Private Sewer Lateral (PSL): Hidden Costs when Buying or Selling East Bay Real Estate
What is the East Bay Private Sewer Lateral Ordinance?
Okay, so this isn't a hidden cost in real estate transactions, but it is one that remains a mystery to many homebuyers, and something most sellers have the luxury of ignoring... at least for the time being. The East Bay Private Sewer Lateral Ordinance went into effect in 2011 and it states, in essence, that when a property transfers ownership, the sewer line that takes waste water from the house to the city main (typically in the middle of the street nearest (or most downhill) from the home) must pass a compliance test that enough pressure flows through the line (unless it's been replaced within the last 10 years and is exempt). In a seller's market, like the one we're in currently, this cost is being passed on to the buyer. Though we're starting to see more homes with it already in compliance (especially with the growing number of flipped houses in the market), the majority of homes still require some work when it comes to the sewer lateral.
Passing the Sewer Lateral Compliance Test
Sellers will typically provide buyers with an estimate for replacement of the line which will most often fall in the $5,000-7,000 range (though I've seen some close to $30,000!). But why, you may ask, do they provide the full replacement cost when only a compliance test is required? The problem is that the vast majority of the lines from homes to the city mains were done in the 1930s and they are clay pipes. With all the trees and vegetation we have, roots invade the clay pipes and cause most of the lines to fail the pressure test. The test costs around $1,500 and its cost is not applicable toward the cost of replacement when the line fails a simple test. So, most people will just go for the replacement option.
Who Pays and How (Much)?
There's an addendum to the purchase contract for cities where this ordinance is in effect which has check boxes to identify who will pay, who will be responsible for providing the compliance certificate to EBMUD, and when it will all be done. It is a negotiable item, though in this strong seller's market, buyers are assuming full responsibility. Here's what's important for a buyer to know: EBMUD must be able to issue a compliance certificate within six months from close of escrow, so the work must be completed within in six months from close of escrow. To ensure the work will be done, EBMUD requires a $4,500 deposit paid at the close of escrow, which they will refund once the work has been done. This means that a buyer assuming responsibility for the sewer lateral will need to have approximately $10,000 in liquid funds to get this taken care of. Yes, $4,500 will be refunded in six months or less, but that extra (approximately) $10,000 needs to be available to be spent pretty quickly after close.
Great, but what was that thing you said about a $30,000 cost?!
The average cost of $5,000-7,000 to replace the sewer line from the property to the city main is from house on a typical city block with flatter streets and a pretty straight shot to the main. The one just under $30,000 I mentioned was for a house in the Oakland Hills where the cost was driven up due to the line not only traveling a long linear distance to the street below the property (easier to flow down hill than up), but it was also placed exceptionally deep as well. Those two components drove the cost sky high.