“As Is” Does Not Trump Disclosure Form

The New York State Property Condition Disclosure Act requires sellers of one-to-four family homes to provide buyers with a Property Condition Disclosure Statement (PCDS) before the signing of the sales contract or provide a $500 credit.

In a recent case, although the seller knowingly acquired the property in “as is” condition, the seller was still found liable for damages attributable to an undisclosed water leak that occurred prior to the sale. The seller delivered a PCDS to the buyer prior to the signing of the sales contract in which he answered “no” to the question: “Are there any flooding, drainage or grading problems that resulted in standing water on any portion of the property?”

However, there was prior water leakage in the basement during a severe storm. The seller had actual knowledge of it, but did not disclose it in the PCDS because he felt that it was “an anomaly”.

The New York Supreme Court, Appellate Term, Second Department determined that the “as is” agreement did not vitiate or otherwise waive the protections of the Act. Adoption of the seller’s position would effectively nullify the statutory remedy afforded to the buyer where the seller, having provided the buyer with a PCDS which certifies that the information is true and complete to the seller’s actual knowledge as of the date signed by the seller”, includes statements about the property condition which, to the seller’s actual knowledge, are misrepresentations.

Furthermore, there is nothing in the Act to suggest that the “as is” provision in the contract of sale should be deemed inconsistent with a PCDS, or that it is superceded by an “as is” provision.

The moral of the story is that sellers should provide a $500 credit to the buyer, rather than provide the PCDS, which makes it easier to defend post-closing lawsuits.