Aug 2018

Phelps v. Caperoon

The Pennsylvania Real Estate Seller Disclosure Law (“RESDL”) requires that persons selling residential property provide the buyer with a disclosure of material defects affecting the property. Only a handful of narrow exceptions to this requirement exist.

What if the property is sold in “as is” condition, though? Is a seller still required to disclose a property’s material defects? The Superior Court of Pennsylvania was recently forced to determine this very issue in Phelps v. Caperoon, — A.3d —-, 2018 WL 3016477, 2018 PA Super 171.

In Phelps, the parties agreed that the buyer would lease the residential property for six (6) months and then purchase the property at the end of the lease term. The buyer inspected the property before signing the contract (which stated that the buyer was purchasing the property “as is”) and was not given the required RESDL disclosure statement. After living in the property for the six (6) months and purchasing the property, the buyer discovered numerus defects including a deteriorated septic system, a cracked furnace, a leaky roof, and flawed electrical wiring. The buyer sued the seller on several grounds including for failing to provide a RESDL disclosure statement. The seller acknowledged that he did not provide a RESDL disclosure statement but raised several defenses against the requirement to provide one including that property sold “as is” in a contract negates the RESDL disclosure requirement.

The Phelps court began by pointing out that RESDL imposes an affirmative duty on sellers to provide a disclosure statement, which is shown through RESDL stating that “Any seller who intends to transfer any interest in real property shall disclose to the buyer any material defects…” Although a seller is not required to conduct a specific investigation or inquiry to complete the RESDL disclosure statement, the statute’s use of the word “shall” means that providing the RESDL disclosure statement is mandatory, unless an exception applies.

The court continued reviewing RESDL’s language and applicable case law before determining that “RESDL contains no exceptions to the disclosure requirements [for the case at hand], including the presence of an ‘as is’ clause in an agreement to transfer residential real estate, and thus, Seller must comply.”

Phelps v. Caperoon provides guidance on whether a RESDL disclosure statement must be provided even if the property is sold “as is”. Although a seller may still choose not to provide a RESDL statement when selling their home, this is done at the seller’s own peril.