirmative representations. In other words, the seller is effectively saying that he or she is not going to make repairs or provide any warranties associated with the property and its systems - it is being sold in its current condition. It is therefore assumed that the buyer is satisfied with the condition he or she finds the property in and is taking that condition into account in making the purchase.

But over a decade ago the Arizona Court of Appeals unequivocally directed that simply including an "as is" clause in a contract does not completely insulate a seller from liability. In S Development Co. v. Pima Capital Management Co., 201 Ariz. 10, 31 P.3d 124 (App. 2001), the Court confirmed that a seller still had a common law duty to disclose known, material, latent defects, even where an "as is" clause was included in the contract.

What this means is that a seller does not have a license to be less than honest even when selling a property “as is.” To avoid liability, a seller should inform the buyer of any defects the seller is aware of, in writing. The seller should also allow the buyer to perform any desired inspections. Buyers, on the other hand, should take extra care in inquiring into the condition of the property and having the property inspected by professionals.

If you are involved in a dispute involving an "as is" clause in an Arizona real estate contract or just have questions about such a clause, you should discuss the matter with a real estate lawyer as soon as possible.