Septic Permits – A Refresher

By Jean Wolinski-Hobbs, Auditor/Investigator

The Real Estate Commission continues to receive complaints related to misrepresentations concerning bedrooms and septic permit disclosure despite the issue’s coverage in Update courses and Bulletin articles. Brokers can be disciplined for making a willful or negligent misrepresentation, whether in listing advertisements or other representations.

This article reviews four types of septic systems: municipal, community, on-site, or the combination of on-site septic and municipal, and outlines considerations for brokers when preparing advertisements or disclosures.

• Municipal Water or Septic System – A broker should accurately determine whether a property is connected to municipal water or is serviced by a septic system. Brokers in municipalities should not assume that septic issues are limited to rural homes; there are many older neighborhoods in cities where a homeowner may not have connected to the municipal system when given the opportunity.

If a property is in an older neighborhood or if there are red flags such as a depression in the yard, or stones marking a tank and the seller indicates that the home is served by the municipal system, a broker should verify that information. Even if a property is connected to a municipal system, the homeowner is typically responsible for the sewer line running from the street to the property. Damage to this line from tree roots or otherwise is not usually covered by homeowners insurance. Verification of municipal connection can be obtained from either the city or county, depending on the property location. If the property is serviced fully by the municipality, the broker’s investigation will be complete.

• Community and Combination Systems – There may be a combination system, where the house’s septic system is connected to a municipal system but water is not. Most owners know if they are connected to a community system that is regulated by the state (Environmental Health Section, a division of the NC Department of Health and Human Services) in conjunction with the county health department that maintains permit information. Community system drain fields are typically owned by the community’s homeowners’ association (HOA). The drain field site may be material depending upon its location, and should be determined through the seller, HOA or the county health department.

Combination systems with municipal system connection may no longer have a permit on file. Brokers should be aware that city or county responsibility ends where the septic system connects to the municipal system. Issues with a pump connected to the septic tank, root damage to pipes in the yard or any other problem that occurs on the owner’s land will be left to the homeowner, potentially at considerable cost.

• On-Site Septic Systems – If a broker learns that a property has an on-site septic system, a call to the county health department should normally provide the broker with the requisite septic permit information. Permits set a capacity (generally, two people per bedroom) which cannot be exceeded in the design parameter. Brokers should be aware that a permit may state other limitations such as prohibiting the use of a dishwasher or garbage disposal.

A broker should be careful not to advertise a property as having more bedrooms than the number permitted by the septic system permit.  Although state law requires that on-site septic permits be maintained until they are no longer in use, there are a few counties where the records were not kept initially.

Issues in locating records can arise when the original septic permits recorded under the original builder or owner’s name and that information is unknown. In those instances, given the difficulty of verifying the permitted number of bedrooms, a broker should research tax records. If the property appears to have four bedrooms but the tax records indicate three bedrooms, that could indicate a septic permit’s limit. Ultimately, in cases when the permit cannot be located, brokers should disclose what they know: namely, that the property has an on-site septic system but the system permit was not located.

• Advertising – When a septic system permit is available and indicates a capacity of three bedrooms, the broker may only advertise the property as a three bedroom home. To knowingly advertise more bedrooms than permitted would be a willful misrepresentation.

One concern with misrepresenting a property as having more bedrooms than the system permits is that the system could be overused and eventually fail. The health department can then prohibit further use of the system in order to prevent possible contamination of groundwater and to protect public health. If the system is repairable, lower occupancy limits can be imposed.

The Commission regularly reviews cases where brokers knowingly advertise properties as having more bedrooms than the permit allows but try to qualify it. For example, a broker advertises that the property has six bedrooms but in the property remarks discloses that the septic permit allows only three bedrooms. Such advertising is still deceptive and encourages overuse of the system by suggesting allowable occupancy by more people than the septic system was designed to handle.

• Complaints – When a broker has misrepresented either the type or capacity of the system, the buyers frequently file complaints with the Commission and may pursue the broker in civil court for their losses. Buyers’ complaints cite septic system failures or discovery that their property is not usable as they intended, meaning certain improvements such as in-ground pools or building additions, are prohibited. Frequently, when a buyer attempts to resell the property, a new listing agent discovers the inaccuracy and the original three-bedroom home is now being advertised as a two-bedroom home. Thus, the owner may have a lower property value and difficulty attracting potential buyers. Resolution of these problems may be possible by expanding system capacity (assuming enough room) or connecting to a municipal system (if available and possible), but at a cost the buyer did not anticipate when purchasing the property. However, all too often, there is no way to fix the problem because access to a municipal system may not be possible or there may not be enough room for an expansion.

Brokers should take reasonable steps to ensure that they are discovering and disclosing the correct sewage system utilized by any home they are listing. If the home is connected to an on-site septic system, then the property should be represented as having the amount of bedrooms as indicated on the permit. Buyer’s agents should be alert to any red flags and perform their own due diligence if there are concerns about the representations.

This article came from the May 2016-Vol47-1 edition of the bulletin.