A contract for the purchase of ranch land contained the following provisions: "Condition of Property: Neither Seller nor any Agent makes any representations or warranties regarding the condition of the Property. Except as otherwise stated in this

Question

Contract or addenda, Purchaser accepts the Property in its present 'AS IS' condition." The contract also provided: "NO ORAL STATEMENT, REPRESENTATION, PROMISE, OR INDUCEMENT SHALL HAVE ANY VALIDITY NOR SHALL BE A PART OF THIS AGREEMENT." "DISCLAIMER: The Seller and Purchaser further acknowledge that neither of them have relied upon the representations, covenants, statements, warranties, or advice of any Broker, or agent of any Broker related to the legal and tax consequences of this contract or any other aspect of this contract unless expressly stated herein." After purchasing the property, the purchasers, Jason and Russell, made improvements to the property, which included constructing a lodge beside the lake and constructing two permanent docks on the lake. However, they discovered that the water level in the lake stayed low except for short periods immediately following a heavy rain. When the water level was low, 30 to 40 feet of shoreline was exposed and the permanent docks were above the head of anyone in a boat on the lake. Russell and Jason purchased the property to entertain clients and had intended for the lake to be the "jewel" of the property. The low water levels made the lake an eyesore rather than a jewel. Jason and Russell sued the seller and the real estate broker and agent for various forms of fraud through their misrepresentations that the lake was low due to the drought and that there was no problem with the lake. Discuss the liability of the broker and agent.

Answer 1

In this case, the problems with the lake were visible to anyone who inspected the property. The lack of water in the lake did not present a health issue; it was an appearance issue. Neither the broker nor agent made representations about the lake except that the levels varied according to rainfall, a statement that was accurate. The broker and agent were not asked specific questions by the buyers about the lake except about the level variations and they answered truthfully. That the property is not what the buyer thought is not grounds for holding a broker or agent automatically liable. The buyers must show that there was some form of misrepresentation or withholding of information. Also, the "AS IS" clause made it very clear that the water in the lake was what it was and nothing more.