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50 & 54 Meadowview Dr. Fort Saskatchewan click here for Details! 

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If you are selling an old washing machine, a car you pulled out of the back forty, or the old brick cellphone you had when you still had hair, you could use an “As-is, Where-is” term to ensure the buyer knows you aren’t providing any warranties on the item. This works well in the realm of personal property, but what about the realm of real property? Well, let’s consider the appropriate time and use of an “As-is, Where-is” term for real property.

When to use

There are times it is entirely appropriate to use an “As-is, Where-is” term for real estate. The most common of these situations would be where the person who has the legal authority to sell the property has never lived there and does not know the property specifically. For example, a bank-owned property would be a situation where the bank has no knowledge of the property because they never lived there and simply could not warrant the condition of the property to a buyer. Similarly, with a court-ordered sale, the judge isn’t going to inspect the property, or in a probate situation, the executor may have never even visited the property either. In such situations, it is not only possible but right to use such a term to signal to the buyer that they should seek additional due diligence conditions to satisfy themselves about the property, or alternately assume the additional risk with proceeding.

When not to use 

Since there exist appropriate times to use “As-is, Where-is”, there must also be times when it would be inappropriate. This term can never be used to shield the seller from a known material latent defect. For example, if the seller knows that the basement floods every spring and feels that making a statement about the property being sold as-is to the buyer will protect them from liability the next time the basement floods, they need to think again. The disclosure of known material latent defects is a requirement of the law, and you cannot contract around a legal requirement.

How to use

In the standard AREA real estate purchase contract, the property is typically sold with the land and buildings, attached goods, and select unattached goods such as appliances. As part of the agreement, the seller warrants that on the completion day the attached and included unattached goods will be in normal working order. So, when using an “As-is, Where-is” term in the standard contract, it should be worded something like “The buyer understands that the property including land, buildings, attached and unattached goods included are sold in “As-is, Where-is” condition with no warranties expressed or implied by the seller.”. This type of a term makes clear to the buyer that even the goods, such as appliances are also sold under the same condition as the land and buildings, and they should do their due diligence in regards to these items as well.

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Practically Speaking:

Polybutylene is a plastic resin that was manufactured into water supply piping for use in new construction. Commonly referred to as Poly-B, these water supply lines in homes carry a stigma that seems to be far-reaching despite their relatively short usage time frame. In my former practice, I had clients who ranged from “who cares?” to “are there any life jackets available for the showing just in case?” and although I am not a plumber, I will try to give a clear explanation of the facts so you can help your clients to know when to seek professional advice from a plumber.

History

Poly-B was developed and approved for use in the USA as early as 1975 at a time when copper prices were very high. The standard at the time for home plumbing systems was copper lines with copper joints which all had to be soldered. This copper piping system not only used a lot of expensive copper, but was time-consuming in soldering, measuring, and cutting. Because of coppers' rigid structure, it requires many joints and elbows to go around corners. All these factors led to the development of a great idea, namely plastic piping which was cheap to manufacture, light weight to transport, had some additional flexibility, and required no soldering at all! This caught on right away and became an instant hit, making its way to Canada as well for wide distribution and use in residential and commercial applications as early as 1978 but with wide appeal during the years 1985-1997. In 1998 the Polybutylene resin stopped being produced because of complaints that some installations were failing, and ultimately the Canadian plumbing code removed Poly-B as a viable material for use in 2005.

The Problem 

According to the Government of Alberta, unconfirmed estimates have 148,000 homes in Alberta with Poly-B water pipe installations, however, Alberta installations were primarily done with brass or copper insert fittings and soft copper crimping rings. Most of the installations that had fast failures, prompting class action lawsuits, used plastic fitting and crimps, but this is more a distinction between bad and worse, not good, and bad. Several factors have been found to lead to the relatively fast failure of this piping, plastic fittings and crimps are one, but the more serious ones are high chlorine water supply, prolonged UV exposure, and prolonged exposure to the high heat of the water or the surrounding environment. The major cause of failure is simply that the core molecular structure of the material was not well suited to the requirements of a water supply pipe, so the pipe gets brittle over time, and is accelerated by the factors I mentioned. Once the pipe is sufficiently brittle, it only takes a small movement in the line through sudden pressure change, being bumped, or even through temperature changes, and the line can split or crack resulting in potentially major water damage.

The Solution 

One of the truly sinister parts about the Poly-B issue is that the pipe most often does not change color or appearance as it deteriorates, so one day it is fine and the next day you have an in-ground swimming pool you never ordered. To be fair, all plumbing systems have a life span, and even copper is rated for only 50 years, but with installations lasting double that without problems. Poly-B seems to have a predictable lifespan but commonly lasts 20-30 years with proper installation and not having any of the accelerating factors mentioned. Because of this uncertainty, the only solution is to replace the piping with a proven system like PEX. This can usually be done with minimal damage when using a qualified plumber, especially one specializing in Poly-B replacement.

How to tell if you have Poly-B piping

The easiest way to check is to find an exposed pipe, most commonly in the utility room, and look at it. Poly-B has a characteristically light to medium grey color but was also made in black, blue, red, and silver. The permanent writing on the piping itself will usually have a code that starts with “PB”, the most common seems to be “PB2110”. It is not uncommon for consumers to see PEX piping, which is the current standard, and think that because it is plastic it must be “the bad one”. Poly-B will normally have copper elbows and connectors and joints to make corners, but PEX most often does not require such connectors since it can bend, and PEX is normally a white translucent color. As a rule, if the house is built between 1980 and 1998, and you see grey plastic pipes in the utility room, it is likely Poly-B and you should alert your clients to this right away so they can plan for a plumber to cost out a replacement.

Insurance Issues

At the time of the writing of this article, I have not heard of any insurance underwriters refusing to cover homes with Poly-B piping. It is conceivable however that since we are nearing the upper limit of the economic life of the late 90s installations this issue may flare up again and insurance companies will alter coverage to match the risk.

Practically Speaking

The harnessing and distribution of electricity has improved our lives in ways that cannot be understated. In our homes today, you are inconvenienced if one of the eight outlets in your bedroom is six inches further than your smartphone cord can reach from your bed. We take for granted this marvel that delivers almost unending power on demand to every corner of our homes and lives, but a discovery of aluminum wiring in a home causes people to gasp and faint in horror. While I am not an electrician, I will explain the issue from a real estate practice perspective for easy digestion.

History

Copper is widely known as one of the best electrical conductors readily available to the marketplace and has been used in wiring applications since the discovery of electricity. During the 60s, the demand for copper as well as its price was skyrocketing, making the use of copper wiring cost prohibitive. There was an alternative already approved for use in wiring applications, and that was aluminum, a much cheaper alternative with ample supply at the time. Although aluminum is not as conductive as copper, this could be compensated for by using larger gauge wire to move the same current safely and that is what was done. Between the early 60s and the late 70s, aluminum became widely used as wiring material for homes throughout North America.

The Problem

Aluminum had some differences in installation which were not always followed strictly by the installers. Aluminum required more care to prevent nicking or breaking of the wire itself or the sheathing, and special plugs and switches were designed to use aluminum wire. Especially in the early and late years of use, when the industry was transitioning into and out of aluminum wire use, the specialized plugs and switches weren’t readily available, or more expensive and anti-oxidization compounds were not widely used.

So, what is the deal with these extra requirements that copper didn’t need? Aluminum is not as good of a conductor and the resistance in the alloy produces more heat than copper naturally, which is why the larger gauge wire was used to compensate. When copper oxidizes its oxidation is also a good conductor of electricity, but unfortunately when aluminum oxidizes, its oxidation is not a good conductor leading to increased resistance and more heat. To add to the problem, aluminum oxidizes not only in the air but mainly in contact with other metals so as basements were developed in the 80s and 90s and wired with copper, those junction connections between aluminum upstairs and copper downstairs also caused this oxidation heat issue. If that wasn’t enough, aluminum also expands and contracts at a different rate than copper and brass, so when twisted with copper in a junction box, or screwed down on a brass terminal for a plug or switch, the expansion and contraction of the aluminum with its heat resistance issues cause the aluminum to work its way out of these connections over time. This condition is called “Cold Flow” and will eventually cause arcing as the electricity tries to jump from the loosened wire to the connection with can cause heat, sparking and fire to surrounding flammable building materials.

Buyer Default 

The AREA standard purchase contract goes on to specify some specific items expected in a buyer default that would require the seller to be made whole. Depending on the point of the default, the lawyer may have already triggered the transfer of title which would need to be reversed to regain the title, enforce any liens against the property, or even regain possession of the property in the case of tenancy at will or other arrangements anticipated in the agreement. These are only examples of allowable cost claims but do not limit the seller’s ability to pursue other remedies either. Additionally, the deposit section of the agreement states that in the event of a buyer default the deposit is disbursed to the seller without prior notice, a portion of which deposit may be owed to the seller’s brokerage through the listing agreement, but the balance of which will almost certainly be used to retain legal counsel to file claims for remedies related to the buyer default.

The Solution  

Well, now you know the problem so the solution must be to rewire the whole house, right? Not at all, aluminum wire in the walls and ceiling is not the issue as I explained. The issue is primarily in the connection to other metals such as incorrect receptacles or joined to copper connections, so the simple solution is to correct those connections. The most common form of this remedy is a practice called “pig-tailing” which should be done by a licensed electrician. Basically, all the plugs and switches in the home are removed from the wall and a short piece of copper wire is connected between the aluminum service in the wall and the plug or switch itself. The connection between the aluminum and copper wire is made using a specialized wire nut and an anti-oxidizing compound. Then the new copper-rated receptacles can be placed back in the wall and are safe. A licensed electrician will also determine if junction boxes contain copper and aluminum connections which also require correct wire nuts and anti-oxidation compound.

How to tell if you have aluminum wires

Well, vintage should be your first hint. If the home is built between 1960 and 1980, or close to that, you should take a quick peek at the electrical panel. The wires coming out of the electrical panel will typically have printing on them every 12 inches and if they are aluminum will often have the abbreviation AL or ALUM or some variation of that. If you can’t tell that way, an electrician or licensed inspector can determine for you by opening the panel or checking certain receptacles.

Insurance

At the time of writing this article, I have yet to hear of an insurance company that requires a house to be rewired from aluminum to copper. The main reason is that there is nothing wrong with aluminum wiring when installed properly and using the correct receptacles. In fact, the current electrical codes still recognize both copper and aluminum wiring as acceptable, although aluminum wire in household gauge is not manufactured anymore because of the stigma attached to it. It is normal however for an insurance company to require pig-tailing to be done within a certain number of days of the possession of a property to protect against the possibility of poor installation or bad connections.

Aluminum wiring has been largely unmarketable since the 70s and therefore not profitable for manufacturers to make it, or its specialized receptacles. The existence of aluminum wiring in a home is not a poison kiss, but an opportunity for a REALTOR® to educate their buyers and sellers about the facts surrounding this, and to know enough about the subject to determine when a licensed electrician should be consulted. If the fix has not already been employed, it is relatively cost-effective, quick, and hardly inconvenient so there is no reason to wait on getting it done.