Dealing with city's permitting

6 Replies

I have recently purchased a duplex REO property which has a number of violations with city liens. I am in the process of clearing the violations and running into some issues in trying to be the "owner/builder" of the work to be performed.

Basically I can hire a licensed contractor or be an owner/builder and hire my own subs.

There are some conditions in the city's document which qualifies someone as "owner/builder".  The specific languages in question is:

"I understand I may build or improve a one-family or two-family residence or a farm outbuilding.  I may also build or improve a commercial building if the costs do not exceed $75,000.  The building or residence must be for my own use or occupancy.  It may not be built or substantially improved for sale or lease.  If a building or residence that I have built or substantially improved it is sold or leased within 1 year after the construction is complete, the law will presume that I built or substantially improved it for sale or lease, which violates the exemption."

There are other conditions but those I clearly qualify.

Now here is the situation.

(1) I am not substantially improving anything.  In fact, I am demolishing, disconnecting, removing illegal unpermitted gazebos, driveways, fences, and electrical and plumbing associated with those.  There is nothing in what I am doing which can result in improving the value of the property to command a higher rent or sale price.

(2) It's a duplex, so I assume (may be incorrectly) the "own use" or "occupancy" applies to only one unit.  In other words, it should be fine as an owner/builder if I use one unit and lease the other?

(3) "must be for my own use or occupancy".  There is nothing in this language that says I have to live there, right?  Yet, the city's front desk clerk told me I have to live there; and another clerk said "no...I believe they have to file homestead exemption on it".   Here I think they are using liberal interpretation of the language here.  If one looks at the language it says "own use".  There is no require to live there or file homestead or it being primary residence.

Seems to me the only requirement is I could lease or sell it within a year, and the only question should be if that's both units or just one.

I am thinking of going over their heads and calling up the chief building official and ask for clarification.  However I am also mindful that this may piss them off and I may invite more trouble with inspectors and paper work down the road.

Any advice would be greatly appreciated.

(3) "must be for my own use or occupancy". There is nothing in this language that says I have to live there, right? Yet, the city's front desk clerk told me I have to live there; and another clerk said "no...I believe they have to file homestead exemption on it". Here I think they are using liberal interpretation of the language here. If one looks at the language it says "own use". There is no require to live there or file homestead or it being primary residence.

IMHO (not an attorney) your interpretation is wrong.  "Own use or occupancy" for a residential property means you live there.  "Own use" would be relevant for, say, an office property.  We have the same limitations here, at least in the cities I've dealt with.  As the owner you can ONLY pull your own permits if you're living there.  If not, you need a licensed GC or a licensed trades person.  In your case, you're doing electrical and plumbing, so that would require permits.

If you were to pull OO permits, then the city discovers you're leasing both units, they could take action. That could include demanding you redo work you've already done. Yes, I have had inspectors demand trenches be dug in a finished basement, walls be opened up and cabinets be removed. Last I checked if you're caught without permits they will make you let them inspect everything and charge you double for permit fees from what they would have been had you done them right up front.

I agree with Jon.

The city here is telling you hat unless you plan to personally live there you can't do the work.

Before I got my builders Lic I worked as code enforcement for a municipality where I live for 8 years.

These rules are in place to stop unlicensed investors from doing work and not being qualified.

Please don't take this wrong, I'm no saying your not qualified by any means. But that's why these rules are in place. They want licensed trade contractors and builders doing his work.

Just be glad that your rules are consistent. We deal with the City of Austin constantly and the rules change from day to day.  It's completely random and what may have been standard process one day is not the next and then it goes back to the old process again.  Depending on the personality of the person reviewing your file also determines whether or not your plans will qualify or need to go to City committee (read your project will be on hold for 6+ months if this happens).

It's just part of the business, and I look on the bright side that it keeps competition out, but it is extremely destabilizing. Keeping on their good side is extremely important.  If you plan to ever be in that office again, they can make your life hell if you have scorned them.  I would advise to grin and bear it.

Just work in the costs of using licensed contractors into your financial models.

@Jon Holdman , there is nothing for the city to discover.  They are already aware of all the violations, hence the liens and citation.

In fact, I also told them they missed other violations A, B, C, D...etc.

I am trying to see if I can qualify for being an owner/builder by leaving one unit vacant, and one unit leased for 1 year, which in my opinion would qualify because one of the units is for my "own use".  I get what you are saying and it is reasonable to interpret "own use" being living there.  But if that's the case, why would they word it as "own use OR occupancy" in that they seem to suggest two different usages.

Now the reason I am trying to be owner/builder is so I can accelerate and take control of the entire process since the whole GC / owner (me) / City triangle is totally mess in terms of communication.  I found myself at the city hall a lot trying to resolve issues the GC is stuck on.

Just one example.  There is a concrete driveway put in by the previous owner without permits and now I am trying to legalize it.  Now to legalize it you must apply for a permit.  Along with the permit one must submit a notarized contract between the owner and the contractor on the price for the job - and is very specific on the scope of work, materials to be used, all that.  To legalize the driveway I was being told I had to submit a contract "PRETENDING" the driveway isn't there now, and I am hiring someone to do it and get the permit approved, and once approved I can immediately call for inspection.  This sounds like a plan until you go to execute it.  I am going to hire a GC and sign a contract with this GC, in the language of the contract says I will pay him $8000 to do the concrete driveway, both he and I will sign it and get it notarized in order to submit to the city.  However, he really isn't going to do any work, we are just pretending, yet I am signing a binding contract saying I am going to pay him $8000 once the job is completed.  The city insists that the cost of the project needs to be the cost of constructing the existing driveway, not the cost of the legalization.  While I was there at the permits office another contractor was complaining that the inspector failed him because the product he used wasn't on the official allowed product list, yet it is, the only thing is, the official product list has the name of the product spelled out, while the product he used has the acronym of the product stamped on the pipe, the inspector was made aware and still failed him.

There is so much stupidity there that I believe by being the owner builder I can short circuit the process.  Being a professional engineer I am already signing and sealing my own plan revisions anyways.  So seems much easier if they can just let me take full control.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.