I usually preface my blog posts and comments with the statement: "Real Estate is Local." Laws vary from state to state. Real estate practices vary from state to state. Real estate practices vary within a state. New York City has many of it's own laws and regulations and Manhattan is a unique place in the real estate Universe. New York is a *Title state many other states are **Escrow states.
In Manhattan we sell properties "AS IS." What does "AS IS" Condition Mean?
Contract contains "as is" language - "official notice" of the property's condition. The purchaser must rely upon its own investigation, rather than upon the Seller's representations, with respect to the condition of the property.
"Seller makes no representation as to the physical condition or state of repair of the Unit, the personality, the included interests or the premises. Purchaser has inspected or waived inspection of the unit, the personality and included interest and shall take the same "as is", as of the date of this contract, except for reasonable wear and tear. However at the time of the closing, the appliances shall be in working order and required smoke detector(s) shall be installed and operable".
Caveat Emptor (let the buyer beware).
The basic theory in New York real property law is "caveat emptor," meaning, "let the buyer beware." This theory is supported by the well-settled principal that a seller has no duty to speak when the parties deal at arms length; the mere silence on the part of a seller without some act or conduct that amounts to concealment is not actionable. Therefore, unless a seller takes affirmative action that prevents a buyer from determining the existence of an adverse condition (i.e., painting over a wall that is the subject of constant leaks), a buyer has no recourse against a seller on account of that condition.
Don’t Look to the Broker
After the seller, the next likely person that a buyer would look to for representation as to the condition of a given building or apartment is the broker. Unfortunately, for several reasons, the broker is not always the best person to rely upon.
In many cases the broker will not have enough information about a particular building or apartment to be in a position to make any representation as to potential problems that may exist. This is particularly the case in New York City, where it would be virtually impossible for brokers to keep abreast of the changing conditions of buildings, let alone the thousands of apartments in any given neighborhood. Furthermore, much of the information circulated by brokers is second-hand or anecdotal, and should not be considered absolutely reliable for such a large investment.
Bottom line: "Due Diligence"
How is a buyer protected? There is a due diligence window between Accepted Offer and Contract signing. Do not sign a contract until you and your attorney have done their home work. Inspect the premises, the building financials, read board meeting minutes, talk to neighbors, the condition should be factored into the offer or request that repairs be performed prior to closing. Avoid disputes about inclusions and exclusions of Personal Property. Appliances and fixtures must be in "working condition"
"AS IS" Condition of the Property.
The seller must deliver the premises vacant and broom clean at closing.
*Title states: Only allow lawyers to write contracts, prepare title documents, hold deposit money and close deals.
**Escrow states: Allow real estate brokers and escrow title companies to prepare contracts, legal documents, hold moneys and close deals.