Expert: Dick Dennis - 2/19/2010

Question
We bought a 4 bedroom house and while we applied for a construction permit, we were informed that the house only had a 3 bedroom septic system. The town won't allow us to finish the attic until we install a new septic system for at least 4 bedrooms regardless if the attic is considered as a bedroom or not.

Who should be responsible for the cost?

Here are some facts about the problem:

1. The seller was the second owner of the house. The first owner updated the septic system about 22 years ago with an existing 4 bedroom house. The town made a mistake to permit them to install a 3 bedroom septic system. The house has always been a 4 bedroom house in town record. Then the first owner sold the house to the current seller.

2. The seller agent never disclosed this problem of unmatched size of septic system and bedroom number to us. They only provided a title V at very late phase of the selling process. In the title V, it did mention the septic system was designed for 3 bedroom and the actual number of bedroom was 4. But no one picked that out.

3. Our buyer's agent never mentioned to us about the septic system. He only mentioned that the seller had title V. When we were viewing the house, we told both the buying and selling agents that we wanted to make sure that we were able to finish the attic before we decided to buy the house. We had no knowledge that we needed a permit that requires a matched septic system. Our buyer's agent found some contractor for us and brought them to look at the house to see if we could install a staircase and finish the attic. Neither agents pointed out to us that we might not be able to do this because of the septic system; (Looking back, this seems so obvious for agent to do.)

So my questions are:
1. Is it legal for the seller to sell a 4 bedroom house with a 3 bedroom septic tank?
2. Can the seller say that they provided title V and hence they didn't hide the problem?
3. Is the town also liable as they made a mistake to permit for the installation of a 3 bedroom septic system for a 4 bedroom house 22 years ago?
4. Is our buyer's agent also liable as he didn't verify the size of the septic tank and bedroom number? Is it also his responsibility to check with the town that the septic system is expandable if we want to finish the attic?
5. Finally, what should we do now that the town requires us to install a new septic system which could cost $20,000 or more?

Thank you so much!

Answer
You don't say in what state or county you're located, Liz, but let me answer the five questions the best I can before you go and hire yourself a good REAL ESTATE attorney.
1. If the county has a law that provides for matching bedrooms and septics, then apparently you were sold an illegal house. But look at my answer for number 3 and 5.
2. Here in California real estate agents cannot just say, "a title V is part of the deal" and then walk away, nor can the seller. They must explain exactly what it is. Therefore, if your state has a similar regulation, I believe both agents are liable for the cost in this matter.
3. A good real estate attorney could press any grandfather clause since the town made the error in the first place. And he/she can go after the seller, too. Let the seller go after the previous owners to save his butt.
4. Your agent and the listing agent definitely should have explained the discrepency of the bedroom and septic requirement.
5. Go get yourself a good REAL ESTATE attorney to hit the deep pockets of the real estate agents and to iron out any grandfather clause that might be there. If the county or town requires you to spend $20,000 for a septic system, then you may as well spend it for a retainer for that real estate attorney and have the real estate agents and seller pay for it.

I believe that if there is no grandfather clause, then those real estate agents are going to have to defend their positions with their Errors and Omissions Insurance. I do wish you well.

Dick Dennis
dixiedee13@aol.com
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