Alabama Supreme Court Upholds As-Is Clause in Residential Purchase Agreement
September 8, 2020
REALTORS® applaud the Alabama Supreme Court for a unanimous decision last week upholding the right to contract and providing stability for real estate professionals and buyers and sellers. Specifically, the Supreme Court held that an “as is” clause in a purchase agreement prevents a buyer from asserting an exception to caveat emptor.
Right to Contract: The decision upholds the importance of the terms of the purchase agreement (contract). Sellers and buyers ultimately control the responsibilities of the parties after signing an agreement. Real estate agents cannot act as lawyers but can inform the parties what the “as is” language means.
For sellers: As-is clauses are a great way of limiting future liability for sellers of real estate. The Supreme Court noted the importance of this provision to sellers by stating, “[o]nce a transaction is closed under the terms of an agreement containing “as is” language and property is conveyed, the seller should have no further risk that liability for the condition of the property would remain.”
For buyers: Buyers should consider negotiating the presence of an “as is” clause in the purchase agreement. If the seller refuses to remove the clause or add language with specific disclosures, the buyer must understand that he or she has almost no recourse against the seller. The buyer should consider having the property inspected by additional experts, especially for issues the buyer sees as potential concerns. Buyers should always inspect the property themselves, or understand the risk if they do not.
Summary of the Case
Facts: In Kidd v Benson, the buyers (Kidds) sued the sellers (Bensons) after the collapse of a bluff and boat house on the purchased property. According to the Supreme Court’s opinion, the purchased property contained a bluff that overlooks the Fish River. To stabilize the bluff and shoreline, the sellers had installed retaining walls and, later when stairs descending the bluff to the boat house separated slightly from the bluff, rip-rap. The buyers noticed the work and asked the sellers if it was preventative or due to a problem. The sellers responded that the work was preventative. The buyers and sellers signed a purchase agreement for the property, which included a provision stating that the buyers accepted the property in its “as is, where is, condition.” In the months after the sale closed and after buyers started renovating the boat house, the bluff area collapsed, taking out portions of the boathouse and retaining wall.
Buyers’ Claims: The buyers sued the sellers for negligence, wantonness and fraud, stating that the sellers had a duty to disclose the issues with the bluff as a material defect that posed a direct threat to health or safety.
Holding: The Supreme Court upheld the lower court’s granting of summary judgment for the sellers and dismissed the buyers' claims. The Court affirmed that “under Alabama law, when a buyer elects to purchase real property subject to an ‘as is’ clause in the purchase agreement, and neglects to inspect the property, the buyer cannot take advantage of any exceptions to the doctrine of caveat emptor.”