Disclosure of material facts which may affect a potential purchaser’s decision to purchase your property is required under Arizona’s common law. This is in addition to any contractual obligations you might otherwise have in regards to the sale of your property.

Non-disclosure of a material fact is essentially treated as an affirmative statement by the seller that the fact does not exist in the first instance. Under Arizona law, this is considered fraud and/or misrepresentation.

As you might imagine, a great deal of the analysis involving allegations of non-disclosure turns on what is a “material” fact. Arizona courts have ruled that a material fact is one in which a reasonable person would consider important in making a decision to purchase the property in question.

Too often, sellers attempt to circumvent their disclosure requirements by use of an “as-is” clause in the purchase contract. The seller’s use of an "as is" clause in a real estate contract is usually viewed as an attempt to shift the burden upon a potential buyer to determine the condition of the property purchased and/or to imply that the property is in some way defective and the buyer may not justifiably rely on seller's silence as a representation that no defects exist.

However, under Arizona law, an “as-is” clause is insufficient to insulate a seller if it can be shown that the seller knew of the material condition and did not disclose it. Further, known defects must be disclosed with specificity to fully protect the seller from liability from incomplete disclosure. The rationale used by the courts to support these conclusions is that an “as-is” clause is viewed as a waiver by the buyer of only breach of warranty claims – meaning tort claims such as fraud or misrepresentation are not waived. In addition, the courts reasoned that latent defects, by their very definition being hidden and undiscoverable by a buyer’s reasonable inspection, unfairly shifts the risk of non-disclosure to the buyer and is violative of the implied duty of good faith and fair dealing imported by law into all contracts.

Accordingly, the best defense a seller has at his disposal is disclosure of any and all defects that a potential buyer could conceivably construe as material to the transaction. Failure to do so may result in costly and time-consuming litigation.

If you have been accused of non-disclosure, or have bought a home where material disclosure were not made, you should speak to an experienced attorney at Platt & Westby to carefully evaluate your case.