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Larsen v. Carlene Langford & Associates, Inc.

Court of Appeals of Texas
2001 WL 224953, 41 S.W.3d 245, 2001 Tex. App. LEXIS 1496 (2001)
ELI5:

Rule of Law:

A buyer's agreement to purchase real property 'as is' conclusively negates the essential element of causation for claims of fraud, negligent misrepresentation, and violations of the Deceptive Trade Practices Act (DTPA), unless the buyer was fraudulently induced into signing the 'as is' agreement.


Facts:

  • In 1996, David and Patricia Larsen, with David being a licensed real estate agent, found a listing for a historic home described as needing work.
  • The property was listed by Carlene Langford & Associates, Inc. on behalf of the sellers, Billi and Roland Barrera.
  • After several visits, the Larsens entered into an earnest money contract to purchase the home, in which they checked a box stating, 'Buyer accepts the Property in its present condition.'
  • The Larsens lived in the home for two months prior to closing under a rental agreement, during which they became aware of numerous problems with the property.
  • David Larsen received the seller's disclosure form but noted it was incomplete and did not request that the sellers complete it.
  • At closing, the Larsens signed a final inspection and disclosure form that again stated, 'I accept the property in its present condition.'
  • After the sale closed, the Larsens determined the home's structural problems were so severe that it was economically irreparable and unsafe for occupancy.

Procedural Posture:

  • David and Patricia Larsen sued Carlene Langford & Associates, Inc., the sellers, and a leveling company in a Texas trial court.
  • The Larsens asserted claims of common-law fraud, statutory fraud, negligent misrepresentation, and DTPA violations against Langford.
  • Langford filed a motion for summary judgment on all claims.
  • The trial court granted Langford's motion for summary judgment.
  • The trial court then granted a motion to sever the claims against Langford, making the summary judgment a final, appealable order.
  • The Larsens, as appellants, appealed the trial court's summary judgment to the Texas Court of Appeals, Waco, with Langford as the appellee.

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Issue:

Does a buyer's agreement to purchase residential property 'as is' in a freely negotiated, arm's length transaction negate the element of causation required to maintain claims for fraud, negligent misrepresentation, and DTPA violations against the seller's real estate broker?


Opinions:

Majority - Justice Gray

Yes, a buyer's agreement to purchase property 'as is' negates the element of causation for these claims. The court reasoned that a valid 'as is' clause shifts the entire risk of the property's condition to the buyer, making the buyer's own choice the cause of their injury, not any representation by the seller or broker. Citing Prudential Ins. Co. v. Jefferson Assocs., the court found the 'as is' agreement here was valid because it was an arm's length transaction between sophisticated parties (as Mr. Larsen was a real estate agent). The court also considered and rejected the exception for fraudulent inducement. The Larsens claimed Langford's agent made misrepresentations, but the court found one statement—that the home could be a nice 'bed and breakfast'—was mere puffery, and another—referencing the seller's disclosure about needing 'some leveling'—was not made with knowledge of falsity or reckless disregard for the truth. Therefore, because the 'as is' agreement was valid and not fraudulently induced, it conclusively broke the chain of causation required for all of the Larsens' claims.



Analysis:

This decision solidifies the application of the Prudential 'as is' doctrine to residential real estate transactions in Texas, emphasizing that such clauses are powerful defenses against claims of misrepresentation and DTPA violations. The case serves as a significant precedent, highlighting that a buyer's sophistication is a key factor in upholding an 'as is' clause. It strongly signals to buyers, especially those with real estate knowledge, that they bear the full risk of a property's condition when they agree to 'as is' terms and that overcoming this clause requires specific proof of fraudulent inducement, not just reliance on general statements or opinions.

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