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“As-Is” Clause in Foreclosure Contract for Sale Bars Purchaser’s Easement Claims

Case Study

“As-Is” Clause in Foreclosure Contract for Sale Bars Purchaser’s Easement Claims

A lawsuit brought against a major mortgage finance company was dismissed by New Jersey Judge Frank Covello after the Goldberg Segalla team of Courtney E. Darmofal and John M. McConnell argued successfully that the unambiguous language in the purchase agreement for a foreclosure property should negate the plaintiff’s claims against our client.

The case — heard in the Superior Court of New Jersey, Chancery Division of Passaic County—stemmed from a foreclosure property that the plaintiff purchased from the mortgage company “as is,”  with no warranties nor representations whatsoever about the condition of the property. The plaintiff also agreed in purchasing the property to waive any and all claims that could arise from encroachments, easements, or other matters which would have been disclosed by survey or inspection.

However, when a restaurant was built at an adjacent property in 2022, the plaintiff sued the mortgage company, claiming it failed to disclose there was a sewer easement related to the property, and that construction caused extensive damage to his sewer pipes.

In filing the suit, the plaintiff brought nuisance, trespass, negligence and punitive damages claims against our client, and also asked the court to order the company to connect/abandon any sewer lateral pipes running beneath the plaintiff’s property in accordance with local code at our client and other defendants’ own cost.

Courtney and John ­— an attorney and the vice chair of Goldberg Segalla’s Business and Commercial practice group, respectively ­– moved to dismiss the suit, arguing that plaintiff agreed to buy the property “as is” with no warranties and no representations. Courtney and John further argued that the plain, unambiguous language of the contract for sale barred the plaintiff’s right to bring his claims, and that any claims related to easements were waived at the time of the property’s purchase. The team argued too that the plaintiff agreed to waive any and all claims or losses that may be incurred as a result of construction or other defects, including, without limitation, any hidden defects or environmental conditions affecting the property, whether known or unknown, and whether such conditions were discoverable through inspection.

Judge Covello agreed that the plain, unambiguous language of the foreclosure contract controlled the issue, and he granted Courtney and John’s motion to dismiss all claims in their entirety against our client.

The mortgage company under the contract for sale of foreclosure property, Judge Covello ruled, had no obligation to disclose anything to the plaintiff, and as such, the plaintiff had no cause of action to bring against our client.

John and Courtney’s motion was favorably decided with a trial date approaching in May 2023, and shows the value of putting in place a plan with the client to carefully review the terms and conditions of a contract for sale, and to examine what defenses may be afforded to a seller of property under New Jersey law.

John is a partner in Goldberg Segalla’s Civil Litigation and Trial, Commercial Litigation and Arbitration, and OSHA and Worksite Safety practice groups. Courtney is an attorney with our Commercial Litigation and Arbitration practice group. Both work from the firm’s Princeton office.