Imagine this scenario: after months of trying to sell her home, Mary finally found a buyer. In fact, the buyer is willing to pay cash and close quickly. Mary is ecstatic because she can finally move to be closer to her grandchildren. However, there’s a catch: Mary discovers a local ordinance that requires all homes to be retrofitted with sprinklers. While sprinklers will improve fire safety, the retrofit project will cost Mary thousands of dollars. So much for the quick closing!

Time of sale (TOS) requirements like the retrofitted sprinkler example are becoming more common in Wisconsin and are causing headaches for both sellers and REALTORS^® alike. This article will provide an overview of TOS requirements, why communities impose them, and why they are problematic for homeowners.

What is a TOS requirement? 

A TOS requirement is an obligation that must be performed prior to closing when a property is sold. The requirement may be an improvement, an inspection, or some other activity such as paving a gravel driveway or conducting an energy audit to determine the energy efficiency of a home or building. Some of these requirements are rather minor, while others are more significant. However, all of the requirements add complexity to the transaction and could delay closing, result in additional costs, and/or create liability for the seller and/or REALTOR^® if the requirement is not satisfied before the transfer of title. For example, one community in Wisconsin passed an ordinance making the REALTOR^® jointly and severally liable for any building code violations not remedied within a certain number of days of closing. 

Why communities impose TOS requirements

Generally, communities impose TOS requirements to address possible health, safety, environmental or aesthetic concerns related to a property. While the concerns themselves and the proposed remedies may be reasonable, requiring the issues to be addressed only when a property is sold is problematic for numerous reasons, including: 

• Only a small percentage of properties are sold each year: TOS requirements only affect those properties that are being sold, which is likely a very small percentage of the overall properties being targeted. Accordingly, decades likely would pass before all the targeted properties are sold and remedied, which brings into question the significance of the concern the community is trying to address. If the community is trying to address a significant or immediate health and safety concern, waiting decades to fix the problem seems to be an imprudent solution. 
• Property owners often don’t have money to make the repairs: It’s a common misperception that all property owners “make money” when selling their property. With the downturn in the real estate market that occurred over the last several years, many homeowners don’t have the money to make expensive repairs or upgrades at closing. Moreover, people are often selling their home because of some adverse change in their life such as a divorce or loss of a job. Imposing an additional financial burden on them only makes a bad situation worse.

Communities often choose to impose these requirements at the TOS because they know the public would not support the imposition of such requirements if they were to be applied immediately to all affected property owners. Requiring all property owners to perform the necessary testing or upgrades to their property would likely shorten the political life of the local officials enacting the requirement into law. Local officials often believe that imposing the requirements at the TOS is a much lower political risk because most property owners are more engaged about things that impact them immediately, rather than during some time-uncertain event in the future. 

Possible legislation next session 

To address the concerns related to TOS requirements, the WRA has been meeting with lawmakers about possible solutions. Hopefully, legislation will be introduced during the upcoming legislative session to address concerns about the growing number of TOS requirements being imposed by local communities. 

For more information about TOS requirements, please contact Tom Larson at tlarson@wra.org or by phone at 608-240-8254.

Tom Larson is Vice President of Legal and Public Affairs for the WRA.