Approaches to Smoke Certificates during COVID-19
The COVID-19 pandemic has caused numerous and obvious disruptions to the real estate industry. Massachusetts declared a state of emergency on March 10, 2020. Shortly thereafter, fire departments widely stopped inspecting smoke detectors for residential home sales. On March 20, 2020, Governor Charlie Baker issued an emergency order allowing transactions to close without complying with the inspection requirements of Sections 26F and 26F 1/2 of M.G.L. c. 148. Ever since, real estate agents and attorneys have been grappling with the practical implementation of the order.
The order states, in essence, that the certificate of compliance can be foregone provided that the buyer agrees to assume responsibility for the same. The buyer must specifically agree to take over the entire responsibility for the smoke detectors, including equipping the home with proper smoke detectors, and facilitating an extension within 90 days of the end of the state of emergency.
Two distinct schools of thought have emerged. The first school of thought rests upon the foundational assumption that the seller is the party who is responsible for the smoke detectors. This school argues that, although the buyer must assume practical responsibility for the inspections in compliance with the order, fairness requires that the seller maintain financial responsibility. Therefore, the seller should be required to equip the proper smoke detectors prior to closing, and some portion of the seller's proceeds should be placed in escrow - to be used in the event the smoke detectors still need to be replaced once the inspection is completed. Thus, the seller retains the economic risk related to the smoke detectors that whey would normally bear.
The second school of thought takes the order at face value: the burden of equipping the home with proper smoke detectors and getting them inspected actually is shifted to the buyer. Since this is not customary, and is only temporary, this shifting burden has not been priced into the market, and therefore the Buyer should be compensated for assuming the risk and hassle of compliance with 26F. Proponents of this school of thought favor a straight credit from the seller to the buyer paid at closing, and that is the last word on smoke detectors between the parties. The disadvantage is that in pricing the risk, the parties are left to determine the likelihood that the inspection would pass.
Both arguments have their merit, and certainly the lender in any transaction will have their say in how this is to be handled. All else being equal, I belong to the second school of thought - partially because I have my doubts that buyers will be punctual in pursuing 26F inspections whenever the state of emergency ends. I would also prefer not to have 200 small escrow hold-backs sitting in a conveyancing account for an indeterminate amount of time.
Regardless of how we as an industry decide to handle the logistics, the priority for real estate agents and attorneys should be to advise their buyers about the risks and effects of foregoing the smoke inspection. Buyers should not take lightly the responsibility for making sure their new home is equipped with smoke detectors that meet current codes and protect their families. They should be made aware that, regardless of what the seller represents to them, they have a duty to make sure their home is protected.