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SRA Municipal Update: As Local Governments Close, What Happens to Property Sales?

Here's a sampling of what we've been hearing from members since the coronavirus hit our region:

"I have a closing scheduled on March 25, but we need a re-inspection and the borough office just closed."

"The township just told me they are not conducting U & O inspections."

"Since they won't inspect, they want my buyer to sign a waiver saying she'll be responsible for any repairs they require after the sale."

Here are examples of municipalities finding a way to get the job done, even during the crisis:

“We are continuing with external inspections of properties, but we would love to see pictures if possible for the smoke detectors, fire extinguisher, hand rails and relief valve on the water heater. If needed, we will issue a conditional U&O for the property.”

“We are continuing our inspections, but will only enter buildings if they are unoccupied in an effort to protect our staff and avoid spreading the virus.”

Many municipal government offices have shut down or drastically reduced their operations during the public health emergency that is the coronavirus/COVID-19 outbreak. Where does that leave Realtors® and their clients?  Because municipalities have different regulations and are reacting to the public health emergency in different ways, each case is unique. If you're involved in a transaction being held up by a municipal closure, your best sources for guidance right now are your company’s broker and counsel, as well as suggesting that sellers and buyers consult with their personal attorneys.  

The Alliance has been in contact with individual municipalities when a settlement issue has been brought to our attention (with mixed success), and we are actively coordinating with the Pennsylvania Association of Realtors® to find a broader solution to this unprecedented situation. 

Here's what we know:

Municipalities can't do use and occupancy inspections if their codes departments are shuttered.

That leaves several possibilities that we have heard: 

  1. An Impasse — Municipalities simply do not inspect, and our members have relied on their own company’s counsel to decide whether to move forward through an agreement between sellers and buyers.  

  2. Waiver/Buyer Responsibility — Municipalities provide a waiver, in which the buyer agrees to be responsible for addressing any code issues cited when an inspection is eventually done, after the sale closes.  We have already seen some municipalities issuing such waivers. While they allow the sale to proceed, they put the buyer on the hook for unknown — and potentially significant — expenses.

  3. A Modified Use & Occupancy Process – Several municipalities have created a new "self-serve" process that allows transactions to move forward through the signing of an affidavit. While there are several versions of this to date, the Aston Township model has been offered by SRA staff as an alternative to allow settlements to move forward without the post-settlement risk to buyers mentioned above. 

  4. A Statewide Solution? — PAR is working closely with statewide associations that represent the Commonwealth’s boroughs and townships to raise this important issue. While it is highly unlikely that a statewide and "one-size-fits-all" solution will be found, PAR and the SRA are actively seeking solutions to help alleviate the challenges being created by the myriad of municipal approaches to use and occupancy inspections and requirements.     

Of course, municipal inspections are just one part of the more complex process of buying or selling a property, and other areas may be similarly affected by the ongoing public health emergency. We will continue to coordinate with our leadership, our shareholders and the state association to find resolutions for these issues.

Please continue to keep us informed about your experiences with local, county and state government during the coronavirus outbreak. Email us at sra@suburbanrealtorsalliance.com.

 

See also:

https://www.parealtors.org/coronavirus/

https://www.nar.realtor/coronavirus-a-guide-for-realtors

 

Posted by: Pete Kennedy on Tuesday, March 17, 2020 at 2:30:00 pm
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