Case Update:  When is "As Is" not "as is"?

In commercial leasing, "as Is" deals are very common and landlords assume that a carefully crafted lease which clearly states that the deal is completely "as is" and with the usual warning that the burden is on tenant to conduct appropriate due diligence will protect the landlord from any defects in the premises.

However, a recent case suggests that there is a notable exception to the "as is" concept.  In Epochal Enterprises, Inc. v. LF Encinitas Properties, LLC (2024) 99 Cal.App.5th 44, the landlord knew that the premises contained asbestos and failed to disclose this to the tenant.  The landlord relied on the “as is” language in the lease to claim that it was not obligated to disclose the asbestos to the tenant. 

The court disagreed and found that because: (1) there is a statutory duty to disclose asbestos[1], and (2) landlord knew of asbestos and failed to disclose same to tenant, that the “as is” language in the lease would not excuse landlord from liability because: landlord’s “failure to comply with disclosure requirements contained in the Health & Safety Code prevented [tenant] plaintiff from knowing about latent hazardous materials at the premises which [tenant] plaintiff had no way of discovering on its own”.  The court concluded that landlord’s “statutory violations led directly to [tenant] plaintiff’s financial losses.”

Epochal Enterprises should serve as a warning to counsel representing landlords that landlords need to understand the scope of statutorily-required disclosures and that the “as is” language in the lease may only be of limited utility in certain circumstances.

For a more detailed discussion of the case, see Kyla Rowe, “Reaching the Limits of Limitation of Liability Clauses: Epochal Enterprises, Inc. v. LF Encinitas Properties, LLC” (May 6, 2024) CEB Daily News.

[1] Asbestos Notification Law [2009 California Health and Safety Code - Section 25915-25919.7 :: Chapter 10.4. Asbestos Notification]