Seller installing water meters and connecting to city sewer

We are looking at a park that has a lagoon. The park does not have individual water meters.

The seller says that in the next 4 - 6 months, he is going to connect the park to the city sewer, and install water meters for all the lots.

The seller and we want to get the park under contract now.

How should we word the purchase contract to reflect these commitments made by the seller?

Thank you.

Possibly the easiest way is to have the seller get quotes for all the work and reduce the purchase price by that amount.

thanks @CharlesD, we actually want the seller to go ahead and do the work. We don’t mind waiting 6 months, but we want to get it under contract now, and close the deal only once the work is done.

A concern would be the certainty the water and sewer will be available in 6 months, especially if that’s just the Seller’s estimation - cities are notoriously late, and cancel projects. Are you comfortable with that being postponed, potentially for years due to “unforeseeable circumstances” or “budget cuts?”

If you can see the equipment dropping the water and sewer lines at the road you should be okay, but need comfort with capacity to cover all homes in this park. Something in writing is preferable.

Also are there any lagoon decommission costs? Not sure.

I’m not sure why the wait but you could put it as a contingency of closing that the scope of work is completed and permitted by the city. Also check to see what the regulations are on abandoned lagoon systems. There may be none but there may be a ton. If there are regulations place those as a contingency to closing also.

@jhutson, @MichaelG, I totally agree. It could take years, or it could not even happen at all.

How do I put it in writing to protect ourselves?

How does this sound?

SELLER will install water meters at each lot. SELLER will connect the park to the city sewer system. SELLER will remove, decommission or rehabilitate the lagoon according to the city and state regulations.

PURCHASER may cancel this Agreement for any reason, at the sole discretion of PURCHASER, at any time before or within Thirty (30) days after water meters are installed at each lot, after the park is connected to the city sewer system, and after the lagoon is removed, decommissioned or rehabilitated according to the city and state regulations.

My contract stated that I could cancel the deal for any reason or no reason during due diligence. I would say that you are on the right track for the wording. I would also decide how the bill back will go for water and sewer to the tenants. If you have the time and energy to do that then it can be all yours. If however you want to have another company deal with the water and sewer charges and you may, as the laws in your area may be strict on the bill back requirements. You could look at the options like ABT water and get the quote for them to install a system for water meters and drop the price by that quote and make sure it is done to your specifications, such as does the meter have an exterior read function or is someone going to have to crawl around in the dirt to read each meter. If I were selling a park to someone I would go for the cheapest meter available to meet my requirements, sewer on the other hand is something regulated by the city and not something I would worry about if it were a permitted process. I would first look at how you want to run things at the park before going much further on the wording discussion, but like I said you are on the right track.

Do you really want the lagoon rehabilitated? :wink:

I really don’t like contractual language that trails some event happening. Your effective date, option period, and closing date all shift based on things like that and can drag the deal out forever - which may not be in your or the Seller’s best interests. I would timebox this to keep the Seller motivated to perform so that you can take ownership at an agreed price and date.

My steer would be to work with the city to get the real date when the utilities will be available and turned on - add 60 days to that as your expected close date. If it is delayed past that that then walk away per your general escape clause. You can always do an addendum if it’s close but slips a little.

I would probably reduce the price for the submetering to do it myself to operate it the way I want… The Seller could otherwise create a larger mess with bad meters (as @MichaelG mentioned) or even worse - bad processes with the tenants that you would have to fix.

@jhutson, yes, maybe rehabilitated is not the best word to use :smile:

@MichaelG, @jhutson, thanks for your advice. I agree that we should be part of the decision process to decide which water meters to install, and how to bill it back to the tenants.