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The buyer and seller of real estate assume numerous obligations when they execute a purchase and sale agreement (“P&S”). Among other duties, the seller agrees to provide full possession of the premises, and that the premises will comply with applicable building and zoning laws. A P&S will commonly include the following provision, or similar language tailored to the particular circumstances:
Possession and Condition of Premises. Full possession of said premises … is to be delivered at the time of the delivery of the deed, said Premises to be then (a) on the same condition as they now are … and (b) not in violation of … building and zoning laws, and (c) in compliance with the provisions of any instrument referred to [in this agreement]
A buyer may argue that this “Condition of Premises” provision creates a warranty, enabling the buyer to sue the seller after the sale is complete if premises fail to comply with applicable laws. However, the Condition of Premises clause does not create a warranty, does not survive the closing and, therefore, cannot provide a basis for the buyer to sue the seller after the sale is complete.
Massachusetts courts have rejected such warranty claims, noting that other provisions of the standard P&S make clear that the obligations imposed by the Condition of Premises section do not survive the closing. The standard P&S also contains a provision entitled “Acceptance of Deed,” which provides that,
the acceptance and recording of a deed by the BUYER … shall be deemed to be a full performance and discharge of every agreement and obligation herein contained or expressed, except such as are, by the terms hereof, to be performed after the delivery of the deed.
Relying on the Acceptance of Deed provision, courts have held that the Condition of Premises provision does not create warranties or covenants that survive the recording of the deed. Instead, it merely states conditions which, if not satisfied, justify the buyer’s refusal to close the sale. It does not entitle the buyer to complete the sale, record the deed, and then sue to enforce those obligations or for damages. By virtue of the Acceptance of Deed provision, such conditions cease to exist when the deed is accepted and recorded.
In Albrecht v. Clifford, 436 Mass. 706 (2002), the Massachusetts Supreme Judicial Court held that the obligations contained in the Condition of Premises provision (¶ 9 of the P&S in that case) are conditions rather than warranties. According to the Court,
The Albrechts allege in Count I of their complaint that Clifford breached the terms of the purchase and sale agreement because “the Residence delivered to the Albrechts at or about the time of delivery of the deed was not completed in accordance with the requirements of the contract and is in violation of certain building laws.” … The judge entered summary judgment on Count I because it was based on a paragraph of the purchase and sale agreement (paragraph 9), that did not survive the Albrechts’ acceptance of the deed but merged with it. …
Acceptance of a deed ordinarily merges all obligations in the purchase and sale agreement, except for those specified in the deed itself. McMahon v. M & D Bldrs., Inc., 360 Mass. 54, 59, 271 N.E.2d 649 (1971). Consistent with this rule of merger, the agreement in this case expressly states that: “The acceptance of a deed by the BUYER … shall be deemed to be a full performance and discharge of every agreement and obligation herein contained or expressed, except such as are, by the terms hereof, to be performed after the delivery of said deed.”
There is an exception to this general rule when a home builder agrees to undertake an obligation, such as constructing or repairing a building on the property, that is in addition or collateral to the conveyance of the deed….
The Albrechts contend that paragraph 9 of the agreement created an obligation that was collateral to the conveyance of the deed and, as such, constituted a contractual warranty that the residence would comply with the applicable building codes. This contention is incorrect. Paragraph 9 of the agreement states that:
“Full possession of [the residence] … is to be delivered at the time of the delivery of the deed, said premises to be then (a) fully completed in accordance with the requirements hereof, and (b) not in violation of any building, planning, health … or zoning laws…. The Buyer and its consultants shall be entitled personally to inspect said premises prior to the delivery of the deed in order to determine whether the condition thereof complies with the terms of this or any other clause hereof.”
This paragraph is not a warranty. Rather, it describes some of the conditions on which the Albrechts could have refused to purchase the residence. The agreement provided that if Clifford had been unable to provide good title, convey or deliver possession of the residence, or “if at the time of the delivery of the deed the premises do not conform with [the agreement’s] provisions”-including paragraph 9-he had up to thirty days to use reasonable efforts to remedy any of these problems. If he failed to fix any problems within that time, the agreement would have become void. We agree with the judge that Count I of the Albrechts’ complaint fails because paragraph 9 is not a contractual warranty that survived the Albrechts’ acceptance of the deed.
Id. at 716-17. (Emphasis added, footnote references omitted).
Similarly, in Solomon v. Birger, 19 Mass. App. Ct. 634 (1985), the Court stated,
Section 4 of that agreement calls upon the seller to convey a good and clear record and marketable title, free from encumbrances, except, among other things, provisions of existing building and zoning laws. Section 9, upon which the plaintiffs heavily rely, provides: “Full possession of said premises free of all tenants and occupants … is to be delivered at the time of the delivery of the deed, said premises to be then (a) in the same condition as they now are, reasonable use and wear thereof excepted, and (b) not in violation of said building and zoning laws….” Into this latter section, i.e., § 9, the plaintiffs read a warranty by the sellers that the premises at the time of delivery of the deed will conform to the building code of the city of Newton. If the agreement so warrants, the materials submitted by the plaintiffs in opposition to the defendants’ motion for summary judgment are sufficient to raise a question of fact whether at the closing between the parties a building code violation existed.
We do not think that the purchase and sale agreement so warrants. Sections 4 and 9 of the agreement are interdependent. Section 4 deals fundamentally with the state of the title. It does so expressly and mentions building and zoning laws, party wall agreements, taxes, and betterments as aspects of title considerations. There is a blank subparagraph in which counsel tailoring the agreement may insert references to such things as easements. Under § 4, certain fundamental criteria for conveyance of title are established so that the buyer, between the time of execution of the purchase and sale agreement and delivery of the deed, can investigate what kind of pig is in the poke. If the buyer discovers a building or zoning law violation, the buyer may, under § 9, opt out of the agreement, unless the defect is cured in accordance with the provisions of § 10. Section 9 is not expressed in terms of warranty, but rather in terms of the conditions upon which the buyer may accept or refuse conveyance.
It is difficult to imagine that an agreement designed by a real estate association would contain a twenty-year warranty about a fact of which the seller is likely to have imperfect knowledge, i.e., whether his structure, at the time of sale, conforms in every respect with the building code.
Id. at 640-41. (Emphasis added, footnote reference omitted).
To the same effect is the decision in Limoncelli v. Grover, 27 Mass. L. Rptr. 195, 2010 WL 3038900 (Mass. Super. 6/25/10), where the Court stated,
Clause 9 of Limoncelli’s contract provides that “Full possession of said premises … is to be delivered at the time of the delivery of the deed, said premises to be then … (b) not in violation of said building and zoning laws …” Massachusetts courts have held that (1) identical language in a purchase and sale agreement, in combination with a merger clause, fails to create a warranty or collateral obligation, and (2) acceptance of the deed extinguishes all of the seller’s obligations under the purchase and sale agreement. See Albrecht v. Clifford, 436 Mass. 706, 716-18, 767 N.E.2d 42 (2002); Solomon v. Birger, 17 Mass.App.Ct. 634, 640-43 (1985).
Id. at *2. (Emphasis added).
Commentators agree. Massachusetts Practice states,
The provision stating that the property at the time of the closing will not be in violation of building and zoning laws is not a warranty by the seller that the premises at the time of the closing will conform to building and zoning laws; rather, it is a condition upon which the purchaser may accept or refuse conveyance. In other words, the purchaser may not bring an action against the seller after the closing should he discover that the property is in violation of building or zoning laws in some respect. If the purchaser discovers such violations before the closing and the seller is unable to make the premises conform to the agreement, the purchaser may, depending upon the wording of the agreement, terminate the agreement and receive a refund of his deposit, require the seller to use reasonable efforts during a specified period to correct the problem, or accept the property in its present condition with or without a reduction in the price.
36A Mass. Prac. Consumer Law, §28:35 (3rd ed.) (Footnote references omitted).
In sum, the Condition of Premises provision of a standard P&S does not create a warranty enforceable after the parties have complete the sale. That conclusion flows from the language of that provision, which creates only a condition on the buyer’s duty to complete the sale, and from the clear language of the “Acceptance of Deed” provision.
