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CONTRACTS 6: Do you understand the clauses in your Purchase Agreement?

This case arises out of plaintiff’s purchase of a personal residence from defendants (sellers) in 2016. Sellers had completed a Seller’s Disclosure Statement (SDS) on August 8, 2015, which they had updated on December 30, 2015. Pertinent to the issues here, the SDS indicated that the house had a geothermal heating system that was in working order. Further, the SDS indicated that there were features of the property deemed in common with the adjoining landowners, including roads, whose use or responsibility for maintenance may have an effect on the property.

In May 2016, plaintiff and sellers executed a purchase agreement for the sale of the subject property. Defendant W, an independent agent with Keller Williams Realty, represented sellers in the transaction.

Pertinent to this appeal, the purchase agreement contained an “as-is-condition” clause, providing:

AS IS CONDITION: Purchaser acknowledges that Seller has provided Purchaser a required Seller’s Disclosure Statement. Purchaser has been afforded an independent inspection of the property and the Purchaser affirms that Purchaser has examined the above described property and is satisfied with the physical condition of the structure thereon and purchases said property in an “AS IS CONDITION,” subject only to the rights of a property inspection.

It is further agreed that Keller Williams Realty and its agents have made no representations or warranties of any kind nor assume any responsibility for representations made by Seller or any cooperating broker pertaining to the condition of the property. The purchase agreement also contained an arbitration clause.

In December 2016, several months after the closing, the geothermal furnace allegedly failed. Plaintiff maintained that he was informed that it was necessary to replace the unit

On March 23, 2018, plaintiff initiated the instant action by filing a complaint. The complaint alleged that before execution of the purchase agreement, defendants knowingly made representations attesting to the proper working condition of the property’s geothermal heating system, even though defendants knew that these representations were false and that the furnace was broken or showed signs of potential breakdown. The complaint further alleged that sellers omitted facts regarding ownership of the private road and its condition.

Plaintiff sought to void the purchase agreement on this basis and requested damages equal to the purchase price, the mortgage payments he had made on the home, and the cost of repairing the private road.

On May 2, 2018, in lieu of filing an answer, defendants moved for summary disposition pursuant to MCR 2.116(C)(7), (8), and (10). The trial court granted defendants’ motion for summary disposition under MCR 2.116(C)(7), concluding that the claims against the realty companies were barred by the valid release contained in the purchase agreement and that the claims against sellers were required to be resolved in arbitration because they fell within the scope of the arbitration clause in the purchase agreement.

Finding the right attorney to assist with the purchase, sale or acquisition of real estate is critical.

Whether you are buying or selling a home or you are involved in a commercial real estate transaction, an experienced real estate attorney can make a world of difference.

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