Addressing Water and Septic Issues in the APS

Posted on: Monday, February 13th, 2017

For agents who are assisting clients with properties that are in a rural area there are two things to be aware of, water and septic. If either or both of these items are private you MUST address it in the agreement of purchase and sale. This blog contains sample clauses pertaining to each issue that we recommend should be inserted into the agreement.

Can you Make your Own Kool-Aid?

First ingredient is water. You cannot make your own Kool-Aid if you do not have potable water.

The other thing you cannot do without potable water is purchase a home if you require a mortgage.

It is not particularly easy to address the private water issue. You cannot simply have a representation that the Seller believes the water is potable. If you are obtaining a mortgage for the purchase, the lender will insist on a Water Potability Certificate. Even if you are not required to obtain this Certificate because the Buyer is not obtaining financing, when you sell, that person will require this and for your own health you want the water to be potable. Therefore, I can think of no situation when it would be appropriate to waive the requirement to have a Water Potability Certificate.

I have received a large number of offers over the years where there is either no clause to address the private water well or merely a statement that a Water Potability Certificate is required prior to closing.

It is my strong opinion that a condition pertaining to this MUST be included in all offers for properties with a private water system.

This Offer is conditional upon the Buyer determining, at the Buyer’s own expense and sole discretion, that:

  1. there is an adequate and potable water supply to meet the Buyer’s household needs;
  2. the pump and all related equipment serving the property are in proper operating condition; and
  3. the Buyer obtaining a Certificate of Potability from the authority having jurisdiction indicating that there is no significant evidence of bacterial contamination.
Unless the Buyer gives notice in writing delivered to the Seller no later than _____ p.m. on the _______day of ___________, 20____ that these conditions have been fulfilled, this Offer shall become null and void and the deposit shall be returned to the Buyer in full without deduction. These conditions are included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period stated herein. The Seller agrees to allow access to the subject property to the Buyer or the Buyer’s agent for the purpose of satisfying this condition.The main differences from the way that I have handled this and the standard clauses (which are set out below) are as follows:

  • The Buyer or the Buyer’s agent are taking the sample. Note, you should visit the following website to be aware of the many ways that one can cheat on a water test: http://inspectapedia.com/water/watercheater.htm.
  • This is a condition so if the Certificate is not obtainable from the samples the Buyer can enter into negotiations about what it will allow the Seller to do in order to obtain the clear certificate. In the example below the Seller can do whatever he deems necessary to obtain the required Certificate.
The standard clauses which should NOT be used are as follows:The Seller agrees to allow the Buyer & the Sales Representative, which has obtained this Offer, to obtain 2 water samples from each water source (well) on the Property and to submit such samples to the health authorities having jurisdiction for testing and submission to the Buyer’s solicitor. Seller agrees to provide access to the property for the taking of such samples at a mutually agreed upon time, and to provide any necessary written authority which may be required of him to obtain sample results from the authorities having jurisdiction. 

AND

The Seller agrees to allow access to the Sales Representative for the purpose of obtaining a water sample or samples, and further to provide written permission for results of such tests, within 3 weeks following the acceptance of this offer, in order to provide the Buyer’s Solicitor with a current Bacteriological Analysis of Drinking Water from the local health authority having jurisdiction over the area, with a rating indicating that there is no significant evidence of bacterial contamination and that the water is potable and fit for human consumption. Should the results indicate a concern of bacterial contamination, the Sellers will remedy the problem, and re-submit a water sample until given a new rating indicating that there is no significant evidence of contamination, and further provide the results to the Buyer, prior to the date set for examining title. 

Septic System Sample Clauses

When acting for a Buyer, it is preferable to request that the septic system be inspected, however, in many cases this is not practical (especially during winter months in which access is restricted). Due to this, I recommend that a clause be inserted into the agreement of purchase and sale to warrant the septic system.When you obtain a representation or warranty for your client you need to explain to your client what they have. It is something that can be relied upon if there is a need for a claim in the future. For big items this is important because it will lay the basis for a claim to be commenced. An example of a clause pertaining to the septic system to be inserted into the agreement is as follows:

The Seller represents and warrants, to the best of the Seller’s knowledge and belief, that at the time of installation:

  1. all sewage systems serving the property are wholly within the setback requirements of the property, and had received all required Certificates of Installation and Approval pursuant to the Environmental Protection Act;
  2. all sewage systems serving the property had been constructed in accordance with the Certificates of Installation and Approval;
  3. all sewage systems serving the property had received all required Use permits under the Act or any other legislation; and
  4. all sewage systems serving the property have been maintained in good working order during the Seller’s occupancy and will be in good working order on closing.
Further, the Seller agrees to provide any and all documentation relating to the sewage system, within the Seller’s possession, or which may be made available to the Seller by the appropriate authorities, and given to the Buyer prior to the last date set for examining title. The Parties agree that these representations and warranties shall survive and not merge on the completion of this transaction, but apply only to the state of the property existing at the completion of this transaction.The Seller agrees to provide evidence if the septic system has been pumped in the past two years or to have the septic system pumped out before the completion of this transaction and will provide a receipt to the Buyer on closing.
Overall, understanding the signs of a failing septic system, and ensuring that they are properly installed and inspected is an important aspect that should be considered by anyone buying or selling a home.

Application in Practice

Given it is my belief that we can learn the most from the discipline of others, I have reviewed the discipline decision of a case referred to as the Kirkfield Offer which can be accessed by clicking here.In this case, the agent for the Buyers of a rural property included only one condition – a home inspection. The MLS listing disclosed it was on a private water and well system. Shortly after closing the Buyers discovered the water supply was polluted and the sewage system was malfunctioning.

RECO ruled that the agent acted unprofessionally in failing to insert into the offer any clauses regarding a water potability test, a well certificate regarding water flow rate and/or a requirement for either a waste disposal certificate or an inspection of the septic system by a qualified person. The agent was ordered to pay a $10,000 penalty and the Brokerage a $5,000 penalty.

The agent in the Kirkfield decision relied on the home inspection condition to be enough to address the private water and septic system. He stated that he thought that in all likelihood the inspector would recommend the water well be checked. While I agree a home inspection is an important requirement to be recommended by agents, it does not absolve agents from knowing about issues related to rural properties and ensuring their clients are properly represented.

The content of this Blog is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.

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