Did you acquire residential or other investment property in Santa Cruz County prior to July 1st, 2023, and are now contemplating selling it? It is essential to familiarize yourself with the new septic system ordinance enacted on July 1st, 2023. For investors in our region, comprehending this ordinance is critical, as it substantially affects the sales process and could notably influence your investment's outcome.

The updated regulations mandate a comprehensive inspection and pumping of onsite wastewater treatment systems (OWTS), also known as septic systems, prior to any property transaction. This requirement applies regardless of the property's purchase date, even if acquired before the implementation of this ordinance. Furthermore, the inspection must be performed by a certified liquid waste hauler and dated within six months of the sale.

Additionally, there's a mandatory reporting component: liquid waste haulers are required to submit the inspection report to county health officials. If the report indicates a failing septic system, this triggers additional county oversight. A failing system typically cannot be simply handed off to a buyer without remediation and replacing an aging septic system with a modern alternative treatment system (ATS) can be a significant financial undertaking. Current market estimates, and ones that I have received myself, have the installation of a new ATS ranging from $45,000 (on the low end with perfect property conditions) to $80,000 or more. This cost variability depends on factors such as system design, property size, soil type, and system capacity requirements.

For investors, there are strategic moves and due-diligence steps that can be leveraged with this ordinance:

1. Pre-Inspection Investment: Prior to finalizing the purchase of your investment property, it is crucial to obtain a passed certified septic inspection, conducted by an authorized liquid waste hauler. In the event of a failed inspection, the Santa Cruz County Environmental Health Department will be notified. Subsequently, the property will undergo an evaluation by an Environmental Health Official to ascertain the necessity for system enhancements or the installation of a new Alternative Treatment System.

2. Cost Analysis: A failed septic test, while challenging, is not insurmountable. It represents a problem that requires resolution, which may involve significant time and expense. Conduct a comprehensive cost-benefit analysis for replacing the septic system, incorporating up to eighteen months for the approval process should an upgrade to a new Alternative Treatment System (ATS) be necessary. This analysis should also account for long-term maintenance expenses and the potential forced appreciation in property value resulting from the new system.

3. Check Your Area’s Water Level: Often overlooked, especially by new investors unfamiliar with septic systems, the effectiveness of a septic system hinges on its leach fields. In essence, water enters the sealed septic tank, solids are separated, and the water then moves to the porous leach fields for ground absorption. However, high ground water levels, like those after heavy rain, can submerge leach fields, causing "over saturation" and system failure, leading to potential septic backup in the home and, if Santa Cruz County Environmental Health is notified, could trigger a ATD upgrade requirement. Not to mention, your tenants will not be too excited to be without a working septic system for potentially weeks to months out of the year (think no toilets or showers). While not an absolute deal-breaker, it's crucial to be aware of the ground water impact on septic systems before investing.

To determine if your property is affected by high groundwater, you can access the Santa Cruz County GIS portal at https://gis.santacruzcounty.us/gisweb/. Simply input your address or APN and navigate through the available layers. Alternatively, you can reach out directly by calling (831) 454-2022 for assistance.

4. Property Selection: Choose your septic system wisely, as not all properties are created equal. The primary cause of septic system failure is the inability of the leach field to disperse water, typically due to sediment buildup. When faced with this issue, you have two choices: 1) upgrade to an Advanced Treatment System (ATS) at a cost of $45,000 - $85,000, or 2) install a new leach field for $8,000 - $12,000. While the latter may seem more economical, it's only viable if your property has sufficient space for a new leach field. In Santa Cruz County, especially in the mountainous and rural areas, many properties lack the necessary expansion fields (space) due to factors like size, slope, groundwater, and zoning restrictions. Therefore, when choosing a property, consider the potential for leach field failure and ensure there's enough room for expansion.

By understanding and navigating the new septic system ordinance efficiently, real estate investors can mitigate risks, capitalize on potential opportunities, and make informed decisions in Santa Cruz County's real estate market.

Has the new ordinance impacted you, or have you adjusted your purchasing strategy to comply with it? Let me know!

Jonathan Pflueger

San Jose, California

3 Votes