As Is / Disclosure Precedents >> Loughgrin vs Superior Court
As Is / Disclosure Precedents >> Loughgrin vs Superior Court
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Loughgrin vs Superior Court - 1993 view
Statement of Facts and Relevant summary
"Purchaser brought action alleging vendor (seller) negligently misrepresented or concealed existence of defects when statutory disclosure form was prepared"
A summary adjudication in favor of vendor was provided (and it's unclear why)
The court determined
Statutory disclosures can be waived (in a seemingly bad move with no consideration given to the true nature of public interest) and 2)
"As Is" Clauses , be they standard contract clauses or those augmented by a Seller/Vendor for more bite and release of liability will NOT insulate vendor from claims for fraud, mispresentaton or negligence. Numerous times, numerous ways, with various references they indicate the As Is clause provides not protections against liabilities.
This is the summary provided on the Case Docs. There is a lot more that is a lot more relevant in the body
Quotes
"The purchase contract was not intended to insulate Seller from Liability for misrepresentation in the preparation of the statutory disclosure form. "
"Contrary to the apparent assumption of many people dealing in real estate (including some brokers), a sale "as is'" is not the equivalent of a waiver of potential claims for misrepresentation".
"Sale of real property "as is" is not equivalent of waiver of potential claims of common-law misrepresentations. ' as is' sale simply means that purchaser accepts property in condition visible or observable by him."
"[Stock or ] augmented 'as is' clause will will not protect against claims of intentional misrepresentation, fraudulent concealment, or negligent concealment not related to failure to inspect".
"While the waiver clause . can be construed as avoiding claims for negligent misrepresentation based upon defects seller should have known existed but did not because he did not because of a lack of inspection, there remains other possibilities of claims on negligence."
"These commitments do NOT preclude the possibility of a claim of misrepresentation for failing to reveal concealed defects not apparent from an inspection of the property, including not only intentional but negligent".
"Even such augmented "as is" clause, however, does not address the issues of 1) intentional misrepresentation 2) fraudulent concealment or even 3) negligent concealment not related to failure to inspect"
From Hu v Lee - "the use of phrase "As Is" relieves a seller of real preoprty from liability for defects. The only exception is when a seller through fraud or misrepresentation intentionally conceals material defects not otherwise visible or observable to the buyer." -- but its not just intentional acts either!!
From Katz v Department of RE - "An 'as is' provision, generally speaking means that the buyer takes the property in the condition visible to or observable by him. It does not in itself protect.. or absolve [seller ] from liability for passive concealment".
The Docs required by 1102.6 (the TDS) has yes no answers that MUST BE ANSWERED. Failure to comply results in award of damages. All other questions and instructions for disclosure must be followed or those damages. The failure of the Agent to answer the question about additional disclosure information is a violation and subject to damages.
other
There is a strange diversion into the idea of waiving the statutory requirements of CA 1102. It indicates they can if it's mutually beneficial but all the reasons for that are seemingly with an inverted bias and not inclusive of actual ramifications. The fact that was pushed by CAR and supprted by Legislation they may have influenced is concerning.
Specific Text References
"Sale of real property "as is" is not equivalent of waiver of potential claims of common-law misrepresentations. ' as is' sale simply means that purchaser accepts property in condition visible or observable by him."
"[Stock or ] augmented 'as is' clause will will not protect against claims of intentional misrepresentation, fraudulent concealment, or negligent concealment not related to failure to inspect".
"The use of "as is" clause did not insulate vendor from claims based upon statutory disclosure requirements where contract provided vendor would furnish such statement within 5 calendar days." -- great, except how exactly is "good faith" supposed to transpire?
Introduction to an Augmented As Is Clause
The Seller sold property with an "augmented' As Is Clause. The clause specified in detail the buyers responsibilities, and demanded he waive any claim, demand or cause of action against Seller and Brokers.
This is very relevant as it's similar to the "get out of jail free" clause that was relied upon by the Seller and Seller's Agent.
Stock As Is Clause vs Augmented As Is Clause
The court references stock clause and the requirements set forth by Shapiro v Hue
"the use of phrase "As Is" relieves a seller of real preoprty from liability for defects. The only exception is when a seller through fraud or misrepresentation intentionally conceals material defects no otherwise visible or observable to the buyer."
That's a HUGE exception that is obviously relevant. It suggests that only fraud or misrepresentation may result in damages, In fact negligence can also be an exception as seen in the next section, meaning the As Is clause provides no protection from liability by default or guaranteed.
Katz v Department of Real Estate - Negligence applies too
"An 'as is' provision, generally speaking means that the buyer takes the property in the condition visible to or observable by him. It does not in itself protect.. or absolve [seller ] from liability for passive concealment".
TAKEAWAY - You had better have a good idea of what you are selling, you better have taken steps to understand what you are selling. Negligence or Fraud can result in lawsuits
Seller must COMPLETE TDS w. YES NO Answers and must deliver the TDS prior to Transfer of Title. Failure to do so does not invalidate the sale, but any person who willfully or negligently fails to perform any duty prescribed by any provision of the article shall be liable in the amount of actual damages suffered by a transferee.
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These are presented out of order
"Section 1102.13 provides that failure by the seller to comply with these requirements does not invalidate the sale, but that "any person who willfully or negligently violates or fails to perform any duty prescribed by any provision of this article shall be liable in the amount of actual damages suffered by transferee".
The prior text indicates the Seller must seek answers to the Yes No Questions and must provide those answers.
"The form of disclosure is set forth in 1102.6 in great detail, requiring that the seller specifically answer yes or no as to whether seller is aware of any significant defects "
The seller had a statutory requirement to answer YES or NO on the TDS to questions about water run off and mold. His refusal to do so initially and then when demanded is violation of these rules. The damages found are applicable.
Waiver of 1102
A question arose about the ability for two people to mutually agree to waive disclosure requirement of 1102.
The determination relied on whether there was a "public interest" that would make waiving it a problem.
it would seem the court came to wrong conclusions because
1) no thought was given to the way in which a private sale is used as a comparable to evaluate other private sales for public banking and the level to which one private sale that was manipulated could affect others (as our experience shows).
2) The Brokers are only in business for "Consumer Protection" a public interest.
3) Buyers are in an inferior bargaining position if brokers are involved, because their Broker is being paid for by the Seller and only the seller has easy and direct standing to sue for service malfeasance (or seemingly so...)
if this was asking specifically if two people in a sale without Brokers could do it, that would be different, because often times those comps are not as readily accepted by bank appraisers. It's unclear so far if in fact brokers were involved.
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