Do “As Is” and Integration Clauses in Purchase Agreements Prohibit Claims of Fraud?

For the first time in about a decade, the Michigan Court of Appeals issued a published opinion in a seller disclosure case, this time focusing on “as is” and integration clauses. See Coosard v Tarrant, ___ Mich App ___; ___ NW2d (2022).

The purchasers claimed the seller failed to disclose a property-line dispute. The seller argued the area was known to be troublesome for property line disputes, and the answer in his seller's disclosure statement -- that encroachments were “unknown” -- should have put the purchasers on notice they needed a survey. The trial court granted summary disposition in favor of the seller, concluding the seller’s disclosure statement was “a giant red flag,” and the seller did not appear to make “an obvious and open misrepresentation.”

On appeal, the Michigan Court of Appeals opined (1) if the seller was aware of the encroachment, the “as is” clause would not bar the purchasers’ fraud claim; and (2) an integration clause would not preclude the purchasers from showing that sellers committed fraud in the MLS listing and the seller’s disclosure agreement. But the Michigan Court of Appeals agreed with the trial court that there was insufficient evidence suggesting the seller was aware of the encroachment.

Sellers should still include as-is and integration clauses in purchase agreement; but the clauses are not licenses to make known misrepresentations about property.

The above is for informational purposes only. The appropriate or best strategy will depend on the facts of each deal/case. Thus, readers should not act upon this information without seeking professional advice. #sellerdisclosure