First District Court of Appeal addresses “as is” language in Commercial Real Estate Contract
In the recent decision styled Thomas J. Duggan, LLC v Peacock Point, LLC, 37 Fla. L. Weekly D1206 (Fla. 1st DCA May 23, 2012), the First District Court of Appeal affirmed the trial court’s denial of a claim for rescission involving an auction sale of subdivision lots under a contract containing an “as is” provision.
The parties had entered into a contract to sell a six-lot waterfront subdivision in Destin, Florida for $3.2 million. The sale arose from an auction and the contract contained an “as is” provision. The buyer sought to rescind the contract because the lots were not as the seller had represented, immediately ready for residential construction. The city would not issue building permits until the development obtained a certificate of completion.
Ruling against the buyer, the trial court found that although the parties made a mutual mistake of fact, that at the time of the auction, the houses could not be constructed on the lots, the buyer had failed to establish that the contract did not put the risk of mistake on him.
On appeal, the buyer argued the the trial court erred by failing to rescind the contract based upon either a fraudulent or innocent mistake and the seller’s failure to make full disclosure despite the “as is” provision or mutual mistake of fact. The court on appeal found that the evidence did not support fraud in that neither the seller nor the auction house knowingly made a false statement of material fact.
The court on appeal also rejected the argument based upon innocent mistake because the buyer failed to show that the seller possessed superior knowledge over the buyer, a sophisticated developer. Since the issue was a matter of public record, the buyer had the same access to the information and the alleged representation did not pertain to some latent defect in the land.
The appellate court also stated that the duty to disclose imposed on sellers in residential real estate transactions does not similarly apply to commercial property sellers. Under the ‘as is” provision, the buyer disclaimed any warranties or representations of any kind or character made by the seller and its agent, the auctioneer.
Finally, the appellate court concluded that to prevail on a claim for mutual mistake, the plaintiff not only must prove the mutual mistake but that the contract did not place the risk of mistake on the party seeking rescission. In this case, the court on appeal concluded that the ‘as is’ language placed the risk of mutual mistake on the buyer.
Florida Real Estate Litigation Attorney
Contact Fort Lauderdale real estate litigation attorney Howard N. Kahn, Esq. if you or someone you know has a real estate or business contract dispute. You can reach him at 954-321-0176 or online.
