Am I liable for tenant health issues after buying an as-is property?

Full question:

I'm buying a bank owned property duplex in Calif. One unit is currently occupied and listing agent (agent for the bank) has been collecting rent on behalf of the bank for last two months. I'm currently I escrow and still within my contingency period. During my inspection contingency period, a licensed HVAC company noted on their billing invoice 'positive indication of cracked heat exchangers which will allow carbon monoxide poisoning into dwellings'. The HVAC guy said by law they have to shutoff the pilot for health and safety reasons and as far as I know, that is all that has been communicated to the tenant. Tenant has been very irate that he doesn't have heat. I don't know how the listing agent has been handling and appeasing the tenant's concerns. HVAC guy had no option but to shutoff and they were only called for evaluation of the system knowing full well that I don't own the property and could not authorize replacement furnaces. HVAC company is a large reputable company in the area and I think they are telling the truth. Also, we have no knowledge if tenant or his wife has had any sickness that might be due to carbon monoxide emissions over the years they have been in the property. I have asked the bank to replace the units before I close escrow and take title. The bank is offering some credit for furnace replacements but not wanting to replace them themselves. The bank always says in its communications that buyer is buying the property as-is. Question: Do I assume (take on) any legal liability from any future lawsuit from the tenant for any possible illnesses they may have had or incurred during the time that either the bank owned the property or the prior foreclosed owner had owned the property before the bank took over? In other words does liability attach to me, the new owner, because I'm buying the property as-is, even though the defective/poorly maintained heating units were owned and controlled by other parties for months and maybe years before I saw for sale listing a few weeks back? (If I do complete the purchase, I will immediately replace the defective furnaces, but the tenant will be without functioning heaters during that time of 1-2 weeks to schedule replacements. It is not too cold right now here in California).

• Category: Real Property
• Subcategory: Sales
• Date: 04/07/2025
• State: California

Answer:

The answer will depend on the terms of your sales contract, particularly whether it includes any clauses about assuming liability or indemnifying prior owners for claims related to the property. We recommend consulting a local attorney to review your specific documents and circumstances.

In general, liability for negligence arises when a person fails to uphold a duty of care, leading to foreseeable harm. To be held liable, you would need to be aware of the risk and fail to act. As a landlord, you have a duty to provide habitable premises. A tenant can hold you liable for failing to provide essential services, like heat. If a judgment is made against you for such a failure, it could result in a lien on the property, which you would inherit as the new owner.

California Civil Code sections relevant to this situation include:

• 1941.1: Defines untenantable conditions, including inadequate heating facilities.
• 1942: Allows tenants to repair untenantable conditions and deduct costs from rent if the landlord fails to act after notice.
• 1942.4: Prohibits landlords from demanding rent if the dwelling is uninhabitable.

In summary, while you may be purchasing the property as-is, you could still face liability for issues that arise after you take ownership, especially if you are aware of them and do not act to resolve them.