Plan to Replace Cesspools Within One Year After Closing in 2016 and Beyond

Are you planning on putting your home on the market this fall or are you planning to buy a home next year? There’s an important new law that will take effect on January 1, 2016 that will require property owners with cesspools to replace them with a septic system, denitrification system, or other type of onsite wastewater treatment system – or connect to sewer – within one year of the sale of real estate. The legislation requires that an inspection be conducted by a system inspector before the closing occurs. The buyer or the seller must hire a registered inspector to make this determination so plan on addressing this negotiation issue if you sell or buy after December 31st of this year.

The law requires the removal of cesspools from nearly all types of uses. Only transfers between current spouses; full siblings; and parents and children are exempt, as well as transfers to a revocable or irrevocable trust where at least one of the designated beneficiaries “is of the first degree of relationship to the grantor.”
Compliance costs can range from a low of about $15,000 to as much as $60,000 if a denitrification system or other alternative technology is required. During the sale, the current owner can negotiate with the buyer about who will pay the costs and arrange for the design and construction.

Some, but not all, towns and cities currently offer some form of low interest loan program if needed. It’s important to check with the town or city hall in the municipality in which the property is located because in some areas, private lenders may offer the only options for loans.

If the cesspool replacement can’t occur until after the closing, some lenders may allow the closing to take place, depending on the type of loan. Keep in mind however, that if the seller agrees to pay the costs, many lenders are increasingly reluctant to hold funds in escrow to ensure that repairs occur after closing. If the buyer agrees to assume the work, they will need to have the funds available or qualify for an additional loan to pay for the work. In that case, the property has to have enough equity to secure the loan. The buyer should check with his or her lender as soon as possible in the transaction process to determine not only loan availability, but monthly home costs and affordability.

Need more information? Contact the Rhode Island Department of Environmental Management Wastewater Division at 401-222-6800.
Source: RI Association of REALTORS

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