Legally speaking: Buying a Property on an “as is where is” basis

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My good friend Ron Ong contributed an article recently. Here’s that article: Renting without Tenancy Agreement?.Here is another very interesting article for everyone thinking about property investment and wants to know what is “as is where is” basis. Please enjoy the article. Feel free to know him better too. (click here) Link with him in FB if you want to keep learning too.

— Article by Ron Ong —

The “as is where is” clause stems from an English legal doctrine known as the “caveat emptor” meaning “let the buyer beware”. This principle puts the risks and heavy weight of a transaction on the purchaser, and it is the purchaser’s duty to do his or her due diligence when deciding whether to go ahead with the sale and purchase transaction despite the fact that sellers are required to disclose known latent defects. 

Often times when the property is being listed and sold on an “as is where is”, the sellers will not make any repairs to aspects of the property that may not be functioning. Notice the words “being sold in its current condition” and the purchaser has inspected the said property and is satisfied with the condition, state, nature and character of the same” in your offer to purchase or even in the subsequent sale and purchase agreement. It essentially means you bear the risk for all defects of quality. 

You can see why agreeing to purchase a property on an “as is where is” is a serious decision for any purchaser. You will have no choice but to accept the property’s physical condition as it is at the date of completion of the purchase, even if the property’s condition had deteriorated significantly since the date of the booking form or offer to purchase. 

Before buying, it is important you learn why the property is listed “as is where is”, so you can make a fully informed decision. If you do not recognise the extreme significance of “as is where is” terms and transactions, you are giving up the very significant opportunity for inspections found in most real estate transactions. 

This means that due diligence prior to entering into an “as is where is” agreement is an absolute must. 

Some examples of due diligence to consider:- 

• Consulting with a lawyer to draft a satisfactory offer to purchase 

• Having a title search performed and examining land records for potential red flags 

• surveying the location and neighbourhood of the property 

• Inspecting the property itself prior to offering a contract or pay any deposits 

At the end of the day, you will have to decide if you are comfortable enough to enter into an “as is where is” transaction. 

Another important aspect to take note is always negotiate for a joint inspection of the property before completion of the purchase or during handover of the property to you. 

Negotiate with the sellers to include a clause in the sale and purchase transaction making completion of the purchase subject to a joint inspection of the property. Assuming the sellers agree to grant you one, having a joint inspection will make it less likely that the sellers will allow the condition of the property to deteriorate too much from the first time you viewed it. This is especially if you are able to negotiate for the joint inspection to occur closer to the completion date. 

Depending on the wording of the clause, the clause may also give you the right to delay completion of the purchase until the seller can deliver the property to you in a condition acceptable to you. 

If a joint inspection is not possible, make sure there is a clause in the sale and purchase agreement which imposes on sellers a contractual obligation to maintain the property in the same condition as at the date of the offer to purchase, save for fair wear and tear. A sample clause can be :- 

“The Vendor hereby covenants with the Purchaser that the said Property shall substantially be in and of the same condition, state, nature and character (fair wear and tear excepted) at the date of presentation of the Completion Date or the Extended Completion Date of the said Property as it is at the date of this Agreement” 

Lastly, obtain an inventory list, take photos and video evidence of the property’s state and condition during inspection or due diligence prior to buying the property. 

You should check that you agree with the inventory, given either by the sellers or the agent. You may note any discrepancies (particularly relating to the condition of fixtures, fittings or furniture included) on the inventory. Take as much photos and videos as you can when you view and inspect the property so that you will be in a better position to prove your case if the seller denies your claims. It never hurts to inspect the property before you sign the contract, so don’t be shy about it. 

In conclusion, if a property is being sold on an “as is where is” basis, this means that it is being sold in its current condition, whatever this condition happens to be. Pay attention to the “as is where is” language to be included, in writing, on the actual agreement. Whatever terms fall within that agreement will control and govern the transaction moving forward. Should you fail to notice the “as is where is” terminology and fail to do due diligence by checking out the property beforehand, you would not be able to complain that the sellers gave you the short end of the stick. 

Disclaimer : This article or guideline is written for general information purposes only. You should always engage professional help before entering into a legally binding agreement.

— end of article —

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<Featured Image is courtesy of Stock Photos from fizkes>

Next suggested article:  7 reasons why property prices will still be rising

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