Legal action? Underrated Septic System not disclosed by seller.

Legal & Legislation
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Legal action? Underrated Septic System not disclosed by seller.

Dominic Watler
Flipper/Rehabber · Member since 2022 · 11 posts · 1 vote

Due diligence is ringing in my ears right now.

I purchased a 2300 sqft, 6 bed room,, 4 unit multi family on the MLS in June of last year and have just completed a beautiful full rehab.

Only now to find out when having the fairly new (2018) septic system looked at because there were apparently components installed incorrectly, that the system is underrated.

The previous owners installed the system under an approved permit by the county for a 3 bedroom SFH of the same square footage.

And stupid me knowing nothing about septics missed it….

Sellers did list any issues with septic on the disclosures sheet and I mistakenly assumed that the county would not have allowed any bogus system to be installed as recent as 2018.

So, give it to me straight. Am I screwed?

The lot size is small and does not allow for the needed drip system foot print to accommodate 4 units.

I’ve contact a few attorneys today and waiting on a return calk to see if I have any legal rights since the sellers knowingly installed an undersized system and did not disclose the issue.

Who’s to blame? The seller, the county, only me?

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    3y

    Sounds like you. The information was available.  You bought it anyways.

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  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    3y

    I'm going to read between the lines here and say you have a bigger issue than an underrated septic system. Your seller permitted a 3 bed septic by telling the county the bldg was a 3 bed home. Meaning you most likely have an unpermitted 4-plex that doesn't meet zoning criteria. The County allowed the system because the County was told the system was for a different use than what you purchased. 

    That's just a guess on my part...but if that's the case you've got a value issue most likely. So first thing is what are you going to do about it today? I'd likely rent the units and do my absolute best to understand if there is any way to get them legalized. If not then suck the cashflow out while you can and wait for values to bail you out over time. When you get to that point convert it back to a SFR to sell and recoup as much of you funds as possible.

    Concurrently explore the potential for pursuing the seller for the difference in the value of the home you bought vs what it legally can be. The DD was definitely on you, and you need to own that, but there is a possibility that there were either fraudulent statements made, or misrepresentations on the seller's part that could open them up to some financial liability. 

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  • Dominic Watler
    OP
    Flipper/Rehabber · Member since 2022 · 11 posts · 1 vote
    3y

    @Matt Devincenzo

    There aren’t any deed restrictions or zoning requirements at the property that I have been able to find.

    The only permits required to build here are for septic and driveways.

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  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    3y

    @Dominic Watler where is this property located? I know there are areas of the country without zoning, but often they still have de-facto zoning via some other mechanism like use or a density based criteria like units per lot...not saying that's the case where you are, it's just becoming much less common for there not to be zoning and building restrictions anymore. 

    If there isn't zoning then it seems in one sense that makes your DD all that much more important, in another the seller likely knew what he was doing when permitting a 3 bed septic for 4 units...so intent could be important. I'd look to see if he rented the units before the new septic install as that could show his knowledge of the issue and he purposely answered incorrectly on the application. 

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  • Dominic Watler
    OP
    Flipper/Rehabber · Member since 2022 · 11 posts · 1 vote
    3y

    @Matt Devincenzo

    Canyon Lake, TX.

    All of the units were rented at some point, but it was a drug infested, no contract situation.

    How else would I find out zoning besides searching the counties website?

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  • Mohammed Rahman
    Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes
    3y

    Hey @Dominic Watler - sorry to hear about your situation. I haven't ever been in this position, but given the circumstances and the fact that you were allowed a due diligence period — this seems to on whichever inspection company was hired for the inspection that failed to catch this. 

    Good luck! 

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  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y

    its on you, just get it fixed how much can it possibly cost a few k.. Lesson learned. 

    ALL the best 

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  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    3y

    31600+ liters needed for 4 users. The permit was cheap $400.  My guess is this is rural, away from the lake or river as county would worry about contamination.

    Go get a copy of the old job card, see who signed off, it that guy living in a mansion while earning $30000 a year? $$

    If a person of experience came out to inspect it would have been easy I assume to visually notice there is more than one house????

    When was house converted from SFR to 4 units what do those permits look like?

    Seller didn't live in property so a court will blame you for not checking or getting a septic inspection. 

    How large is the lot? Is there room to easily get backhoe in there and dig larger tanks? 

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Dominic Watler

    County is not to blame

    Did you buy the property as a 4 unit?

    More than likely it falls on you as this was public information. This also is where your agent should have helped to question this if they were familiar with area and didn’t help. Not their fault really falls on you unfortunately

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    3y
    Quote from @Bob S.:

    its on you, just get it fixed how much can it possibly cost a few k.. Lesson learned. 

    ALL the best 

    The OP indicated the lot is too small to support the required leach field for 4 units. The options are few: reduce to occupancy of 3 br SFR (basically lose 3 units, results in huge financial loss), hook to sewer which depending on distance to sewer could be over $100k, convert to Aerobic Treatment Unit (ATU) which in my market is ~$20k.

    OP could potentially continue to overburden current septic system, but it’s failure (and it will fail at some point) could be very costly and eliminate some options   

    I suspect the ATU could be best solution at cost of near $20k (not sure of the cost variances in various markets). I see no solution that is a few thousand dollars. 

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