Usually a Seller who has lived on and is familiar with a property will be willing to give certain disclosures
about the property’s condition in the Seller’s Disclosure Statement as drafted by the Minnesota Association of
Realtors. When a party has owned and occupied the property for a long time prior to sale and insists on selling the property
in an “as-is” condition, this often sends up red flags for Buyers and their agents.
It may be that
the seller is trying to avoid disclosing known problems and defects or it may simply be a case where the Seller isn’t
comfortable giving disclosures about the condition of the property when they really don’t know the true condition of
the property. In some transactions the seller has never lived on the property and has very little knowledge of it’s
condition. The sale of properties going through a probate or mortgage foreclosure or where the Seller received the property
as a result of the probate (the heirs) or foreclosure (the bank) fit into this category. The Seller of these properties have
no knowledge of the property’s condition and will be unwilling to make such disclosures. In other cases the Seller
has lived on the property but just is not very knowledgeable when it comes to building conditions. In such cases, the Seller
will insist that an As-Is Addendum be made a part of the Purchase Agreement and that the property will be sold As-Is.
An As-Is Addendum is not a “waiver” of all disclosures that are required by federal state and local government
regulations to be provided by the seller. Even with the use of an As-Is Addendum, depending upon the terms agreed to therein,
the Buyer must receive one of the following:
1. A Seller’s Property Disclosure
Statement;
2. An Independent Third Party Inspection Report; or
3. A
waiver of Minnesota Statutes §§ 513.52-513.60.
If a Seller uses an As-Is Addendum but also provides
a Seller’s Property Disclosure Statement it is questionable as to what value the A-Is Addendum is for the Seller. If
the Seller wants the As-Is Addendum to be affective, the Seller needs to provide the independent third party inspection report
or a waiver pursuant to the statute.
Even if the disclosure requirements of Minnesota Statutes §§ 513.52-513.60
on the As-Is Addendum are properly waived, the Seller is still required to provide the following disclosures:
1. Methamphetamine Disclosures;
2. Septic System Disclosure;
3. Well Disclosure;
4. Lead Based Paint Disclosure;
5. Disclosure of Valuation Exclusions; and
6. All Required
Local Government Disclosures.
It is important to keep in mind that a Buyer should not rely solely on the Sellers
disclosures – whether an As-Is Addendum is used or not. Disclosures are made only to the best of Seller’s knowledge.
The Seller may in fact have no knowledge of adverse conditions required to be disclosed or may not understand what they are
looking at. They may look at something as a minor issue when, in fact, it is an indication of a potential major problem.
They may not know what they should be looking at and therefore they miss a potentially major problem. The bottom line is
that the Buyer should never rely solely on the Sellers’ disclosures. Get a reputable inspection and rely on an expert.
In summary, if you are representing a Buyer considering purchasing a property ‘As-Is”, it is
important that the purchase be made contingent upon an acceptable inspection, and that Buyer has the property thoroughly inspected
and satisfies her or himself as to the condition of the property before the Buyer closes. If you represent the Seller, the
Seller must know that even with an As-Is Addendum certain disclosures must be made, however, disclosure thereof will be only
to the extent of Seller’s knowledge.
NOTICE
The foregoing is not intended to constitute legal advice for any specific circumstance, but is intended to reflect broadly
applicable principles, under Minnesota law, relevant to a typical situation. Each set of facts and each contract is, or can
be unique; the unique facts and specific language of the contract may require a different legal analysis and may result in
a different outcome. Before proceeding in reliance upon this or any other general description of law, consult with an attorney
competent in the field of practice relevant to your situation.
Copyright 2007 Nash & Lodge, PLLP
Click here to return to the Articles Page