The City of Lansing is making me pull a Permit on an addition that's was put on my rental property 15 years before I owned it. Contractor won't touch it and city won't let anyone live in it until it's done.
Read below for Full Story. It's long..
Hello, my name is Sam Rockafellow and in December of 2019 I purchased my first rental property. It was a 2 bedroom 1 1/2 bath home on the south west side of Lansing Michigan. It was owned by the Bank and I was able to purchase it for $42,000. It need some updating and with the given layout of having two livingrooms I thought I could put and additional bedroom in it by simply adding in a couple of walls. I also wanted to make the half bath a full bath by adding a tub shower combo.
I was admittedly unexperienced in the business of owning rentals and tried to do the work myself. I knew it needed a new water heater and having installed one before I knew how to do it. Unfortunately I was not aware the you needed a permit in order to change a water heater. I Also tried to tackle a leaking pipe by myself but after 2 days of getting frustrated I decided to go the property management route. It took me about 2 months to find property management company to help me with the rehab. After a short interviewing process I ended up hiring a local management company called DS Huber Real Estate Group. They gladly accepted the project and started to get quotes for the rehab in February of 2020. I ended up accepting a quote from R&R Remodeling of $25,000 to do the work. The owner of R&R is Jeffrey Hillman who at the time was ALSO the Turn Coordinator working for DS Huber. (Huge Red Flag but I carried on anyway)
COVID 19 infected America in the begining of March 2020 as we were about 2 weeks in the Rehab process. All construction was shut down for about a month until things started to get back to normal as far as working standards. We were able to finish the project in June 2020 after running into some permit problems. There was working being done without permits (partly me doing the water heater and the other part was constructuon work being done by R&R). I never called the city to make sure proper permits were pulled and I never confirmed with the construction company the the permit did in fact get pulled and executed.
I get approved by the city for the home to be a rental and by July I have tenants move into the property with the understanding that all the work was complete.
In October of 2020 I started receiving mail from the city saying that work was being done without a permit and that work had been complete without a final inspection. My property manager said he was handling it so I ignored it. Sill receiving mail eventually received a fine for not complying with the requests of the city. Then we got a notice to vacate the premises which the building inspector delivered personally to my tenants. They Tenants did what I would do and moved out that weekend and have no intrest in renting from me again. Now I have an empty house that is flagged by the city as unlivable until corrections are made.
So what happened? After a short conversation with the building inspector Chad Wakley he said that the permits were pulled to do the work on the property but the contractor never got a final inspection. R&R finished the project and then CANCELED the permits with the City. The inspector whether it was protocol or curiosity checked on the property and seen it was completed. He then picked it apart via inspection as I would do to. The Hallway that was created by adding a bedroom is 4 inches too narrow. There was an attached garage that was transformed into addition living space 15 years before I purchased the property that never had the proper permits pulled. Now the building inspector is claiming that "he does not know the state of that house before I purchased it" and is requiring that I pull permits on an addition that was done years ago. Probably done by Joe Shmo for a case of beer. It will not pass code compliance and could cost up to 20k to get up to code. The other issue is that my property management company is claiming that they can't get a contractor to touch it with a 10 foot pole because of reasons unknown to me.
Lessons learned, confirm that the guy your hiring to manage turns is actually following through with permits. Pull permits before you touch a Damn thing in the house.
I TAKE FULL RESPONSIBILITY FOR THE SITUATION
Not sure if I can pull the permit myself and hire someone to come fix all the problems.
Can I fight the city and say I'm not responsible for the addition?
Recommend you hire a knowledgeable attorney - one that knows the city and real estate.
They should be able to "file" an appeal with the building department, but will have to prove the city failed to cath this problem BEFORE you bought it.
To prove this, you'll need to check MLS past listings and request the City Assessors report to check what the city knew about the property. It may show the Assessor increased the square footage, which they would only have done if the city knew about the addition. The attorney may also need to request records from the city to see if they had any record of outstanding permits before you bought it.
It is an uphill battle, but you may be able to get a "restraining order" against the city so you can rent it out and generate cashflow to pay the attorney.
I am not an expert in this area but I have experience with a lot of renovations and permits. I ask this question all the time, "what happens if they want you to permit work for something done before you bought a property." The answer has always been, I have not heard of that happening. (This is from years of asking the question from general contractors, real estate agents, and others in the business). Since it seems you are getting hit with something that almost never happens, if I were you, I would reach out to a real estate attorney. The city may be more willing to work with you and negotiate if you have an attorney make a call for you to discuss the situation. (It's annoying but often times attorneys get further than you or I can just because of their title). If the attorney only has to do a small amount of work like make a phone call it will be inexpensive, especially compared to what the cost will be to resolve the prior work.
I would also go after the contractor that failed you (for the part they were responsible for). Hit them where it hurts online/social media, facebook, google, better business bureau, yelp, anywhere and everywhere you can find to hit them. I have found I get a response from contractors/vendors if I agree to take down negative reviews if they resolve the problem. I would also file a claim in small claims court against the general contractor that failed to do their role properly (provided the cost of all this for you is under the limit allowed in small claims).
Hopefully someone with more experience will also comment specifically on how to help resolve the permit issue.
Reach out to Sam Dua (517) 346-7000. He's the best real estate attorney in the area! Almost all of the Lansing, MI, area investors use him!