Legal Hotline: What Do I Do About a Failed Title 5 Inspection?

Q. I am selling a home that has a failed Title 5 inspection. What are my seller’s options?

It is a common misunderstanding that a property must have a passing Title 5 inspection for title to transfer. What the law requires is that a pre-sale inspection occur within 2 years before a transfer takes place. A failed Title 5 is one of the most frequent stumbling blocks to a successful transaction we see on the Cape Cod, Nantucket, and Martha’s Vineyard.

If a property has a failed inspection, the system must be repaired or replaced within 2 years. The current owner or buyer of a property with a failed inspection may enter into an enforceable agreement with the Board of Health requiring them to upgrade the system or connect to the public sewer within 2 years following the transfer of title. If a property owner has entered into this type of agreement, they must disclose it to prospective buyers, and it must be binding on subsequent owners.

The most straightforward option available to sellers with a failed Title 5 inspection is to repair or replace the system prior to transfer as a failed Title 5 can make conventional financing very difficult. However, this may not be a viable option for all sellers because of the expense involved. In these situations, the seller and buyer may negotiate a resolution that satisfies both the requirements of the law as well as the financial well-being of all parties involved.

It is also important to remember that an inspection is not required before a transfer in the following situations:

1. Refinancing or any situation where no new parties are introduced;
2. A transfer between spouses;
3. A transfer between parents and child(ren);
4. A transfer between full siblings; and
5. Where the property is held in a trust.

Services provided through the Massachusetts Association of REALTORS® is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service. The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at legalhotline@marealtor.com.