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New Maumee Ordinance Will Have Profound Effects on Real Estate Transactions
A recently enacted inspection Ordinance will have profound effects on sellers and purchasers of real estate in the City of Maumee, Ohio. On June 17, 2024, Maumee City Council passed the Real Property Conveyance and Inspection Code to address illegal connections to the Maumee sanitary sewer system. Effective immediately, sanitary sewer connections of any real property containing a structure must be inspected prior to conveying the property. The Ordinance is in response to the City of Maumee’s illegal discharges of surplus untreated sewage into the Maumee River dating back more than 25 years. The Ohio Environmental Protection Agency learned of the illegal discharges in 2021 and required the City of Maumee to correct the problems by 2051.
Illegal connections to the sanitary sewer system from many residential, commercial and industrial properties in Maumee (such as sump pumps, downspouts, footer tiles, yard drains, connections from parking lots, connections to cesspools or sewer laterals that need repair or replacement) convey clean stormwater runoff into the sanitary sewer system resulting in increased flows and unnecessary treatment of clean water. When excess flows occur, the sanitary sewer system can become overloaded resulting in untreated wastewater backing up into basements and being discharged into the Maumee River.
Inspection Process
The property owner, or their agent, must submit an application for a Certificate of Inspection to the Maumee Department of Public Service. After an application and the required fee are submitted the City must inspect the property within 10 days and shall issue a Certificate of Inspection within 10 working days after gaining access to property. If, after submitting the application, the owner, agent or occupant fails to either provide a report from an authorized private inspector or refuses to consent to an inspection, the City may inspect the drainage systems using a search warrant.
For properties that pass the inspection without violations, the City will issue a Certificate of Compliance which will be valid for five years. If the property owner desires to sell the compliant property using the Certificate, the owner must sign an affidavit confirming no changes have occurred.
Non-Compliant Properties
If the inspection reveals illegal sewer connections, the City of Maumee will issue an order requiring the violations be corrected within 90 days (or shorter period if the issues are deemed to be an emergency). The City has the ability to extend the time for compliance if good cause is shown. Property purchased at a Sheriff’s sale or court-ordered auction with violations that have not been corrected within 90 days may be granted an extension but will be required to post a performance bond or equivalent financial guarantee.
Closing
The Certificate must be provided by the seller when a property’s title is transferred or interest is conveyed. The purchaser will be required to submit a statement acknowledging receipt of the Certificate. A copy of the purchaser’s acknowledgment statement shall be submitted to the City as a condition of transfer of title. If a seller fails to provide the Certificate, the seller will be deemed to have warranted that all structures were in compliance with the codes related to illegal connections.
Closing Prior to Correction of Deficiencies
If all violations are not corrected prior to closing, the seller and purchaser are required to establish an escrow account with the title company closing the transaction. In this case, repair estimates must be obtained from at least two companies and the escrow account must be funded with 110% of the highest estimate (but the escrowed amount must be at least $500). If two estimates cannot be obtained, the City may determine the amount of the escrow. The purchaser may request permission from the City to allow a bond to be issued in lieu of the deposit of funds into escrow. If the funds held in escrow are less than $3,000, no funds may be released until all violations are corrected. If the funds exceed $3,000, a partial release of the funds may be authorized upon determination that substantial progress has been made in correcting the violations. Title companies are prohibited from recording a deed to convey the property unless there is compliance with the provisions of the Ordinance.
Exemptions
The following transfers are exempt from the inspection requirements:
(1) properties not containing a structure; and
(2) transfers from an individual to a trust, to a limited liability company wholly owned or controlled by the same owner without monetary consideration, transfers on death to surviving spouse or current resident who has a family relationship with the owner, or transfer between residents who occupy the subject property.
What Happens if Violations are not Corrected Prior to Transfer?
If all violations identified in the Certificate are not corrected prior to transfer, an escrow account must be established between the purchaser and the seller with the title company handling the transaction or, if one is not being used, a title company approved by the City.
The amount in escrow must be equal to 110% of the estimated cost of repairs to correct all remaining violations, but the amount cannot be less than $500. Repair estimates must be obtained from at least two companies and the amount deposited in escrow must be 100% of the higher estimate. If two estimates cannot be obtained, the Public Service Director may determine the amount of the escrow.
The purchaser may request permission from the Chief Building Official or Public Service Department Staff to allow a bond to be issued in lieu of the deposit of funds into escrow. The bond must be approved by the Law Director, and if the bond is rejected, the seller or the purchaser must deposit funds into the escrow account.
Funds in the escrow or bond can only be dispersed or released upon written authorization from the Chief Building Official or Public Service Director, or their designee. If the funds held in escrow are less than $3,000, no money can be released until all violations are corrected. If the funds exceed $3,000, a partial release of the funds may be authorized if a determination that substantial progress has been made in correcting the violations.
Penalties
Any owner, tenant, agent or person in control of property who sells or conveys the property without a current Certificate, releases funds from escrow without approval, provides a false inspection report, falsifies any other documents required hereunder or otherwise violates the Ordinance will be guilty of an unclassified misdemeanor for each offense. A fine may be imposed of a minimum amount of $250 and a maximum amount of $1,000. Each day the violation continues will be a separate and distinct offense.
If you have any questions regarding the requirements of the new Ordinance, please contact Gene R. Abercrombie, Esq. or Lindsay Rich Steinmetz, Esq., at 419-241-6000, both of whom are in the Real Estate Practice Group of Eastman & Smith Ltd.
Mr. Abercrombie and Ms. Rich Steinmetz gratefully acknowledge the assistance of Anna E. Rowland, a summer associate, in preparing this article. Ms. Rowland is a rising third year law student at the University of Toledo College of Law.
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Disclaimer: This alert has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.