In reading the Purchase and Sale Agreement, did you ever wonder why the seller doesn’t have the ability to terminate the contract if the title 5 fails inspection? Shouldn’t they have the ability to get out, especially if they can’t afford to fix it?
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Here’s why: Nowhere in the P&S contract – or in the law – does the seller commit to pay for any upgrade or repair of the system. The buyer can withdraw from the contract simply because he/she may be exposed to greater costs then anticipated, much like the home inspection clause. Within 2 years of the inspection, the “owner” is responsible for compliance with title 5.
The seller, buyer [and occasionally the mortgage lender] will decide who will pay for the costs of the repair through negotiations of a P&S agreement.
According to the Purchase and Sale agreement, the only thing the seller is obligated to do is (1) get an inspection and (2) provide the buyer with a copy of the inspection report. It makes a whole lot of sense to request that the seller perform the inspection at the ONSET of your listing agreement rather than after a P&S is executed. Why?
If the seller and all potential buyers knew, at the beginning of the process that there were septic repairs needed, the offers and negotiations would be “reality based”, instead of a huge surprise and renegotiation during a tight inspection period.
In a nutshell, the seller need not accept the buyer’s request to [help] pay for repairs, and therefore does not need to be provided with an escape clause. The seller has not obligated themselves to any costs associated with the sale. They should bear in mind though, that if they don’t sell the house within the 2 years from inspection, the seller, still being the “owner” will be responsible to have the system repaired.
PROPERTY TRANSFERS & SYSTEM INSPECTIONS
Massachusetts Department Of Environmental Protection, Bureau Of Resource Prevention
When are Title 5 on-site sewage disposal system inspections required?
Inspections are required:
- When a facility is to be sold to new owners, or there otherwise is a transfer of title, except between spouses;
- When facilities are divided or combined together;
- When there is a change in use or an expansion of the facility;
- For large systems (10,000 gallons per day or more), shared systems, and systems on a condominium with five or more units, on a specified, periodic basis; or
- When DEP or the local approving authority requires an inspection.
- Inspections are necessary to ensure the proper operation, upgrade and maintenance of on-site sewage disposal systems. The Code, therefore, requires system inspections to be done in certain circumstances. Most inspections will occur as a result of property transfers when facilities are sold, divided or combined. In order to provide further guidance to the regulated community, this document is intended to clarify the regulatory intent of the Department.?
For how long is the system inspection valid?
For most property transfers, the inspection must occur at or within two years prior to the time of transfer. If a system has been pumped on an annual basis and pumping records are available, then the inspection is valid for three years. If weather conditions prevent inspection at the time of transfer, the inspection must occur as soon as weather permits, but in no event later than six months after the transfer, provided that prior to or at the time of transfer the seller notifies the buyer in writing of the requirements contained at 310 CMR 15.300 through 15.305 for inspection and upgrade.
What if the system was inspected and I want to resell the property?
If an inspection was conducted within the applicable timeframe, the inspection may fulfill the inspection requirement for more than one transfer of title, and need not be repeated.
Who must obtain the inspection and who receives the results?
Under Title 5, the property owner or facility operator is generally responsible for obtaining an inspection of the system. Prior to the time of transfer of title, however, the parties may contractually allocate responsibility for the inspection provided that such inspection occurs within the specified timeframes. An inspection must be conducted by a DEP approved System Inspector. If an inspection is required, s/he must record the inspection results on a DEP approved inspection form and submit the form, within 30 days of the inspection, to the approving authority. Boards of Health are the approving authorities for most systems. DEP is the approving authority for state and federal facilities. For large systems and shared systems, the System Inspector and the owner must submit the inspection form to DEP. If an inspection is not required, a system owner may have a voluntary assessment of the condition and operability of the system performed, in which case, the results of the assessment are not required to be submitted to the approving authority.
With property transfers, does the buyer receive a copy of the inspection report, too?
The Code requires that a copy of the inspection report be submitted to the buyer or other person acquiring title to the facility served by the system. The inspection is intended to provide sufficient information to make a determination as to whether or not the system in its current condition is adequate to protect public health and the environment. The inspection, however, is not a guarantee that the system will continue to function adequately and is not a guarantee that the system will not fail at a later date.
How does the inspection requirement apply to the following types of property transfers?
The following types of transfers, among others, require an inspection within the applicable time frames:
- Inheritance by will or intestacy (without a will) – with the exception of inheritance by a spouse, which would not require an inspection, inspection of the system must occur within two years before or one year after the will being allowed by the probate court and the appointment of the executor, or within two years before or one year after the appointment of an administrator if the deceased dies intestate (without leaving a valid will). An inspection conducted up to three years before the time of transfer of title may be used if the inspection report is accompanied by system pumping records demonstrating that the system has been pumped at least once a year during that time. Executors or administrators are required to notify, in writing, those who acquire title to real property from an estate of the inspection and upgrade requirements contained at 310 CMR 15.300 through 15.305.
- Legal life estate or an interest for life in trust – inspection of the system must occur within two years before or six months of the death of the life tenant or the expiration of a present interest in trust for a term of years. If a successive life interest or an interest in trust for a term of years passes to a spouse, the inspection must occur within two years of the death of the last surviving spouse or the expiration of a present interest in trust to the spouse for a term of years. An inspection conducted up to three years before the time of transfer may be used if the inspection report is accompanied by system pumping records demonstrating that the system has been pumped at least once a year during that time.
- Inter-family transfers where new parties are involved (e.g. parents deed property to children) – within two years prior to transfer or, if weather conditions prevent inspection at the time of transfer, the inspection must occur as soon as weather permits, but in no event later than six months after the transfer. An inspection conducted up to three years before the time of transfer may be used if the inspection report is accompanied by system pumping records demonstrating that the system has been pumped at least once a year during that time.
- Tax taking either by the federal, state, or municipal government – Inspection of the system must occur within two years prior to transfer by governmental entity to buyer or within six months after the expiration of the right of redemption, provided that the governmental entity notifies the buyer in writing of the requirements contained at 310 CMR 15.300 through 15.305 for inspection and upgrade, if necessary. An inspection conducted up to three years before the time of transfer may be used if the inspection report is accompanied by system pumping records demonstrating that the system has been pumped at least once a year during that time.
- Levy of execution that results in a conveyance of property – Inspection of the system must occur within two years prior to officer’s deed of debtor’s interest to buyer or within six months after the expiration of the right of redemption, provided that the officer notifies the buyer in writing of the requirements contained at 310 CMR 15.300 through 15.305 for inspection and upgrade, if necessary. An inspection conducted up to three years before the time of transfer may be used if the inspection report is accompanied by system pumping records demonstrating that the system has been pumped at least once a year during that time.
Bankruptcy – Inspection of the system must occur within two years prior to transfer by bankruptcy trustee to buyer or within six months after the transfer, provided that the debtor notifies the buyer in writing of the requirements contained at 310 CMR 15.300 through 15.305 for inspection and upgrade, if necessary. An inspection conducted up to three years before the time of transfer may be used if the inspection report is accompanied by system pumping records demonstrating that the system has been pumped at least once a year during that time. - A change in ownership or the form of ownership where NEW parties are introduced(e.g., introduction of new beneficiary/ies in a nominee trust; introduction of new joint tenant(s) or new tenant(s) in common; introduction of new parties where property is transferring from joint ownership to nominee or business trust, or where a new general partner is introduced; creation of a legal life estate or an interest for life or for a term of years in trust for a party other than the creator or his or her spouse, etc.) – Inspection of the system must occur within two years prior to transfer or if weather conditions prevent inspection at the time of transfer, the inspection must occur as soon as weather permits, but in no event later than six months after the transfer, provided that the new party is notified in writing of the requirements contained at 310 CMR 15.300 through 15.305 for inspection and upgrade, if necessary. In a nominee trust situation, whoever has authority to add a new beneficiary is responsible for the inspection. Trustees in the nominee trust situation are advised to notify those with authority of their inspection obligation. An inspection conducted up to three years before the time of transfer may be used if the inspection report is accompanied by system pumping records demonstrating that the system has been pumped at least once a year during that time.
NOTE: An exception to this general rule that an inspection is required where new parties are introduced is the situation where a transfer occurs between spouses during life, out right or in trust, in which case an inspection is NOT required. Examples of such spousal transfers which do NOT trigger an inspection include: (1) a spouse transfers the real property to the other spouse, individually, or into a trust of which the other spouse is the sole or primary beneficiary; or (2) a spouse transfers the real property to him/herself and the other spouse, as joint tenants, tenants in common, or as tenants by the entirety.
- Sale of a condominium unit for condominiums consisting of five or more units, all systems must be inspected every three years. Condominiums with fewer units must either follow this inspection schedule or, instead, the system serving the particular unit transferred must be inspected within two years prior to transfer, or if weather conditions prevent inspection at the time of transfer, the inspection must occur as soon as weather permits, but in no event later than six months after the transfer, provided that the buyer is notified in writing of the requirements contained at 310 CMR 15.300 through 15.305 for inspection and upgrade
How does the inspection requirement apply to the following types of property transfers?
The following types of transfers do NOT require an inspection:
- Refinancing a mortgage or similar instrument, whether or not the identity of the lender remains the same;
- Taking of a security interest in a property including, but not limited to, issuance of a mortgage;
- Appointment of, or a change in, a guardian, conservator, or trustee;
- A change in the form of ownership among the same owners, such as placing the facility within a family trust of which the owners are the sole, present beneficiaries, or changing the proportionate interests among a group of owners or beneficiaries;
- Adding or deleting a spouse as an owner or beneficiary; or a transfer between spouses during life, out right or in trust;
- Any other change in ownership or the form of ownership where NO NEW parties are introduced (e.g., from spouses jointly or as tenants by the entirety to one spouse either for estate planning purposes or pursuant to a divorce settlement or court order, from joint ownership to nominee or business trust, or into limited or general partnership, etc.);
- Transfer within two years of issuance of the Certificate of Compliance;
- Owner of the facility or person acquiring title has signed an enforceable agreement with the approving authority to upgrade the system or to connect the facility to a sanitary sewer or a shared system within the two years following the transfer of title, provided that such agreement has been disclosed to and is binding on subsequent owner(s);
- Facility is subject to a comprehensive local plan of on- site septic system inspection approved in writing by the Department and administered by a local or regional governmental entity; and the system has been inspected at the most recent time required by the plan.
When do large and shared systems need to be inspected?
Shared systems must be inspected annually. Large systems, that is, systems with a design flow of 10,000 to 15,000 gallons per day at full buildout, must be inspected once every five years on the basin schedule in the Code.
What is required in connection with changes of use and expansions?
A system must be inspected upon any change in use or expansion of use (if the expansion of use results in an increase in design flow to the system such as adding a bedroom, or adding seats to a restaurant) of the facility served if a building permit or occupancy permit from the local building inspector is required for such change in use or expansion. Any change in the footprint of a building will also require an inspection to determine the location of the system to ensure that construction will not be placed upon any system components or on the reserve area of the system, unless official records are available to determine the location of the system components.
Is an inspection required in the context of new construction?
Issuance of a Certificate of Compliance by the approving authority (generally the Board of Health, or the Department in the case of state and federal facilities and large systems) upon completion of a new system, or for a system upgrade, operates to exclude the system from the requirement for inspection for any transfer of title within the next two years.