1st Property Purchased-OPEN CODE VIOLATIONS!

Rockford, Illinois
General Real Estate Investing
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1st Property Purchased-OPEN CODE VIOLATIONS!

Matthew Perry
Member since 2022 · 21 posts · 2 votes

We bought our first rental property,  a triplex (home converted to 3 separate units) after several months of searching for the best deal. We found out after that this property has several open code violations and 1 or 2 of these are going to cost between $20-$60k each. We had an inspection done, but they don't pull codes. We did not use an attorney because no one we had talked to told us that was needed. We bought AS-IS but I know there is some law(s) in place to not let this happen. We were supposed to be notified! Anyone had this happen?? It's a mess! We have now the city legal department after us to get these completed because the previous owner just stopped responding to them and sold us the property. BEWARE and always check on the property you are buying if there are open code violations! We are 3 hours away from Chicago and I know for a fact that a sale of a property can't even take place with code violations open. So how did this happen?? I need this to be a topic on Seeing Greene lol. Please let me know any advice you have! We are in central Illinois.

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Ray Hage
Investor · Fort Lauderdale, FL · Member since 2020 · 1k+ posts · 755 votes
3y

I am sure it varies by state to state and city to city but here in Fort Lauderdale, you can definitely sell or buy a house with open code violations. I got some more bad news for you. Assume you fix those violations and there are more that you and the city are not aware of, you may get hit with more violations so my advice to you is to speak with whoever inspected your home that all the things he checked would in compliance with the city. If you really want to be sure, hire someone who specializes in this. A friend of mine down here got hit with code violations 6 months after he bought the house because the previous owner put on addition to the home. 

My advice is through the city website, see what you can find out what the home really was. For example, if it was a SFH that got converted into a triplex without permits, you can bet there will be other code issues like plumbing or electric. You're in a tough situation and now you will need to dig your way out. Speak with the city and see if they will lower the fines if you comply within 6 months. Here in south Florida, they are generally fair in giving time and breaks to a new owner who was caught unaware of a situation.

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  • Ray Hage
    Investor · Fort Lauderdale, FL · Member since 2020 · 1k+ posts · 755 votes
    3y

    I am sure it varies by state to state and city to city but here in Fort Lauderdale, you can definitely sell or buy a house with open code violations. I got some more bad news for you. Assume you fix those violations and there are more that you and the city are not aware of, you may get hit with more violations so my advice to you is to speak with whoever inspected your home that all the things he checked would in compliance with the city. If you really want to be sure, hire someone who specializes in this. A friend of mine down here got hit with code violations 6 months after he bought the house because the previous owner put on addition to the home. 

    My advice is through the city website, see what you can find out what the home really was. For example, if it was a SFH that got converted into a triplex without permits, you can bet there will be other code issues like plumbing or electric. You're in a tough situation and now you will need to dig your way out. Speak with the city and see if they will lower the fines if you comply within 6 months. Here in south Florida, they are generally fair in giving time and breaks to a new owner who was caught unaware of a situation.

    3Reply
  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    Ya things have already began to spiral into more... which is crazy. Someone dropped the ball during the purchase.. we just don't know who. Now we know you can look this up before a purchase, but it was never mentioned before.

    0Reply
  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    3y

    @Matthew Perry, I'm not sure how your state may differ but I believe my state (PA) is probably similar to most states.

    In my state a property may only be sold "As-Is" (meaning that the seller doesn't need to disclosure material defects) in very limited circumstances such as a foreclosure or an estate where they would not have first hand knowledge of the property's condition. Otherwise no matter what the sales contract states a disclosure would be required.

    Second, a code violation may or MAY NOT constitute a material defect. That would be arguable depending on what the issue is. For example high grass/weeds probably would not be a material defect.

    In the sales contract used by realtors in my state, it makes the seller responsible for giving the buyer any notices the seller has received about the property such as special assessments, violations, etc. So, this is where the seller is held accountable in my state specifically for this.

    The municipality may or may not have an ordinance about open code violations with regard to title transfers (sales) but it really isn't enforceable. Anyone can hand someone else a deed without the government even knowing about it!

    So, I would investigate how these specific issues are the same or different in your state's laws and also I would look carefully at your sales contract to see if they were required to disclose those notices.

    Did you use an agent? If so, contact them for advice. If not, well that is a lesson learned because THIS IS EXACTLY the kind of thing an agent helps protect you with!!!

    0Reply
  • Nicholas Mann
    Valhalla, NY · Member since 2013 · 132 posts · 84 votes
    3y

    Did you use a title company during your purchase and if so did you get title insurance? We closed on a property a few months ago and the title company found the code violations and had the sellers rectify them prior to closing. Not sure if it’s required or not but clear title is very important (probably to help prevent issues like this) . Best of luck moving forward 

    2Reply
  • Paul De Luca
    Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
    3y
    Quote from @Matthew Perry:

    We bought our first rental property,  a triplex (home converted to 3 separate units) after several months of searching for the best deal. We found out after that this property has several open code violations and 1 or 2 of these are going to cost between $20-$60k each. We had an inspection done, but they don't pull codes. We did not use an attorney because no one we had talked to told us that was needed. We bought AS-IS but I know there is some law(s) in place to not let this happen. We were supposed to be notified! Anyone had this happen?? It's a mess! We have now the city legal department after us to get these completed because the previous owner just stopped responding to them and sold us the property. BEWARE and always check on the property you are buying if there are open code violations! We are 3 hours away from Chicago and I know for a fact that a sale of a property can't even take place with code violations open. So how did this happen?? I need this to be a topic on Seeing Greene lol. Please let me know any advice you have! We are in central Illinois.


    I don't know the local laws in Rockford, but I would think they had to disclose that the sale was subject to the buyer remedying the violations. I would ask the city legal department about if that was required or if you had to sign something.

    This highlights how important due diligence is. Maybe an attorney or experienced agent could have uncovered this problem before the sale.

    0Reply
  • Adrian Castillo
    Real Estate Consultant · Brandon, FL · Member since 2015 · 66 posts · 27 votes
    3y
    Quote from @Matthew Perry:

    We bought our first rental property,  a triplex (home converted to 3 separate units) after several months of searching for the best deal. We found out after that this property has several open code violations and 1 or 2 of these are going to cost between $20-$60k each. We had an inspection done, but they don't pull codes. We did not use an attorney because no one we had talked to told us that was needed. We bought AS-IS but I know there is some law(s) in place to not let this happen. We were supposed to be notified! Anyone had this happen?? It's a mess! We have now the city legal department after us to get these completed because the previous owner just stopped responding to them and sold us the property. BEWARE and always check on the property you are buying if there are open code violations! We are 3 hours away from Chicago and I know for a fact that a sale of a property can't even take place with code violations open. So how did this happen?? I need this to be a topic on Seeing Greene lol. Please let me know any advice you have! We are in central Illinois.

    @Nicholas Mann you just made a tremendously valid point, if a reputable title company was used, a cloud on the title would have shown up.

    1Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    3y

    Here is a link to an Illinois Seller's Disclosure Statement.  Did you receive one?  Notice #23 asks if the Seller has received a Notice of Violation.  While this might assist in recovering from the Seller, I doubt your reliance on it would relieve you of responsibility for correcting the violations. 

    Free Illinois Property Disclosure Statement - PDF | Word (esign.com)

    0Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    3y
    Quote from @Adrian Castillo:
    Quote from @Matthew Perry:

    We bought our first rental property,  a triplex (home converted to 3 separate units) after several months of searching for the best deal. We found out after that this property has several open code violations and 1 or 2 of these are going to cost between $20-$60k each. We had an inspection done, but they don't pull codes. We did not use an attorney because no one we had talked to told us that was needed. We bought AS-IS but I know there is some law(s) in place to not let this happen. We were supposed to be notified! Anyone had this happen?? It's a mess! We have now the city legal department after us to get these completed because the previous owner just stopped responding to them and sold us the property. BEWARE and always check on the property you are buying if there are open code violations! We are 3 hours away from Chicago and I know for a fact that a sale of a property can't even take place with code violations open. So how did this happen?? I need this to be a topic on Seeing Greene lol. Please let me know any advice you have! We are in central Illinois.

    @Nicholas Mann you just made a tremendously valid point, if a reputable title company was used, a cloud on the title would have shown up.

    I believe a code violation would only constitute a cloud on the title if a notice of the violation is recorded in the public records of the county where the property is located.


    2Reply
  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    3y
    Quote from @Paul De Luca:
    Quote from @Matthew Perry:

    We bought our first rental property,  a triplex (home converted to 3 separate units) after several months of searching for the best deal. We found out after that this property has several open code violations and 1 or 2 of these are going to cost between $20-$60k each. We had an inspection done, but they don't pull codes. We did not use an attorney because no one we had talked to told us that was needed. We bought AS-IS but I know there is some law(s) in place to not let this happen. We were supposed to be notified! Anyone had this happen?? It's a mess! We have now the city legal department after us to get these completed because the previous owner just stopped responding to them and sold us the property. BEWARE and always check on the property you are buying if there are open code violations! We are 3 hours away from Chicago and I know for a fact that a sale of a property can't even take place with code violations open. So how did this happen?? I need this to be a topic on Seeing Greene lol. Please let me know any advice you have! We are in central Illinois.


    I don't know the local laws in Rockford, but I would think they had to disclose that the sale was subject to the buyer remedying the violations. I would ask the city legal department about if that was required or if you had to sign something.

    This highlights how important due diligence is. Maybe an attorney or experienced agent could have uncovered this problem before the sale.


     I doubt the City Attorney would provide legal advice to a private citizen.

    0Reply
  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    @Kevin Sobilo we did use an agent, they did not catch it on the contract checklist. It was not marked at all if the seller knew about any legal state or local issues with the property. The seller had an agent. We had an inspection.. no one told us anything.

    0Reply
  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    @Nicholas Manni. Chicago, that HAS to happen prior to close... everywhere else in Illinois-I don't know how it slipped through.

    0Reply
  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    @Peter Walther we received something similar. But that box was not marked at all. Our agent missed it and so did we.

    0Reply
  • Steve Ehrman
    Troy, MI · Member since 2019 · 61 posts · 20 votes
    3y

    @Matthew Perry. I always pull city inspection reports. Then I pay $750 for my inspector that will give me intimate details including where he sees potential code violations. This has kept me out of several potential money pits.

    BTW I ALWAYS pay my inspector the rush fee even when it is not a rush. Always find any excellent inspector.

    0Reply
  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    @Adrian Castillo you would think something would have come up. We are working to use the title insurance, maybe. The title company is the largest in our city and one of the biggest in Illinois.

    0Reply
  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    @Peter Walther oh , it was reported. The inspections and violations had started 2018. There is a lot of record everywhere for this.

    0Reply
  • Sarah Ziehr
    Real Estate Broker · Chicago, IL · Member since 2015 · 531 posts · 266 votes
    3y

    I have sold a few properties with an open violation and it was allowed as long as the buyer assumes responsibility or they were cash buyers. Outside of Chicago, each municipality has their own rules and some are pretty strict. In addition to looking for open violations, I would have checked if permits were pulled for any improvements that were made to the property.  

    Illinois is an attorney state, so I am curious why your agent didn't mention hiring one. I have found that many brokers rely heavily on the attorney, and because of this, they may not know what they are doing. When I got started in real estate my broker at one of the top firms told me I didn't need to worry about anything after going under contract because the attorney handled it all. What a laugh! That couldn't be further than the truth. 

    I would contact your title company and you may need to hire an attorney after all. 

    Keep us posted as to how this unfolds. Good luck!

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Matthew Perry:

    We bought our first rental property,  a triplex (home converted to 3 separate units) after several months of searching for the best deal. We found out after that this property has several open code violations and 1 or 2 of these are going to cost between $20-$60k each. We had an inspection done, but they don't pull codes. We did not use an attorney because no one we had talked to told us that was needed. We bought AS-IS but I know there is some law(s) in place to not let this happen. We were supposed to be notified! Anyone had this happen?? It's a mess! We have now the city legal department after us to get these completed because the previous owner just stopped responding to them and sold us the property. BEWARE and always check on the property you are buying if there are open code violations! We are 3 hours away from Chicago and I know for a fact that a sale of a property can't even take place with code violations open. So how did this happen?? I need this to be a topic on Seeing Greene lol. Please let me know any advice you have! We are in central Illinois.


     My advice, is to just fix it. It would not be 60k. Talk to PM to fix stuff. 
    You know in CA I could do everything for 60k :)

    Also, when you purchase, try to purchase SF, as they would not be part of any city inspection.

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Matthew Perry

    “We did not use an attorney”

    Mistake #1. If you do not know what you are doing always hire professionals. If you used a realtor they could of walked you through the process of what you should have done and who to use as part of your team to make sure everything went smoothly

    Expensive lesson learned but as noted, not just fix it and move on.

    7e investments53 Reviews
    WebsiteView Page
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  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    @Steve Ehrman I appreciate the advice for the future... we have learned a lot during this. This being our very first property... there were a lot of things we didn't know and unfortunately couldn't rely on anyone on our team like the realtor, inspector, etc... which is upsetting.

    0Reply
  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    @Sarah Ziehr believe me... we are wondering why no one mentioned an attorney too. And the problem is... we were not told at all... of any of the violations so we didn't sign off. So we are seeking legal advice now.

    0Reply
  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    @Carlos Ptriawan it's classified on the loan as a SF... a residential property... we are being treated like a commercial property though now, and based on building safety and neighborhood services... more problems keep coming up driving up the cost. We went from being able to tear down an old staircase, to having to rebuild because of fire safety and its been designed now 4 times and we have to now redo all of the gas lines and close up windows. 5000 dollar project is now estimated 60k and growing.

    0Reply
  • Matthew Perry
    OP
    Member since 2022 · 21 posts · 2 votes
    3y

    @Chris Seveney we are attempting to fix. We used a trusted realtor who advised no attorney. We were going off of the advice of people we trusted and now we are stuck. It wasn't lack of using professionals... it was the wrong team we built.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Matthew Perry:

    @Carlos Ptriawan it's classified on the loan as a SF... a residential property... we are being treated like a commercial property though now, and based on building safety and neighborhood services... more problems keep coming up driving up the cost. We went from being able to tear down an old staircase, to having to rebuild because of fire safety and its been designed now 4 times and we have to now redo all of the gas lines and close up windows. 5000 dollar project is now estimated 60k and growing.

    The city inspection is being applied to rental property only, your exit strategy could be just to walk away from the property, or sell it as is and sell it to local investor or to first time home buyer. If the property becomes OO then there would be no inspection, try to sell it.

    I used to have problem like you, then I attended so many meetings with the city remotely, meeting with the court judge,etc. It's so frustrating. After a year so the problem is fixed. It's just I'm fortunate I have a good PM.

    This is another reason why I just purchase locally, much less headache and more of a wealth builder.

    0Reply
  • Jay ThomasPro Member
    Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
    3y

    When buying real estate, it is important to consider the title of the property. It is highly recommended to use a reputable title company during the purchase and get title insurance to protect yourself against any potential issues that may come with owning the property. In our case, we used a title company when we closed on our property a few months ago and they found code violations that had to be rectified by the sellers before closing. This shows how important it is to make sure you have clear title and why getting title insurance can be beneficial in protecting your investment.

    [email protected]832-889-5607
    0Reply
  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    3y
    Quote from @Matthew Perry:

    @Kevin Sobilo we did use an agent, they did not catch it on the contract checklist. It was not marked at all if the seller knew about any legal state or local issues with the property. The seller had an agent. We had an inspection.. no one told us anything.


    It should be in the contract itself that the seller is responsible for disclosing these things? Was it? 

    If your agent made errors in representing you that is costing you money, they could be liable to you for that. They carry Errors & Omissions insurance for that purpose. You might want to ask a lawyer to go after them for this in that case.
    0Reply
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