Check Allowed Occupancy Limits Before Advertising Property

By Peter B. Myers, Information Officer 

Each year, the Commission receives numerous complaints related to various types of misrepresentation by brokers. One common type of misrepresentation involves overstating the number of bedrooms or allowed occupancy limits of properties, whether they are being advertised for sale or for rent. Either way, a broker’s advertisement must NOT overstate or exceed the allowed limits and design parameters of the property’s sewage disposal system or occupancy permitted by the local municipality. In other words, be sure to check the limits imposed by the septic permit, specifically the number of bedrooms the septic permit allows, and occupancy limits of the local municipality.

When residential properties are built and served by on-site septic systems, the local permit department typically evaluates the site and determines the maximum number of bedrooms allowed based on the design of the system and the land’s ability to percolate wastewater into the ground. That’s why the evaluation was historically referred to as a “perc” test. The results of the test determine the maximum number of bedrooms allowed on the site.

Brokers must be aware of both bedroom and occupancy limitations in the sale, resale, and rental of properties with on-site sewage disposal systems. The Real Estate Commission expects all brokers to possess the skills and knowledge to accurately represent facts about such properties regarding the number of bedrooms and/or  maximum occupancy. The septic permit generally can be checked by making a phone call to the local permit department or by checking the department’s website. Checking the permit is especially important when there has been an addition or remodel to the property to increase the original number of bedrooms. A broker should not assume permits were issued for the construction. If the actual number of bedrooms in the property exceeds the number of bedrooms allowed on the septic permit, the listing broker may NOT represent the dwelling as having any more bedrooms than are indicated on the septic permit, even if there is a disclaimer made.

Many municipalities have occupancy limits for residential dwellings.  For properties being advertised for rent, the occupancy level is generally calculated by multiplying the number of bedrooms on the septic permit by two, based on a maximum of two occupants per bedroom. The maximum is, of course, calculated regardless of the actual number of beds the landlord might have set up inside the dwelling. Therefore, claiming a three-bedroom property “sleeps 12” because it has six sets of bunk beds is a misrepresentation if the local municipality limits occupancy to two persons per bedroom. If the licensee overstates the maximum occupancy in a rental home, the tenants might over-occupy the dwelling and overload the septic system, causing the system to fail.  Such system failure could result in not only the contamination of surrounding groundwater but also the potential condemnation of the property, not to mention costly repairs that would have to be made by the property owner.

Brokers must take reasonable steps to discover and disclose material facts and to ensure everything being advertised is correct, including the septic information. That means checking the number of bedrooms on the permit and calculating the maximum occupancy based municipality requirements. Buyer’s agents should also be alert to problems and red flags related to the septic system and septic permit, and whether the imposed limits match the actual number of bedrooms in the dwelling. It might be necessary for the buyer’s agent to verify the information advertised by the listing agent, and to therefore potentially alert the buyer client of problems.

In some cases, the permit department might not keep records permanently or the records might not be available for other reasons. In that case, it is reasonable to advertise based on the existing number of bedrooms but with the disclosure that the permit records are not available and therefore certain assumptions have been made by the listing agent.  Both listing and buyer agents should be able to explain to their clients the value of obtaining a septic permit and what information such permits provide.  Disclosures must always be made so that the potential buyer is made aware of material facts before the potential buyer makes an offer.

CAVEAT: Real Estate License Law prohibits misrepresentation, omission, or concealment of material facts; a course of misrepresentation through false advertising; and improper, dishonest, or fraudulent conduct. Willful or negligent misrepresentation of the occupancy design limits of a property’s on-site sewage disposal system violates the Real Estate License Law and may result in disciplinary action by the Commission.

This article came from the February 2017-Vol47-3 edition of the bulletin.