When does an “as-is” sale support of claim of deceptive trade practices? A recent case from the Austin Court of Appeals provides some insight as well as a cautionary tale to anyone selling a property requiring repair.

In Christians v. Flores, Flores sued Christians regarding the “as-is” purchase of a home located in Austin, Texas, asserting that Christians failed to disclose issues with the home’s roof.  Prior to the sale of the property, the roof was damaged by a hailstorm. A roofer who visited the house testified at trial that a storm had damaged the roof beyond repair and needed to be replaced. Christians refused to have the roof repaired at that time.

Prior to closing on the purchase of the house, Flores had not been made aware of the roof damage.  Due to a close relationship between Flores and Christians, Flores opted not to have the property independently inspected. Before closing, the roofer who previously inspected the house informed Flores about the need to replace the roof. Flores asked Christians to file an insurance claim with USAA, Christians’ property insurer, to cover the cost of the roof replacement. The property insurer ultimately paid $34,730.89 to Christians to replace the roof. However, Christians retained all the insurance proceeds and informed Flores that the property insurer had determined the roof only needed to be repaired, not replaced.

After closing on the sale, Flores contacted the property insurer and discovered the roof needed to be replaced, and that the insurer had paid out the claim to Christians. Flores sent a demand letter under the Texas Deceptive Trade—Consumer Protection Act (DTPA) to Christians requesting all of the insurance proceeds and attorney’s fees. Christians refused and used all insurance proceeds on his own attorney’s fees and other costs.

Flores later filed suit against Christians, asserting causes of action for DTPA violations, negligent misrepresentation, and fraud.  Christians counterclaimed alleging Flores filed a baseless suit, and after a bench trial the trial court rendered judgment for Flores awarding in the amount of $286,725,87 against Christians.

The Austin Court of Appeals evaluated several areas of the trial court’s ruling, beginning with the “as-is” provision of the sale agreement. The Court opinioned that, while an as-is clause is generally enforceable, it is not enforceable if the buyer demonstrates that he was induced to enter the agreement by fraudulent misrepresentation or concealment of information by the seller.  Under the fairly egregious facts of this case, the Court had little trouble holding that Christians concealed the information from the property insurer and misrepresented to Flores that only simple roof repairs were needed.

The Austin Court of Appeals held that Christians damaged Flores by providing misleading information regarding the need for a roof replacement and his correspondence with the property insurer. By not releasing the funds provided by insurer, the Court concluded that Flores met the standard of proof to show Christians committed a DTPA violation.

“As-is” provisions in sales contracts are important risk management tools, but they cannot protect against unscrupulous behavior and fraudulent concealment of material facts.  The attorneys in our Austin and Dallas offices are available to answer any questions you may have about as-is” provisions. Please contact us at info@gstexlaw.com.

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