Air carrier Captain reported they refused aircraft due to inoperative lavatory that had overflowed into cabin during inbound flight.

Narrative

Our inbound flight on Aircraft Y was delayed in ZZZ1 due to maintenance issues. At approximately XA:55; As passengers began deplaning in ZZZ; our crew proceeded down the jet bridge to prepare for a timely crew swap. As this was an OE flight and I was acting in the First Officer role; I went outside to perform the exterior inspection.Upon returning to the jet bridge; I overheard the inbound Captain describing that the lavatory had been over-serviced to the point that it overflowed into the aft cabin. Once the inbound crew fully deplaned; we boarded the aircraft and were immediately overwhelmed by a strong sewage odor.As I moved toward the rear of the aircraft to stow my roller bag; the stench intensified significantly. Several members of the crew; including myself; also noticed visible dampness in the aft 2-3 rows of cabin carpeting.I discussed the conditions with both the Flight Attendants and the Captain in training. We unanimously agreed that the aircraft was in an unsafe and unsuitable condition for boarding passengers or operating any flight. We began coordinating with Operations and Maintenance to find a solution.Ultimately; the decision was made to swap our crew onto an arriving aircraft from ZZZ2; while Aircraft X would be ferried to Maintenance for proper inspection and sanitation.The consensus from Operations; Maintenance; and the crew was that the aircraft should not have departed ZZZ1 in its prior state. Upon reviewing the inbound Captain's logbook entry; I noticed that his narrative to us mentioned significant overflow into the passenger compartment; yet the logbook entry did not accurately reflect that blue lavatory fluid had contaminated the cabin carpet. This omission was concerning; as the condition poses a potential corrosion risk and may exceeded acceptable cabin hygiene for passenger or crew operations.Furthermore; the Captain in training stated that he overheard several passengers on the inbound leg complaining about the odor. In my opinion; the inbound crew appeared to prioritize completing the flight over ensuring the aircraft was in a safe and sanitary condition.It's worth noting that after sitting open for several hours; the smell had somewhat dissipated and the carpet appeared dry; per the mechanic who later assessed the aircraft--though none of our crew touched it to verify.This situation resulted in significant delays; including a delay of over 7 hours for flight ABCD and the subsequent flight AEFG.Cause: The primary root cause appears to be the inbound Captain's failure to accurately convey the severity of the lavatory issue to the Maintenance Controller; or the Maintenance Controller's decision to defer the AFT lavatory without addressing the fact that blue lavatory fluid had overflowed into the passenger cabin. Additionally; the inbound crew's decision to operate the aircraft on a revenue flight to an outstation; despite clear signs that it was unfit for passenger service; represents a serious lapse in judgment. It suggests that reaching the layover may have been prioritized over ensuring safety and passenger comfort. The original issue--the lavatory overflow--was likely caused by improper servicing; possibly due to a lack of training; understanding; or attention to detail by the ground personnel who performed the task.Suggestion: Over the past year; I've observed several lavatory-related issues; particularly at outstations but also occasionally at hubs--most notably in ZZZ3. The most common problem involves ground crews failing to service the lavatory altogether. This often results in toilets flushing without blue juice; ultimately requiring the lav to be deferred until it can be properly purged by Maintenance. Deferrals are time-consuming and can significantly impact on-time performance. In certain circumstances--such as a single-lav CRJ700 operating a block time over 90 minutes--this can result in the aircraft being stuck at an outstation or requiring a ferry flight. There should be increased emphasis on ensuring lavatory servicing is completed on every turn. Stations that consistently fail to meet this basic requirement should face appropriate accountability or corrective actions. Additionally; the decision in this case to accept the aircraft for passenger flight out of ZZZ1 rather than take the time to address the issue properly is questionable. I believe this situation presents a clear training and counseling opportunity--primarily for the Captain--who should have been more specific in describing the extent and location of lavatory fluid exposure in the cabin.