Real Estate Clauses, Principles and Doctrines in New York

(and what they may mean to buyers and sellers)

Doctrine of caveat emptor

New York law follows the long-standing tradition in the purchase of real property that a buyer has the duty to satisfy himself of the quality of the bargained-for purchase of the property without trying the seller. See Stambovsky v. Ackley, 169 A.D.2d 254, 572 N.Y.S.2d 672, 675–76 (1st Dept.1991); London v. Courduff, 141 A.D.2d 803, 529 N.Y.S.2d 874, 875 (1st Dept.). Further, the term to purchase the property “AS IS” is a specific contract disclaimer as to the condition of the property to be purchased and thwarts this breach of contract claim (see Mosca v. Kiner, 277 A.D.2d 937,939 [4th Dept.2000]; McManus v. Moise, 262 A.D.2d 370,371 [4th Dept.1999]). Under the generally accepted doctrine in real estate transaction of caveat emptor or buyer beware, there is no duty upon the seller to disclose any information concerning the property (Caceci v. DiCanio Construction Corp., 72 N.Y.2d 52,57 [1988]).

Seller has no duty to disclose

New York law does not impose a duty on a seller of real property to disclose information concerning the property. See,Renkas v. Sweers, 10 Misc.3d 1076(A), 814 N.Y.S.2d 892 (Sup. Ct. Monroe Co), “Active concealment is some conduct, more than mere silence, by the seller that may create a duty to disclose information concerning the property (Gizzi at 881;Bethka v. Jensen, 250 A.D.2d 887,888 [3d Dept.1998]). To recover damages for active concealment, “the plaintiff must show, in effect, that the seller or the seller’s agents thwarted the plaintiff’s efforts to fulfill his responsibilities fixed by the doctrine of caveat emptor” (Jablonski at 485).

Any potential fraud claim to be brought against a seller for failing to disclose a lawsuit involving the property and its circumstances would fail. Facts which are accessible as a matter of public record bar a claim of justifiable reliance necessary to sustain a cause of action for fraud. Grumman Allied Industries, Inc. v. Rohr Industries, Inc., 748 F.2d 729, 737 (2d Cir.1984); Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 184 N.Y.S.2d 599, 603, 157 N.E.2d 597, 601 (1959); Most v. Monti, 91 A.D.2d 606, 456 N.Y.S.2d 427, 428 (2d Dept.1982).

To the extent that there may be “latent” defects in the building, a duty to disclose a latent defect concerning the premises may be based (post-closing and upon later discovery) on the theory that where a buyer is not able to discover the defect in question through ordinary inspection and would not be willing to purchase the property if he or she knew of it, then a contract that is procured without disclosing such a defect is procured by fraud and misrepresentation. See, Young v. Keith, 112 A.D.2d 625, 492 N.Y.S.2d 489 (3d Dep’t 1985); McMillen v. Marzacano, 277 A.D. 977, 100 N.Y.S.2d 240 (1st Dep’t 1950). These allegations would require a high burden of proof.

The “Merger” clause

If the contract of sale contains the typical merger clause, which indicates that “all prior understandings and agreements between the parties are merged in this agreement….” this clause will bar any claim that the seller should be held liable for any representations or omissions. See, Chase Manhattan Bank, N.A. v. Edwards, 87 A.D.2d 935, 450 N.Y.S.2d 76, 78 (3d Dept.1982), aff’d 59 N.Y.2d 817, 464 N.Y.S.2d 739, 451 N.E.2d 486 (1983); Dorsey Products Corp. v. United States Rubber Co., 21 A.D.2d 866, 251 N.Y.S.2d 311, 313 (1st Dept.1964), aff’d 16 N.Y.2d 925, 264 N.Y.S.2d 917, 212 N.E.2d 435 (1965).

Anticipatory repudiation

This principle, known as the doctrine of anticipatory repudiation, provides that when there has been a repudiation of the contract by one party before the time for his performance has arrived, the other party may treat the entire contract as breached and commence suit without delay. 22A N.Y. JUR.2D Contracts Section 444 (1996). Resort to this doctrine is at the election of the non-breaching party. See Sven Salen AB v. Jacq. Pierot, Jr., & Sons, Inc., 559 F.Supp. 503, 506 (S.D.N.Y.1983), aff’d, 738 F.2d 419 (2d Cir.1984). However, “there must be a definite and final communication of the intention to forego performance before the anticipated breach may be the subject of legal action. Mere expression of difficulty in tendering the required performance, for example, is not tantamount to a renunciation of the contract.” Rachmani Corp. v. 9 East 96th Street Apartment Corp., 211 A.D.2d 262, 629 N.Y.S.2d 382, 385 (1st Dep’t 1995) (citations omitted). The doctrine of anticipatory breach thus obviates the need for the non-breaching party to postpone suit until the time for performance of the other party has expired.