MUST UPGRADE TO SEPTIC SYSTEM AS CONDITION OF SALE

real estate attorney hunterdon county new jersey

Cesspool, or septic? Will upgrade regulations delay closing?

Effective June of 2012, properties serviced by a cesspool, privy, outhouse, latrine, or pit toilet may not be transferred without upgrading to a septic system.  (NJAC 7:9A-3.16(b)).  The regulations allow limited exceptions to this rule, such as a conveyance between family members or former spouses.  (NJAC 7:9A-3.16(c)).  In addition, construction, installation, alternation, or repair of cesspools, privies, outhouses, latrines, and pit toilets are no longer allowed (NJAC 7:9A-1.6(g).  If the local Board of Health discovers that such a system is in need of repair, the system must be abandoned and replaced with a properly engineered and approved septic system.  (NJAC 7:9A-3.16(a)).

CESSPOOLS BEING PHASED OUT

A cesspool is essentially a pit into which untreated sewage is collected, which allows the liquids to leach directly into the surrounding soil and the solids and sludge are retained within the pit.  (NJAC 7:9A-2.1).  Privies, outhouses, latrines, and pit toilets are similar structures which generally allow discharge of untreated liquids to the environment.

Some real estate properties do not support installation of a septic system, whether due to soil conditions, proximity to wells, insufficient lot size, or similar constraints.  If such a property is serviced by a cesspool or similar system, the owner must hire an engineer to verify that a septic system is infeasible, and that the cesspool or similar system is or may be adapted in a manner that is protective of human health and the environment.  As a last resort, a holding tank may be installed, which requires periodic pumping. (NJAC 7:9A-3.16(a)(1)).

Upon the transfer of property containing a cesspool or similar prohibited system, the system must be upgraded. The property cannot continue to be serviced by the cesspool after closing.  Therefore, during the contract negotiation, the buyer and seller must negotiate whether septic design, approval, and installation will be the financial responsibility and a project of the seller prior to closing, the buyer after closing, or some combination thereof.  Upon transfer of the property, the parties must clearly document which party is responsible for compliance with the applicable NJDEP regulations.

WHO IS RESPONSIBLE FOR THE UPGRADE?

While often the seller assumes upgrade responsibility prior to transfer of the property, some deals require that the buyer perform the upgrade after closing.  However, if a buyer delays hiring an engineer until after closing, the buyer risks accepting a property that cannot be upgraded due to site constraints, or that requires a mounded system, or that is more costly than originally anticipated.  Other unknowns may occur.  As an alternative, the parties can agree that seller obtains engineering which must be acceptable to the buyer, or the buyer may invest in the engineering, prior to closing, as part of buyer’s due diligence.

Landlords selling an as-is, tenant occupied property face an additional concern: do the regulations allow the buyer to upgrade the system, after closing, while the tenant remains in the property?  Provided that the buyer’s and seller’s closing documents clearly specify that the buyer is performing the upgrade, and the upgrade is in fact performed with diligence, a Board of Health may allow the continued occupancy by the tenant during installation of the septic system.  Once the system is installed, the cesspool is abandoned.  However, because many Board’s of Health do not have experience with upgrades after closing, especially when tenant occupied, it is advisable to confirm with the Board of Health what it will allow and require, during negotiation of the contract.

Additional information may be obtained by contacting your local Board of Health, or at the NJDEP, Division of Water Quality, Onsite Wastewater Management Program website: https://www.nj.gov/dep/dwq/owmp_main.htm.

© Shanahan & Voigt, LLC 2014

BE ADVISED that these comments are not legal opinions and are not to be relied upon as legal advice. If you need legal advice, contact your county bar association; most of which have referral services.