BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Drought Issues
As the drought continues across most of California, local municipalities and water districts are instituting water conserving measures, including restrictions on water use and price increases. On May 5, 2015, the State Water Resources Control Board adopted an emergency regulation including a mandatory 25 percent statewide reduction in potable urban water use between June 2015 and February 2016. These measures have an impact on the uses of the properties being purchased, including the ability to use water in the home or for landscaping, agricultural or livestock purposes.
The current drought raises a number of issues of which brokers and agents should be aware:
1. Drought Advisory: It is recommended that buyers be provided with the attached Drought Advisory, or a similar advisory which may exist in a regional disclosure advisory, to make buyers aware of the impact of the drought on potential limitations on use of the property being purchased, and on the landscaping and appearance of the property. Discuss the drought with buyers, particularly those from out-of-state, and educate them as to the impact on the property and its use.
2. Painted Lawns: Some homeowners whose lawns have turned brown have decided to hire a service to paint their lawns green. Most of these are advertised as being safe and environmentally friendly, and must be re-applied to maintain the color. Sellers should disclose if the lawn has been painted so that buyers understand what they are buying and can investigate whether the materials are environmentally safe and will not harm family or pets.
3. Synthetic Grass Lawns: Some homeowners have removed the grass and installed synthetic grass lawns. This also should be disclosed to buyers. Buyers may want to investigate the type of synthetic materials used. Some synthetics use ground tire rubber which some have criticized as perhaps having toxic materials and generating excess heat. Other expressed concerns are abrasive surfaces, toxic gases if burned and environmental impacts when removed and replaced. While none of these concerns may be proved to be present in a particular synthetic, buyers should be advised that they may want to check it out.
4. Seller in Possession after COE: Sellers in possession (SIP) after COE are obligated to keep the property in the same condition as when they entered into the purchase agreement at the time they turn over possession to the buyer. However, if there is a long escrow followed by a long SIP, it may be difficult for sellers to maintain the lawn and landscaping in the same condition In such situations, it would be wise to recommend inserting a clause in the purchase agreement or SIP agreement:
“Seller will attempt to maintain the lawn and landscaping in its present condition, however, Seller has no obligation to exceed the water allocation limits set by a state or local water agency.”
5. Sewer Lines: When there is a drought, the soil dries up and water tables shrink. The roots of trees and shrubs seek out water sources, and one of those is the sewer lateral from the home to the street (the Private Sewer Lateral, or PSL). The result is that there is an increase in the incidence of clogged PSL’s reported by buyers after COE, even for homes with little or no prior history of such problems.
Some cities have enacted ordinances requiring the videoing, repairing and/or cleaning out of PSL’s prior to COE, or requiring buyers to do so within a specified time after COE. However, in all cases, if sellers are planning on providing a disclosure package, they may want to consider adding a report showing that the PSL complies with the local ordinance if any, or that the PSL is currently in good condition.
Buyers should be encouraged to have a PSL inspection as a part of their due diligence on the property.
6. Preparing Home for Market: If you, as a listing agent, are advising a seller on adding landscaping, recommend drought-tolerant plants and ground cover which require less water. Also recommend adding a low-flow drip irrigation system on a timer. If the seller is going to replace a clothes or dishwasher, recommend that they purchase water-saving appliances. These will help make the home more attractive to drought sensitive buyers.
7. New Law: Some HOAs have requirements that homeowners maintain their landscaping, and penalizing those who do not keep their yards and/or landscaping in good condition. However, in July, 2014 a new California law went into effect prohibiting HOAs from penalizing homeowners for brown lawns and under-watered landscaping during established drought conditions.
DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
(Broker Name)
DROUGHT ADVISORY
PROPERTY ADDRESS: _________________________________________________
The Governor of the State of California recently issued a proclamation that the State of California is in a State of Emergency due to severe drought conditions. Water has been restricted by many local municipalities and water authorities. In addition, the California State Water Resources Control Board may institute mandatory statewide water restrictions. Water restrictions may impact the Property in a number of ways, including limiting water usage and/or increasing water costs. These limitations may affect the quality of life at the Property and the ability to use water in the home or for landscaping, agricultural or livestock purposes.
It is strongly recommended that Buyer thoroughly investigate this issue, including, but not limited to: inquiring of the Seller whether Seller is aware of any water restrictions or has received any such notices; contacting the local water authority; contacting the local government including City and County authorities; and publicly searching whether there are any water limitations. If the local authorities have not yet instituted water limitations, they could be contemplating it in the future. Buyers are encouraged to research whether this issue is being addressed by any of the local authorities.
Buyer acknowledges that brokers do not have expertise in water usage rights or limitations. Buyer further acknowledges and agrees that broker: (1) does not have an obligation to research any water restrictions relating to the Property; (2) shall not be responsible for inspecting public records concerning water usage at the Property; (3) shall not be responsible for providing tax or legal advice regarding the Property; and (4) shall not be responsible for providing other advice or information that exceeds the knowledge, education and experience required to perform real estate licensed activity.
BUYER AGREES TO SEEK LEGAL, TAX, INSURANCE, WATER AND OTHER DESIRED
ASSISTANCE FROM APPROPRIATE OFFICIALS.
Buyer: _______________________________________ Date: ___________________
Buyer: _______________________________________ Date: ___________________