Buyers purchased a house in its AS IS condition, but in retrospect it became clear that the house was suffering from a sealing problem and moisture defects.
The Court held that the sellers must compensate the buyers for the hidden defects in the house. Israeli law stipulates that a seller has an increased obligation to negotiate in good faith by virtue of being the owner of the property and the one with the knowledge of its condition. The examination of the property performed by a buyer is effective and good for the buyer itself. However, such examination does not exempt the seller from providing facts regarding a discrepancy or a hidden defect in the property. In this case the sellers contended that there was local moisture that had already been treated, but in retrospect it turned out that previous tenants of the house complained about flooding, mold problems and moisture defects to the sellers. Thus, the claims about the sealing and moisture problems in the apartment were known to the sellers, but they did not disclose them to the buyers at the time of purchase. Although the buyers visited the house several times, they have not been able to detect the moisture damage due to visual concealment done by installing tiles. Therefore, even if the apartment was purchased in its AS IS condition it does not exempt the sellers from their duty of disclosure towards the buyers, especially when it comes to a hidden defect which was well known to the sellers or at least, they should have known about it. Therefore, the sellers are to compensate the buyers.