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Nov 2005
01
November 01, 2005

Proposed Septic System Legislation Would Impose New Costs, Procedures

Legislation introduced earlier this year would impose new requirements and costs on the sale of residential properties served by septic systems.

Senate Bill No. 71 (SB71), introduced by Senators Patricia Birkholz and Mike Goschka, would require the Michigan Department of Environmental Quality (MDEQ) to prepare a model county ordinance prescribing standards for the design, installation and maintenance of septic systems. The ordinance will include standards for the minimum vertical distance from groundwater; consideration of soil permeability; standards for distance from rivers, lakes and streams; and standards to "address the appropriateness of a [septic] system based on current use."

The bill requires differential standards based on the degree to which a septic system in a given location might present a threat to groundwater or surface water. Under the bill, the MDEQ's model ordinance must include a prioritization procedure to address septic systems that the MDEQ considers to present the greatest risk of contaminating groundwater or surface water. Prioritization must consider potential impacts on water bodies appearing on the MDEQ's "impaired waters" list (required under the federal Clean Water Act), and areas identified as having "significant ecological importance."

The bill does not include a requirement that counties actually adopt the model ordinance. Where the ordinance is adopted, however, we can expect new concerns for buyers and sellers of waterfront properties and properties in areas of "significant ecological importance." The bill offers no guidance as to what features or conditions might render an area ecologically important. This apparently is left to the discretion of the MDEQ and/or the implementing county.

Of perhaps more immediate concern to the real estate community, SB71 prohibits the sale of property served by a residential septic system unless the system has been inspected and a copy of the inspection report has been given to the transferee. This mandatory inspection procedure - which is not linked to adoption of the new MDEQ model ordinance - must cover compliance with existing ordinances and must determine whether the septic system is functioning as it was designed to do.

For systems installed after the effective date of an applicable county ordinance, the inspection must determine those actions needed to bring a noncompliant system into compliance with the ordinance. For systems installed before the enactment of a county ordinance, the inspection must determine those actions needed to allow the system to function as designed.

The bill authorizes counties to charge for the newly required inspections - an option counties are sure to take. Thus, a new closing cost is born.

Perhaps the greatest practical impact of SB71 is a requirement that any required action identified in the inspection report be undertaken within one year after the report is delivered. The bill does not assign responsibility for the required actions, but leaves that issue to be worked out between buyer and seller.

As noted above, the MDEQ's model ordinance will contain standards for maintenance of septic systems based on proximity to water bodies and other factors. Depending on the stringency of those standards, and the extent to which they may be incorporated into agency inspections, septic system repair requirements for existing systems could result in significant additional costs.

The bill does not cover transfers of properties pursuant to foreclosure and other transactions exempted under the Seller Disclosure Act.

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Scott D. Hubbard is a partner in the Environmental Group of Warner Norcross & Judd LLP. He practices exclusively in environmental law, focusing on wastewater management issues, solid and hazardous waste, site cleanups, lender liability and environmental issues affecting business transactions. He represents a wide variety of industrial, institutional and municipal clients in matters before federal and state agencies and in private transactions. Scott may be reached in the Grand Rapids office at 616.752.2157.

Warner Norcross & Judd is a full-service law firm with offices in Grand Rapids, Holland, Metro Detroit and Muskegon. Because each business situation is different, this information is intended for general information purposes only and is not intended to provide legal advice.

West Michigan Commercial Development & Real Estate Quarterly

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