Investigating Lakeshore Property; the "C" Word, by Carter DeLaittre
As published in the March 1, 2002 issue of Outdoor News
A buyer purchasing lakeshore property must adequately investigate the property to make an informed decision. Investigations take different forms and occur before, or after, the buyer and seller sign a purchase agreement.
Let's begin by discussing these investigations and some of the problems and issues they may alert you to about the property. We'll wrap up by examining how to protect yourself if an investigation performed after the purchase agreement is signed discloses problems with the property or your future use of the property.
Buyer's Property Investigations
Here is a "to do" list for the well informed buyer.
Atlas Check/Lake Survey. These are easy. As soon as you learn about the property, open your atlas, find the lake the property is located on and note the recreational opportunities in the area. Does the area look interesting?
Next, go to the Minnesota DNR's website (www.dnr.state.mn.us) and click on "Lake Finder." If the lake is one of the 4,500 lakes listed, click on "Lake Survey" to learn its size, depth, water clarity, etc. Many lakes have fish sampling surveys. If your dream is catching an occasional walleye dinner from your lake, but the predominant species are bullhead, redhorse and snapping turtle, you're better off knowing now. A contour map and aerial photo of the lake also may be available on-line.
Zoning/Setbacks. In 1990, the Minnesota legislature enacted the Shoreland Development Act, resulting in minimum standards that govern the use and development of shoreland property. Most lakes fall within one of three classifications -- General Development, Recreational Development and Natural Environment. Each classification has its own standards for lot size, lot width and structure setback from the ordinary high water level (OHW) of the lake.
You must know your lake's classification and the different setbacks that affect the property. Be careful, your county may have adopted more restrictive standards. If you're not sure, contact your county's zoning department.
Survey. Knowing the required setbacks is often not enough. You also need an accurate survey showing the boundary lines of the property, total acreage, location of the septic system, water well, cabin and other structures and the distances from each other, the OHW and the lot lines.
Do the existing cabin, septic system and water well meet the required setbacks? If not, the offender may be an allowable non-conformity (i.e., "grandfathered"). But what if the septic system or water well needs to be replaced or relocated? What if you want to put an addition on the cabin or even tear it down and rebuild? Will the setbacks preclude you from making additional improvements to the property or make those improvements cost prohibitive?
The obligation of obtaining and paying for a new survey is negotiable between the seller and the buyer. If the seller gives you a copy of an existing survey, ask the surveyor who did the work to re-certify it in your name.
A survey is especially important if you are buying a vacant lot and are planning future improvements. The configuration of the lot may not accommodate your initial plans. The location of water wells and septic systems on adjoining lots, and the required setbacks, could adversely affect your planning.
More on surveys next week.
Septic System. A seller is required to disclose in writing the location of any septic system on or serving the property, whether it is in use and, to the seller's knowledge, if it complies with applicable laws and rules. Find out who services the system and ask for maintenance records. When was the septic tank last pumped? When was a certificate of compliance last issued? Make sure a compliance inspection is performed if required by local ordinances.
If you are buying a cabin and planning to add on a bedroom, you may not be able to obtain a building permit or variance for the bedroom unless the septic system is in compliance with current requirements.
If you are buying a vacant lot -- GET HELP! Hire a licensed site evaluator to advise you on the best locations for a cabin, water well, septic tank and drainfield. Numerous factors go into this planning. The type of soil, the level of the water table, the rate at which the soil will accept effluent (i.e., yucky water), the proposed number of bedrooms and the volume of water to be treated, will all affect the type and size of the septic system that will best suit the property. The boundary lines of the property must be located so that you know the system will fit. Don't be surprised if your initial choice of the "perfect spot" for your cabin ends up being your third alternative.
Water Well. Again, a seller is required to disclose in writing the status and location of all known wells on the property and whether each is in use, not in use or sealed. Find out the age and depth of the well. Is the well readily accessible if service or repairs are needed? Does it comply with required setbacks? You may wish to have a water quality test performed.
Cabin Inspection. Hire a licensed inspector or building contractor to inspect the cabin and its mechanical systems. This is especially important with an older cabin and one you may intend to add on to. Make time to attend the inspection. You may gain valuable tips regarding cabin maintenance, energy efficiency and how all those "things" work.
Document Review. Review any covenants, conditions and restrictions (CCRs) and easements that affect the property. They usually are found in the county recorder's office. Easements may give others the right to use a portion of the property. CCRs may restrict certain activities on the property and, in some cases, also create easements.
If you are buying a vacant lot - WATCH OUT! Easements could interfere with your desired location for a future cabin. The CCRs could adversely affect your initial use of the property by prohibiting camping or the use of trailers.
Environmental Issues. Although these typically are not a concern when buying lakeshore property, there are exceptions. Did an older cabin have an underground storage tank for fuel oil? Was the property the site of an old gas station? Was the cabin part of a resort that stored gasoline in an underground tank? If you have serious concerns, an environmental investigation may be warranted.
Many of these investigations will require hiring an appropriate professional -- surveyor, site evaluator, attorney, etc. Some you can perform on your own. If you question your own ability to do a good job, spend the money to get help.
The "C" Word
Now, what if an investigation performed after your purchase agreement is signed discloses serious problems with the property or your future use of the property and you want to "back out" of the agreement? Let's hope your purchase agreement contains a "contingency" that allows you to do so.
Generally, a contingency is a clause in a purchase agreement that gives the buyer a certain period of time to investigate the property and the right to terminate the agreement if the investigation reveals matters that are not acceptable to the buyer. Until the contingency is satisfied (e.g., completion of an acceptable investigation), the buyer is not obligated to purchase the property.
Many buyers sign purchase agreements for lakeshore property within hours of first seeing the property and knowing very little about the property. If the purchase agreement is not contingent on the satisfactory outcome of subsequent investigations, a buyer could be legally obligated to purchase a property loaded with problems.
WARNING: SELLERS DO NOT LIKE CONTINGENCIES. Many consider a contingent deal to be "no deal at all" because the buyer has a unilateral right to terminate the agreement. Minnesota's prime selling season for lakeshore property is relatively short -- three to four months at most. If a seller loses a buyer, the seller also loses valuable selling time. If presented with two competing offers, one contingent and the other non-contingent, a seller may choose the non-contingent offer even if it is for less money.
To appease skeptical sellers, keep the length of the contingency period as short as possible but still give yourself enough time to complete your investigation. Better yet, gather as much information as possible before you sign the purchase agreement so that you can keep the number of contingencies, and their length, to a minimum.
Some people are risk takers. Others are not. If you have a fear of the unknown, make sure you investigate the property and protect yourself with a contingency.
