The Two Inspections Morgan Hill Sellers Don't Know About Until Escrow

Your buyer has removed contingencies. The moving truck is booked. Then your escrow officer sends over a document you have never seen before: a request for a Certificate of Compliance tied to something called a Private Sewer Lateral. If you're selling a house in Morgan Hill, this is usually the exact moment sellers find out the city attached two inspection requirements to their closing before they ever listed.

Both requirements went into effect on June 1, 2022, through the city's Private Sewer Lateral Ordinance and its companion Water Conservation Ordinance. Neither shows up on a listing sheet. Neither gets mentioned by most portals when they estimate your home's value. But both have to be resolved before the city will let your buyer turn on water service, which means both have to be resolved before your sale actually closes.

The rule that moves every year

The Private Sewer Lateral Ordinance applies to any property more than 15 years old. That sounds like a fixed cutoff until you notice it isn't. The exemption date rolls forward annually: in 2026, any Morgan Hill property built in 2011 or later is exempt from the sewer lateral inspection. Next year the line moves to 2012. The year after, 2013.

That sliding threshold is the actual mechanism worth understanding, because it means almost nobody in Morgan Hill can permanently rule themselves out. A house built in 2010 was exempt every year since the ordinance began in 2022. This year, for the first time, it isn't. A homeowner who checked the rule when it took effect in 2022 would have found any home built in 2007 or later was exempt. Check that same home today and the cutoff has moved four years, to 2011. The exempt pool only narrows over time, and relying on what you learned when the ordinance started is exactly how a seller gets caught off guard now.

The companion Water Conservation Ordinance uses a fixed date instead of a moving one: any property built on or before January 1, 1994 has to have its showerheads, toilets, and urinals inspected and, if needed, swapped for WaterSense-rated fixtures before the sale closes. Morgan Hill's older neighborhoods, many built well before that cutoff, don't get a rolling exemption on this one. If your house predates 1994, this requirement never goes away.

What actually happens, step by step

Both ordinances feed into a single process the city calls Utility Inspections at Property Sale. Here's how the two requirements compare in practice.

Sellers start the process with a Kickoff Form on the city's site, then hire a Qualified Contractor to run the camera through the lateral, from the cleanout closest to the house to the connection at the street. If the line passes, the contractor submits the report and CCTV footage to the city's Environmental Services Department, and a Certificate of Compliance follows within a few business days. That certificate lasts 10 years, which means a seller who complied when the ordinance first took effect in 2022 may not have to think about this again until sometime in the low 2030s. Anyone selling now for the first time since 2022 is doing this cold.

When the inspection doesn't pass

Older clay pipe is common in Morgan Hill's established neighborhoods, and root intrusion or offset joints are the kind of defect a CCTV camera finds without much trouble. When a lateral fails, the seller has two paths. One is to complete the repair before closing, which means hiring a licensed plumber, and then paying for a second inspection from a NASSCO contractor to certify the fix.

The other path is a Transfer of Responsibility Form, notarized by both parties, that shifts the repair obligation to the buyer. Once the city approves the form, it gets submitted to the Utility Billing Department so the buyer can start water service, and the buyer then has 180 days from that point to complete the work. Buyers who don't finish in time are subject to penalties and can have their water service terminated, so this isn't a way to make the problem disappear. It's a way to move the clock, and a smart buyer will usually price that into the offer.

The city also runs a Private Sewer Lateral Grant Program to help offset repair costs, capped at one grant per property in a 20-year period. Applicants need a Letter of Approval before work starts and have to submit three contractor bids along with the failing inspection report. It's not a guarantee, but it's a real resource that a lot of sellers never learn about because they find out they need a repair three weeks before their closing date, when there's no time left to apply.

Why the same question gets a different answer three miles away

Here's where a lot of confusion creeps in, and where some plumbing-company marketing pages have gotten it flatly wrong. Several sites advertising sewer lateral services in the South Bay describe San Jose as having a mandatory point-of-sale inspection program similar to Morgan Hill's. It doesn't. According to a Silicon Valley Association of Realtors briefing on the topic, San Jose splits lateral responsibility between the homeowner and the city, with the homeowner covering the upper portion and the city responsible for the lower section, and the city does not require an inspection before a sale. The same SILVAR piece notes that Los Gatos and Saratoga don't require sewer lateral inspections either.

Morgan Hill is different on both counts. The city requires the homeowner to handle the entire lateral, upper and lower, and it requires the inspection before the property can transfer. A seller who owned a home in San Jose for twenty years and never thought about their sewer lateral is not going to get the same free pass in Morgan Hill. The rule isn't a Silicon Valley standard. It's set city by city, sometimes sanitary district by sanitary district, and assuming your last sale taught you the rules for your next one is exactly how people end up surprised in escrow.

The probate angle

This matters more than usual for anyone selling an inherited home. Estates often involve houses that have been owned by the same family for decades, which puts them squarely inside both ordinances: old enough to trigger the sewer lateral rule under almost any version of the rolling cutoff, and frequently built before 1994, which triggers the fixture retrofit requirement outright. An executor working through probate is already managing court timelines, appraisals, and family coordination. Finding out mid-escrow that the home also needs a CCTV inspection and possibly a plumbing retrofit adds a delay nobody budgeted for. Ordering the inspection early, before the home even goes on the market, gives an executor room to handle repairs on a normal timeline instead of a forced one.

What this means if you're listing this year

Check your home's construction year before you set a listing date. If it was built before 2011, plan for the sewer lateral inspection. If it was built before 1994, plan for the fixture retrofit too. Order the CCTV inspection early rather than waiting for your buyer's contingency period, because a failed inspection with time to spare is a repair. A failed inspection with five days left before closing is a negotiation, usually one that costs you money.

Quick Answers

Does this apply to condos and townhomes? Sometimes. Multi-unit properties may fall under a separate Private Sanitary Sewer Collection System designation instead of the standard PSL rule, depending on how the building connects to the city main. The city recommends contacting them directly for clarification on shared-line properties.

My certificate is from 2022. Do I need a new one? Not if it's still within its 10-year validity window. Keep the original certificate and pass it to the buyer at sale.

If I sell in San Jose instead, does the same rule follow me? No. San Jose does not require a point-of-sale sewer lateral inspection, and its ownership split between homeowner and city differs from Morgan Hill's rule that places the entire lateral on the property owner.

What if my house is exempt this year but won't be next year? The exemption date only moves forward, narrowing the pool of exempt homes over time. A property that's exempt today because of its build year will eventually age into the requirement, so it's worth confirming your status again if you plan to sell in a few years rather than now.

Selling in Morgan Hill involves more moving pieces than the market data alone will show you, and the ordinances above are exactly the kind of detail that surfaces late if nobody flags it early. If you're planning a sale, handling an estate, or just want a straight answer about where your property stands, Julio Orozco is glad to walk through it with you. Let's Connect.