You’ve closed the deal on your property.  Inspections were done, hands shaken, and keys turned over.  You’ve cancelled your insurance policy.  

And then you’re sued, for an injury that took place on the property after the sale.  You have no insurance coverage, because your liability insurance only covers accidents occurring during the coverage period.
 
This scenario is something most sellers of real estate never dream of, but when it happens it can be a nightmare.  In Slicer v. Hill, C.A. No. 08C-04-191 MJB (Del. Super.), this exact scenario faced the principals of Defendants Able Associates, L.P. and DLR Properties, L.P. (collectively, the “Able Entities”).[1]  In Slicer, the Superior Court ruled as a matter of first impression that, under Delaware law (and subject to certain limited exceptions), a vendor of land has no duty to persons coming on the land after the completion of the sale.  In doing so, the Court recognized an important public policy, namely, that sellers who convey their property “as is,” ignorant of any defects, should not be liable once they no longer control, and have no ability to remedy, the property in question.[2]
 
BACKGROUND
 
The Able Entities, via various arrangements over the years, collectively owned the ground lease on the Kirkwood Shopping Center located outside Wilmington, Delaware (the “Property”) for some thirty years.  The Property included, among other things, a Kohl’s department store.  The Plaintiffs were a husband and wife who contended that the wife was seriously injured on October 20, 2007 when she was struck by a car while walking in a parking lot (the “Parking Lot”) located on the Property.  At the time of the accident, the Able Entities did not own, occupy or control the Property. 
 
Plaintiffs asserted that the accident was caused, in whole or in part, because the Parking Lot did not have crosswalks between the Kohl’s department store and the parking spaces, and because the shrubbery on the parking islands in the Parking Lot obstructed the view of drivers (the “Alleged Defects”).[3]  Plaintiffs further alleged that Able Entities were negligent insomuch as they either created or failed to remedy the Alleged Defects during their ownership of the ground lease on the Property.
 
The facts of the case, at least with respect to the Able Entities, were uncomplicated and entirely undisputed.  The Able Entities owned the ground lease on the Property (including the Parking Lot) from the 1960’s.  The Able Entities were primarily owned and managed by Dale Reese, a local real estate developer and investor, who died in 2007.  Following the death of Mr. Reese, the executors of his estate began preparations to wind up the affairs of his companies, including the Able Entities.  Accordingly, the Able Entities entered into discussions with co-defendant Oekos Management Corporation (together with certain related affiliates, “Oekos”) with the intent of selling their interest in the Property to Oekos.  Several months of discussions, inspections, and due diligence investigations ensued.  Because the parties were able to conduct all due diligence that is customary in commercial real estate transactions of this nature, and Oekos had ample time to uncover any defects or dangerous conditions in the Property, it was agreed that the sale would be “as-is.”  The Agreement of Purchase and Sale executed by Able Entities and Oekos on July 26, 2007 stated, in relevant part:
 

[Oekos] warrants and acknowledges to and agrees with [Able Entities] that [Oekos] is purchasing the property in its ‘as-is, where is’ condition ‘with all faults’ and defects as of the closing date and specifically and expressly without any warranties, representations, or guarantees, either express or implied, as to its condition ... or any other warranty of any kind, nature or type whatsoever from or on behalf of [the Able Entities].
 
…
 
Effective as of the Closing, Buyer shall be deemed to have released seller parties from all claims which Buyer or any agent, representative, affiliate … has or may have arising from or related to any matter or thing related to or in connection with the property including the documents and information referred to herein, the leases and the tenants under such leases, any construction defects, errors, or omissions in the design or environmental conditions … and Buyer shall not look to Seller or any indemnified parties in connection with the foregoing for any redress or relief.  This release shall be given full force and effect according to each of its express terms, including those relating to unknown and unsuspected claims, damages, and causes of action.

The undisputed facts also showed that Oekos spent months inspecting the Property and conducting due diligence investigations on the Property.  For example, Oekos drafted an offer memorandum regarding purchasing the Property on June 22, 2007 expressing interest in purchasing the Property.  An officer for Oekos testified that he visited the Property “several times” before Oekos closed on the sale.  Moreover, it was also undisputed that the Alleged Defects―lack of a crosswalk and shrubbery in the parking islands―were conspicuous and in plain view for anybody visiting the Property to see, and could even, as the Able Entities’ attorney pointed out to the Court, be seen from space. 
 
However, prior to the consummation of the sale of the Property, neither Able Entities nor Oekos considered the Alleged Defects to present a dangerous condition for a number of reasons.  First, a pedestrian had never been injured in the Parking Lot before Plaintiff even though crosswalks were not always present in the Parking Lot.  Second, there was a stop sign present in the Parking Lot along with white bars and the word “STOP” painted on the Parking Lot.[4]  Third, Oekos commissioned a Property Condition Report on August 6, 2007 from EBI Consulting that revealed the Parking Lot did not require “immediate repairs”, there were “no open material violations” of municipal building codes on the Property, and that the “local Fire Department was consulted for any open material violations” and none were discovered. 
 
On October 11, 2007 the transaction with Oekos closed and the Able Entities relinquished all ownership and control over the property.  Accordingly, as is customary at the conclusion of commercial real estate sales in the State of Delaware, the Able Entities canceled their property liability insurance policy the next day.  The Plaintiff was struck by a car in the Parking Lot nine days later.  Plaintiffs asserted claims for damages totaling approximately $4 million against all defendants, including the Able Entities.
 
DUTIES
 
The Delaware Supreme Court has held that “[g]enerally, to determine whether one party owed another a duty of care, we follow the guidance of the Restatement (Second) of Torts.”[5] 
 
The Restatement states that generally, “a vendor of land is not subject to liability for physical harm caused to his vendee or others while upon the land after the vendee has taken possession by any dangerous condition, whether natural or artificial, which existed at the time that the vendee took possession.”[6]  An exception to this rule exists where the vendor conceals or fails to disclose the dangerous condition to the vendee if (i) the vendee does not know or have reason to know of the defect, and (ii) the vendor knows or has reason to know of the dangerous condition and has reason to believe that the vendee will not discover the condition or realize the risk.[7] 
 
Here, it was undisputed that the Able Entities did not conceal or fail to disclose the condition of the Parking Lot which was in plain view for anybody to see.  Moreover, Able Entities did not know or have reason to know that the Parking Lot contained any dangerous condition given that its condition complied with local building and fire codes, no pedestrian had previously been injured in the Parking Lot, and a Stop Sign was present where Ms. Slicer was struck by the car in the Parking Lot along with white bars and the word “STOP” painted on the Parking Lot.
 
Another limited exception to Section 352 exists where “the vendee of real property has knowledge of the dangerous condition at the time of the conveyance but sufficient time has not elapsed at the time of an accident to allow the vendee to remedy the defect ...”[8] 
 
Here, the Able Entities argued that they did not have knowledge of the Alleged Defects―lack of a crosswalk and shrubbery in the parking islands―because no one thought those conditions presented a dangerous condition.  Moreover, even if those conditions were defects, Oekos purchased the land “as is”, and from the date they began their due diligence through the date of Plaintiffs’ alleged injury, Oekos had ample time to correct the Alleged Defects. 
           
Plaintiffs advanced the argument that, because a crosswalk was removed approximately a year before the transfer of ownership from the Able Entities to Oekos, and replaced with stop signs and stop bars, that removal and replacement constituted the concealment of a dangerous condition under Section 353.  However, at the time of the transfer of ownership, the condition of the Property and the Parking Lot, including the Alleged Defects, were plainly visible to anyone viewing the property, and in fact were visible from space to anyone capable of doing a simple Google search.  Therefore, the Able Entities contended that it was logically impossible that they had concealed any aspect of the condition of the Parking Lot (including the Alleged Defects) from Oekos, rendering Section 353 inapplicable.  Likewise, the Able Entities maintained that the exception highlighted in Stone is inapposite because Oekos did not believe that the Parking Lot contained any dangerous conditions and did not intend to make any investigations beyond their already-conducted due diligence or to undertake any remedial steps with respect to the Alleged Defects. 
 
THE VERDICT
 
On April 20, 2012 Superior Court Judge Jane Brady issued a ruling granting the Able Entities’ motion for summary judgment, holding that the Able Entities had no duty to the Plaintiffs after the consummation of the sale of the Shopping Center.  As noted above, other courts and legal authorities, citing Restatement (Second) of Torts, had previously held that a seller or vendor of land has no such duty, either to the vendee (buyer) or third parties, unless the seller knew of a material defect or unsafe condition at the time of sale.  Courts normally deviate from that rule only when the seller concealed a dangerous condition, such as chemical contamination or insect infestation, from the buyer. However, the issue was a matter of first impression previously undecided in Delaware.
 
In ruling on the motion, Judge Brady wrote "[even] if lack of a crosswalk is a dangerous condition, Able and DLR could not possibly have concealed the condition at issue, as it is one [the buyer] should have noticed upon reasonable inspection prior to purchasing the property."
 
Plaintiffs later appealed the Court’s ruling but dismissed their appeal before a hearing was held.
 
CONCLUSION
 
The issues addressed by the court were of importance to commercial real estate developers (and indeed all landowners) operating in Delaware.  Had the Court ruled against the Able Entities, the implications for sellers of real estate in Delaware would have been severe, with expensive insurance tails becoming a de facto requirement.