On March 1, 2002, the New York State Property Condition Disclosure Act became law. This statute requires a seller of a one- to four-family home to provide the buyer with a Property Condition Disclosure Statement (PCDS) or a $500 credit. (Raw land, new construction, cooperative and condominium units are exempt from this requirement.)
The Act's legislative findings suggest that it was the lawmakers' intention to "increase clarity regarding the nature of property" and to "provide greater certainty to contracts entered into by better informed buys and sellers." In actuality, the Act has fostered confusion and litigation. A case in point is Calvente v. Levy, wherein the purchaser knowingly acquired the property in "as is" condition, yet the seller was still found liable for $1500 in damages attributable to an undisclosed water leak that had occurred prior to the sale.
Apparently, the seller had knowledge of the leak-related occurrence but did not disclose that fact on a PCDS supplied to the seller. (The seller is reported to have checked off "no," in response to the question as to whether there had been any "flooding, drainage or grading problems" with the home.) When later challenged, the seller explained the response as an "anomaly" and pointed to the "as is" provision in the parties' contract.
We are advised that the contract contained the following language:
Condition of Property. Purchaser acknowledges and represents that Purchaser is fully aware of the physical condition and state of repair of the premises and of all other property included in this sale, based on Purchaser's own inspection and investigation thereof, and that Purchaser is entering into this contract based solely upon such inspection and investigation and not upon any information, data, statements or representations, written or oral, as to the physical condition, state of repair, use, cost of operation or any other matter related to the Premises or the other property included in the sale, given or made by Seller or its representatives, and shall accept the same 'as is' in their present condition and state of repair....
Typically, "as is" means that a purchaser is accepting a piece of property in its then current state or form, subject to all latent or patent (visible or hidden) defects and all past incidents and occurrences. In our humble opinion, what previously transpired with the structure had no bearing on an "as is" deal. Yet, both the Justice Court of the Town of Blooming Grove, Orange County, and the Appellate Term, 9th and 10th Judicial Districts, recently concluded to the contrary.
In Calvente v. Levy, the appellate court determined that an "as is" deal did not vitiate or otherwise waive the protections of the disclosure law. As the court observed:
Contrary to defendant's contention, such agreement does not thereby vitiate the Disclosure Statement which the statute requires "shall be attached to the real estate purchase contract"...nor waive the buyer's cause of action specifically provided for under Real Property Law section 465(2)...Adoption of the defendant's position would effectively nullify the statutory remedy afforded to the buyer in the situation where the seller, having provided the buyer with a Disclosure Statement 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 therein about the property condition which, to the seller's actual knowledge, are misrepresentations. Further, there is nothing in the statute to suggest that the parties' agreement to an "as is" provision in the contract of sale should be deemed inconsistent with a Disclosure Statement, or that the latter is of necessity superseded by an "as is" provision. The statute clearly contemplates the validity of both instruments since it provides that "[n]othing contained in...this disclosure statement is intended to prevent the parties...from entering into...agreements for the sale of real property as is."
This case reinforces the dangers of providing a PCDS. Had the buyer been given the $500 credit, the seller would have had an easier time defeating the post-closing claims and walked away with a savings of at least $1000 (and that's not counting the legal fees and costs that were incurred to defend the case and prosecute the appeal).
Looks like as far as these kinds of transfers are concerned, you can't have your cake and $500, too.
For a copy of the Court's decision in the Calvente case, please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2006/2006_26163.htm