Caveat Emptor in an “As Is” World: Fraud in The Purchase and Sale of Real Property

By: Jeffrey M. Haber

In New York, the doctrine of caveat emptor — “let the buyer beware” — remains an important principle in residential real estate transactions. Unlike many other states that require extensive seller disclosures, New York adheres to a more traditional approach: absent fraud, active concealment, or a special relationship, a seller has no general duty to volunteer information about defective conditions in the property. The burden rests on the buyer to discover any issues through inspection and due diligence prior to closing.

Under the doctrine, buyers are expected to investigate all aspects of a property’s condition, such as structural integrity, environmental concerns, mechanical systems, and legal compliance. The failure to do so may leave the buyer without recourse after the transaction is complete, even where significant defective conditions are later found.

However, the doctrine is not absolute. New York courts recognize exceptions to the doctrine. For example, a seller may not engage in active concealment of defective conditions, such as deliberately hiding structural damage, masking water intrusion, or otherwise preventing a buyer from discovering a condition that could have been revealed through reasonable diligence. Similarly, if a seller chooses to speak on a subject, they must do so truthfully; partial disclosures or misleading statements can give rise to liability for misrepresentation.

In Serba v. Cook, 2026 N.Y. Slip Op. 03464 (2d Dept. June 3, 2026), the Appellate Division, Second Department, affirmed the dismissal of a complaint alleging, inter alia, fraud in connection with the sale of real property on the grounds that, inter alia, the defendants were not obligated to disclose the alleged omitted condition under the caveat emptor doctrine and certain provisions of the contract of sale barred plaintiff’s reliance-based claims.

Applicable Principles

A cause of action to recover damages for fraudulent misrepresentation requires “‘a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury.’”[1] “A cause of action to recover damages for fraudulent concealment requires, in addition to the elements of a cause of action to recover damages for fraudulent misrepresentation, an allegation that the defendant had a duty to disclose material information and that it failed to do so.”[2]

“[I]n the context of real estate transactions, a claim of fraudulent misrepresentation must be analyzed within the doctrine of caveat emptor.”[3] “New York adheres to the doctrine of caveat emptor and imposes no liability on a seller for failing to disclose information regarding the premises when the parties deal at arm’s length, unless there is some conduct on the part of the seller which constitutes active concealment.”[4] “If however, some conduct (i.e., more than mere silence) on the part of the seller rises to the level of active concealment, a seller may have a duty to disclose information concerning the property.”[5] “To maintain a cause of action to recover damages for active concealment, the plaintiff must show, in effect, that the seller or the seller’s agents thwarted the plaintiff’s efforts to fulfill his [or her] responsibilities fixed by the doctrine of caveat emptor.”[6] 

Moreover, a cause of action alleging fraudulent inducement may not be maintained if specific disclaimer provisions in the contract of sale disavow reliance upon oral representations[7] or when the parties insert into their contract a provision “that the buyers had inspected the premises, agreed to accept it ‘as is’, and understood that no representations were made as to its condition.”[8]

Serba v. Cook

In November 2021, plaintiff, as purchaser, entered into a contract with the defendant, as seller (the “seller”), to purchase residential property located in Westchester County, New York. In January 2022, plaintiff commenced the action, inter alia, to recover damages for fraud against, among others, seller, defendants Spano Abstract Service Corp. (“Spano”), which prepared a title report/certificate for title insurance for the property, J Philip Real Estate, LLC (“J Philip”), a licensed real estate broker (“broker”), the broker’s managing member, and the listing real estate agent for the property. Plaintiff alleged, among other things, that, after the closing in December 2021, she discovered the property was not connected to the public sewer system and that J Philip, the broker, the listing agent (collectively, the “Real Estate defendants”), and the seller had concealed this fact from plaintiff. Additionally, the plaintiff alleged that Spano breached its duty to conduct a diligent search regarding the property’s connection to the public sewer system.

Spano and seller separately moved, inter alia, pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against each of them. The Real Estate defendants also moved pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them. In an order dated June 20, 2022, Supreme Court, among other things, granted the motion of the Real Estate defendants and those branches of the separate motions of Spano and the seller. Plaintiff appealed.

The Second Department affirmed.

The Court held that the caveat emptor doctrine barred plaintiff’s fraud claims.[9] In so holding, the Court found that “the complaint failed to adequately allege facts that would support a finding that the seller and the Real Estate defendants thwarted the plaintiff’s efforts to satisfy the plaintiff’s obligations under the doctrine of caveat emptor.”[10] 

The Court also held that the “as is” and disclaimer clauses in the contract of sale barred the fraud claims: “the causes of action alleging fraudulent misrepresentation and fraudulent inducement are barred by the ‘as is’ clause in the contract and the specific disclaimer regarding the condition of the property.”[11]

A disclaimer clause disclaims reliance on extra-contractual representations. For a disclaimer clause to be enforceable, it must contain language that makes it clear that the parties are not relying on such representations. In other words, a party’s disclaimer of reliance cannot preclude a fraudulent inducement claim unless: (1) the disclaimer is specific to the fact alleged to be misrepresented or omitted; and (2) the alleged misrepresentation or omission does not concern facts peculiarly within the knowledge of the non-moving party.[12] Thus, “only where a written contract contains a specific disclaimer of responsibility for extraneous representations, that is, a provision that the parties are not bound by or relying upon representations or omissions as to the specific matter, is a plaintiff precluded from later claiming fraud on the ground of a prior misrepresentation as to the specific matter.”[13] 

Accordingly, the Court concluded that “the Supreme Court properly granted those branches of the separate motions of the seller and the Real Estate defendants …to dismiss the causes of action alleging fraud insofar as asserted against each of them.”[14]

Takeaway

As discussed, New York adheres to a traditional, buyer-focused approach in residential real estate transactions through the doctrine of caveat emptor. In practice, this means the primary responsibility for uncovering defects and other conditions in real property rests on the buyer. Purchasers are expected to conduct inspections and due diligence, including assessments of structural conditions, environmental and legal issues, before closing. If they fail to do so, they may have little or no recourse after closing, even if serious problems emerge.

At the same time, the doctrine is not without limits. Sellers cannot actively conceal defects or interfere with a buyer’s ability to discover them. Nor can they make partial or misleading statements; once a seller chooses to speak about a condition, they must do so truthfully. Liability may arise if a seller’s conduct goes beyond mere silence and crosses into active concealment or misrepresentation.

The caveat emptor doctrine’s strength is further reinforced through contractual protections. “As is” clauses and specific disclaimers, especially those stating that the buyer has inspected the property and is not relying on representations about its condition, can significantly limit or bar claims for fraudulent inducement or misrepresentation. These provisions reflect and reinforce the expectation that buyers protect themselves through their own investigation.

Serba illustrates how New York courts apply these principles. There, as discussed, plaintiff alleged fraud after discovering post-closing that the property was not connected to a public sewer system. However, the Court affirmed the dismissal of the claims, finding no adequate allegation that the seller or the Real Estate defendants actively concealed the condition or prevented plaintiff from discovering it through reasonable diligence. The Court also emphasized that the contract’s “as is” and disclaimer provisions undermined plaintiff’s claims of reliance.

Taken together, the key takeaway of Serba is that New York courts remain committed to the caveat emptor doctrine: buyers must be proactive and vigilant, while sellers are generally protected from liability for nondisclosure unless they engage in deceptive conduct or violate specific disclosure obligations.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm.

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[1] Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178 (2011), quoting Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421 (1996); see also 98 Gates Ave. Corp. v. Bryan, 225 A.D.3d 647, 649 (2d Dept. 2024).

[2] 98 Gates Ave., 225 A.D.3d at 649 (internal quotation marks omitted); see also Mandarin Trading, 16 N.Y.3d at 179.

[3] Hecker v. Paschke, 133 A.D.3d 713, 716 (2d Dept. 2015); see 98 Gates Ave., 225 A.D.3d at 649.

[4] Simone v. Homecheck Real Estate Servs., Inc., 42 A.D.3d 518, 520 (2d Dept. 2007); see also Hecker, 133 A.D.3d at 716.

[5] Daly v. Kochanowicz, 67 A.D.3d 78, 91-92 (2d Dept. 2009) (internal quotation marks omitted); see also Gordon v. Connie Profaci Realty, LLC, 231 A.D.3d 712, 714 (2d Dept. 2024).

[6] Jablonski v. Rapalje, 14 A.D.3d 484, 485 (2d Dept. 2005); see Razdolskaya v. Lyubarsky, 160 A.D.3d 994, 996 (2d Dept. 2018).

[7] Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959); Roland v. McGraime, 22 A.D.3d 824, 825 (2d Dept. 2005); Fabozzi v. Coppa, 5 A.D.3d 722, 723-724 (2d Dept. 2004); Platzman v. Morris, 283 A.D.2d 561, 562-563 (2d Dept. 2001); Masters v. Visual Bldg. Inspections, 227 A.D.2d 597, 597-598 (2d Dept. 1996).

[8] Venezia v. Coldwell Banker Sammis Realty, 210 A.D.2d 480, 481 (2d Dept 2001).

[9] Slip Op. at *3.

[10] Id., citing Gordon, 231 A.D.3d at 714; Hecker, 133 A.D.3d at 717.

[11] Id., citing J. Carey Smith 2019 Irrevocable Trust v. 11 W. 12 Realty LLC, 240 A.D.3d 432, 434 (1st Dept. 2025); Comora v. Franklin, 171 A.D.3d 851, 853 (2d Dept. 2019); Laxer v. Edelman, 75 A.D.3d 584, 586 (2d Dept. 2010); Hecker, 133 A.D.3d at 717.

[12] Basis Yield Alpha Fund [Master] v. Goldman Sachs Group, Inc., 115 A.D.3d 128, 137 (1st Dept. 2014). See also Danann Realty, 5 N.Y.2d at 323; MBIA Ins. Corp. v. Merrill Lynch, 81 A.D.3d 419 (1st Dept. 2011).

[13] Basis Yield, 115 A.D.3d at 137.

[14] Id.