Chapter 6 - § 6.3 • SELLER'S REPRESENTATIONS AND WARRANTIES

• Jurisdiction: Colorado

§ 6.3 • SELLER'S REPRESENTATIONS AND WARRANTIES

The issue of a seller's representations and warranties can become complex if the property has significant environmental complications. Typically, the purchase agreement will provide that the seller will warrant that there are no environmental conditions undisclosed to the buyer and/or that there are no environmental conditions on or under the property of which the seller has knowledge, except for those specifically identified in an exhibit to the contract. The seller may also be asked to acknowledge that the property is not in violation of any federal, state, or local law, ordinance, or regulation relating to environmental conditions. Sometimes the seller will be asked to represent that no hazardous substances or hazardous materials have been used at the property or that there are no underground storage tanks at the property. A practical way to deal with form representations or too broad representations is to prepare a "disclosure schedule" as an addendum to the contract. See Form 6C, "Disclosure Schedule."

An issue for negotiation regarding the seller's representations and warranties is the stated level of knowledge in making the representations and warranties. Potential formulas include "to the best of seller's knowledge," "to seller's actual knowledge" ("with inquiry" or "without inquiry"), or "to the actual knowledge of [specific seller officer]." See Form 6M, "Purchase Agreement Clauses — Alternative Forms of Seller's Representations."

Another issue is whether the seller makes any representations or warranties regarding the accuracy or reliability of information provided by others, such as previous owners or the seller's contractors. While provided reports may contain both fact information (data) and contractors' opinions, sellers usually will not want to make any representation about the accuracy of the disclosed information. See Form 6N, "Purchase Agreement Clause — Buyer's Non-Reliance on Seller's Information."

Sellers normally want to sell the property on an "as is" basis. See Form 6O, "Purchase Agreement Clause — 'As Is' Sale." Previously, courts evaluated the circumstances to determine whether the "as is" clause should be upheld, looking at such factors as...