Ohio Supreme Court Holds Seller Had No Duty to Disclose Recorded Sewer Easement in 'As-Is' Sale

The Ohio Supreme Court has reversed an appellate opinion and found that a seller does not have a duty to disclose a publicly-recorded sewer easement. In Ashmus v. Coughlin, the buyer planned to raze the seller’s lakeside lot and build a new home. The purchase contract included a 14-day due diligence period; if no issues were raised, then the property sold as-is. The purchase agreement’s disclosure statement did not specifically request information about easements but included a catch-all section where anything could be disclosed that “could inhibit a person’s use of the property.” The seller did not disclose the easement. When the buyer found out about the sewer line, they backed out of the deal. The seller sued for the lost contract value, and the buyer countersued for non-disclosure. The Ohio Supreme Court considered whether a recorded sewer easement constitutes a defect that must be disclosed and whether the disclosure is limited to physical conditions that could inhibit a person’s use of the property based on its current use, or whether the disclosure must consider the buyer’s planned future use.

The Ohio Supreme Court determined that a working sewer line and a recorded easement do not constitute a defect according to the ordinary use of the term “defect.” Second, the court determined that because the disclosure form referred to “a person” as opposed to “the person,” the seller was not required to anticipate how a particular buyer would use the property and modify their disclosures to reflect pertinent concerns. The court restated that the standard for the disclosure is whether the condition would interfere with an “ordinary buyer’s use of the property.” Sellers and their realtors should take solace in relying on recorded easements and fully operational utilities in fraudulent nondisclosure cases. 

In dicta, the Ohio Supreme Court reminded practitioners that, “where an ‘as is’ clause exists in an agreement, there is no duty to disclose even latent defects. (***) For that reason alone, there was no common-law duty of disclosure (in this matter).”