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New Requirements Regarding
Private Sewage Disposal Systems

by Joseph Younker, Attorney

October 2009 -- If you are contemplating a real estate transaction involving property serviced by a private sewage disposal system (e.g., septic system), you should know that Iowa law now requires the inspection of such systems prior to the transfer of the property. The new inspection law took effect July 1, 2009, and provides that county recorders are to refrain from recording a conveyance instrument without documentation that any private sewage disposal system installed on the property has been inspected by a certified inspector. The inspection requirements apply to both commercial and residential properties.

Although new to our area, the concept of time of transfer inspections is not new to the state. Twenty-two Iowa counties had time of transfer ordinances in place before the inspections became a matter of state law. According the Iowa Department of Natural Resources (“Iowa DNR”), the primary purpose of the new legislation, from an enforcement perspective, is to develop a systematic approach to eliminate septic systems without secondary treatment.

Time of Transfer Inspection

The new law requires that any private sewage disposal system be inspected prior to the transfer of the property. “Transfer” is defined as “the transfer or conveyance by sale, exchange, real estate contract, or any other method by which real estate and improvements are purchased, if the property includes at least one but not more than four dwelling units."

Certain types of transfers, however, are excluded from the definition of “transfer” and exempt from the inspection requirements. Exempt transfers include the following:

1. court-ordered transfers (e.g., the execution of a judgment/decree for specific performance; the foreclosure of a mortgage; the forfeiture of a real estate contract; transfers by a bankruptcy trustee; transfers resulting from the exercise of eminent domain);
2. transfers to a mortgagee (e.g., nonjudicial voluntary foreclosures; deeds in lieu of foreclosure);
3. transfers by a fiduciary in the course of administering an estate, guardianship, conservatorship, or trust;
4. transfers between joint tenants or tenants in common;
5. transfers to spouses and certain other relatives;
6. transfers pursuant to a divorce;
7. transfers with consideration of less than $500;
8. transfers between certain closely-held, “family” entities and their members, partners, or shareholders.

Additionally, the new law does not require inspections in two other situations. First, no inspection is necessary if the buyer intends to demolish any buildings serviced by the private sewage disposal system. Qualification for this exemption requires that the buyer file a binding acknowledgement with the county Board of Health and attach a copy of it to the Groundwater Hazard Statement. Second, inspections are valid for a period of two years for any ownership transfers during that period. A second inspection is not necessary during this two year window.

Inspection Requirements

The inspection must be completed by a certified inspector, and the new law charges Iowa DNR with certifying inspectors. Certified inspectors are authorized to conduct inspections on a statewide basis. Iowa DNR maintains a database of contact information for inspectors.

If the private sewage disposal system includes a septic tank, the inspection must include opening the tank, pumping out the tank, and disposing of the contents. Pumping the tank, however, is not necessary if the seller can present documentation indicating that the tank was properly pumped out by a licensed tank cleaner within three years prior to the inspection.

Inspection Extension

The new law allows for the inspection to take place post-closing in certain limited circumstances: 1) weather delays; and 2) temporary physical conditions preventing the inspection. To take advantage of the extension, the buyer must execute a binding acknowledgment and file it with the county sanitarian. The acknowledgment must recite that the inspection will take place at the earliest practical time – usually within the same building season.

Outdated Systems

Outdated systems are not necessarily required to come into compliance with current regulations. According to Iowa DNR, a properly functioning system with secondary treatment should pass inspection. If the system, however, is improperly functioning, it must be renovated to meet current standards either by the seller or, by agreement and within a reasonable amount of time as determined the county or Iowa DNR, by the buyer. Renovations do not have to be completed before the closing.

Groundwater Hazard Statement

The Groundwater Hazard Statement has been revised to account for these new inspection requirements. Recorders are no longer accepting the old forms.

Please contact our office at (319) 466-1511 (Iowa City) or (319) 363-0101 (Cedar Rapids) if you have questions or if you would like our assistance in complying with these new requirements.