Thread: foreclosure home inspection

My wife and I purchase foreclosed homes as a hobby to rehab and sell. The City of Joliet, Illinois building dept. are refusing water service turn on until a city inspector inspects the house. They say there are ordinances and state laws that say we cannot rehab homes for profit. Is this true? They say we cannot do any work ourselfs without using licensed people. Is this true?We have done 4 other homes in Joliet and they asked to inspect and we refused and they sold us the building remodel permit. We always buy the building permits for the work we are doing. We use unemployed unions friends for the work we cannot perform ourselves.
My question is:
Can a government agency refuse water turn on service to a homeowner?
Has anyone heard of this before?
Are there laws saying we cannot rehab a home for profit?
Please email jmauzer@att.net or call 815-325-2809

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Originally Posted by John Mauzer

My wife and I purchase foreclosed homes as a hobby to rehab and sell. The City of Joliet, Illinois building dept. are refusing water service turn on until a city inspector inspects the house. They say there are ordinances and state laws that say we cannot rehab homes for profit. Is this true? They say we cannot do any work ourselfs without using licensed people. Is this true?We have done 4 other homes in Joliet and they asked to inspect and we refused and they sold us the building remodel permit. We always buy the building permits for the work we are doing. We use unemployed unions friends for the work we cannot perform ourselves.
My question is:
Can a government agency refuse water turn on service to a homeowner?
Has anyone heard of this before?
Are there laws saying we cannot rehab a home for profit?
Please email jmauzer@att.net or call 815-325-2809

Hi John,

You are going to need to check with the city for specifics on laws. For instance San Francisco has a requirement that only licensed electrical contractors can work on electrical systems. Used to be that a general contractor could do electrical as a part of other work performed.

I do not know of any laws that prohibit profit on remodeling/rehabbing. That would be silly.

"Can a government agency refuse water turn on service to a homeowner?" Apparently they can!

Originally Posted by John Mauzer

My wife and I purchase foreclosed homes as a hobby to rehab and sell. The City of Joliet, Illinois building dept. are refusing water service turn on until a city inspector inspects the house. They say there are ordinances and state laws that say we cannot rehab homes for profit. Is this true? They say we cannot do any work ourselfs without using licensed people. Is this true?We have done 4 other homes in Joliet and they asked to inspect and we refused and they sold us the building remodel permit. We always buy the building permits for the work we are doing. We use unemployed unions friends for the work we cannot perform ourselves.
My question is:
Can a government agency refuse water turn on service to a homeowner?
Has anyone heard of this before?
Are there laws saying we cannot rehab a home for profit?
Please email jmauzer@att.net or call 815-325-2809

The law is probably similar to a Florida law which prohibits the same thing, except that it does not prohibit you from rehabbing and making a profit as you worded it.

The Florida law allows an owner to act as their own contractor, which (in part) you did. (The 'in part' part is because you also had other unlicensed people do the work too, and they are not exempt.)

The key to the Florida law is that if you choose to act as your own contractor (which is perfectly legal), then you are not allowed to rent, lease, sell, or even offer for rent, lease, or sale FOR ONE YEAR from when the work is COMPLETED.

That last part is what prohibits you from doing what you are doing.

Back to the "which (in part) you did":
- When you act as your own contractor then you must act as a contractor is required to act:
- - You must personally supervise all unlicensed workers (*you* *are* *the contractor*).
- - All unlicensed workers must be employees of yours (you take out FICA, Workmans Compensation, unemployment insurance, etc., as *you* *are* *the contractor*).

And when you do what you describe in Florida, then you are outside the owner/builder exemption and you are now working as an *unlicensed contractor*, which comes with a minimum $5,000.00 fine, among other things.

How do you get around that at this point?

Hire a licensed general contractor to pull ALL NEW PERMITS IN THEIR NAME, have the city make inspections for THOSE PERMITS, and now *you* are no longer bound by the exemption to not "rent, lease, sell, or even offer for rent, lease, or sale FOR ONE YEAR from when the work is COMPLETED" because a licensed contractor did the work.

There still remains one problem, though, and that is that *you did* work as an unlicensed contractor and they can still come after you for that. In Florida, if you correct the situation by hiring a licensed contractor, that usually serves as notice to the state that you stopped doing what you were doing and came into compliance on your own - and the state wants you to be in compliance. You might still get fined, but maybe not, you saw the error of your ways and corrected them, but, you still did act as an unlicensed contractor ...

Any way, hiring a licensed contractor to pull all new permit and having the city inspect the work on those new permits may well get you out of the Catch 22 you put yourself into.

Of course now, though, you have the additional expense of the licensed contractor, the new permits, and any corrections the city wants done - you might no longer make a profit on the flip of that house.

If you do that again on your own without a licensed contractor ... don't expect to get out of the unlicensed contractor fine a second time, you should have known better the second time, the second time you would be in deep doo-doo if you continue to act as an unlicensed contractor.

Make sure you work with a licensed contractor the next time, or, make sure you have enough to carry the house for one year before you "rent, lease, sell, or even offer for rent, lease, or sale FOR ONE YEAR from when the work is COMPLETED".

At least in Florida, but I suspect the city is working with a similar law there.

The law is intended to protect *the innocent buyers and tenants who purchase or lease* from unlicensed contractors and to protect them from what could be unsafe work.

Next time ... hire a licensed contractor to pull the permits and handle the work ... it will be a lot less stressful for you.

The same goes for landlords in Florida who make repairs themselves instead of hiring licensed contractors - they are now working as unlicensed contractors and are no longer allowed to rent or lease out their property for one year after the work is completed ... AND ... they are not ripe for being fined a minimum $5,000.00 for working as an unlicensed contractor.

This sounds like an issue that you might consider contacting your attorney about.

Originally Posted by Randy Aldering

This sounds like an issue that you might consider contacting your attorney about.

Yeah, as we HIs know.... this is the quickest/easiest way to work through any dispute

Can't do any work yourself? What is their definition of "subcontractors?" "Contractors" must be licensed and have the required certificates on file:

Untitled Document

John,
The problem may revolve around the fact that you do not live at the house in question. Many Jurisdictions allow the home owner (resident) to pull a permit in their name and to perform the work themselves. The work has to meet all code requirements and pass an inspection and all work is done by the resident home owner.

Your problem is that you are not living in the property. You are acting as a general contractor and therefore must use licensed contractors. The rehab for profit issue does not mean that you can not make a profit on rehabbing a property just that you as a "flipper" can not treat the process as though you are living in the house.

In the past you must have given the impression that you were doing the work on your primary residence. This time you had some one ask a question that caused them to flag the permits and process or something to that effect.

"Can a government agency refuse water turn on service to a homeowner?" Why not. It makes for leverage to insure that you have followed the rules.

I am not aware of any state laws that prohibit you from making a profit. If there were the resulting problems would make the current mortgage/housing fiasco look like child's play. Government tends to promote flipping rather than discourage it. This is America, profit is part of our DNA.
From your post there are basically two issues here.
1 - it is common practice for local municipalities around here not to turn on the water unless they get in to see what's going on. Sometimes they want in, sometimes they don't. Remember the plumber protects the health of the nation.
2- This is the bigger issue. You pissed off the City and put yourself on their radar. Deny it, fool yourself, whatever. Based on what you have stated, you pissed them off, proven yourself to do non-compliant rehab work or they've gotten complaint calls about your jobsites. Or maybe it's just the fact that you refused to let them into the other buildings. Now they are playing hardball. Now they don't give a damn what you want, you will comply.
Imagine my utter lack of surprise that a flipper doesn't want to let the Muni inspectors in. I have yet to see a flipper job that could come close to passing a real inspection. You're using unemployed union friends? Really? Like anyone is supposed to believe that. If it were true pulling a legitimate permit and letting Muni inspectors in wouldn't be an issue.
Let me give you a piece of advice. Start doing whatever Joliet wants. If you don't they might send inspectors out to everyone of your properties, write them all up, haul you into housing court and fine the living crap out of you. Lick your wounds and comply. If they want to run you out of town, it will happen.

It does seem that all local, state and federal officials want as much profit as possible so that they can work out new ways to add additional taxes. Unless your are an elected official and then it seems that you do not have to pay taxes when you get caught. Oh, forgot, also those that come up for appointment by the President.

Flipping for a hobby? LOL, what a silly statement!

A private person isn't exempt from the standards required by the local building department.

If the true intent is to buy and sell a house as a business plan, why wouldn't one need a license? Why wouldn't one need to subject himself to laws and inspections. How does one account for his hobby when thousands of dollars are at risk? My hobby is boating..... does that mean I can take people out for boat tours as a business? Forget, safety inspections, insurance requirements, captain skills..... who needs to worry about that stuff?

An inspector colleague put it succinctly when we talking about the job that a local flipping business does in this area...... "XX is proof that you should not hire ALL of your help from in front of Home Depot!". Looking at some of the work they do, I agree, but maybe they should hire there and might get a better job'.

Don,
Can you buy a boat, fix it up and sell it as a hobby? Many do. Called upgrading.
Business lic. is questionable depending on jurisdiction.
Costly hobby with allot of money at risk ? How about gambling at a Casino?

There are many people who purchase a house and while living in the house make improvements and then sell to purchase another project to work on. They enjoy the process. To many this is a little crazy, but so is sailing to many. Where you go slow with no other purpose than the act of sailing the boat.

Home has technically lost occupancy status due to lack of water/sewer services. Must use licensed insured contractor, complete with completion bond, to restore to occupancy, including Illinois State Plumbing law considerations.

Exemptions for Completion Bonds and licensed (locally) contractors, or where applicable state licensed entities (plumbers, roofers) regarding work are limited solely to owner-occupants and leasee occupants.

Unless/until you are actually occupying (legally) the home, it does not surprise me that you are not being allowed to proceed.

The exempted work is only applicable to that which is physically, literally, actually performed by the actual owner/occupant - not friends, family members, or others you employ. Even Habitat for Humanity must have the required contractors insurance AND provide a completion bond to the AHJ.

Property maintenance inspections, pre-permit inspections, and Occupancy inspections (as well as responsible pre-inspection/investigation prior to reconnection to the public water and sewer systems) are common. Requiring a plumbing system to be inspected, possibly tested, and most likely responsibly SANITIZED prior to re-connection to the public water supply and therefore sewer service prior to re-issuing an occupany status following an extended period of unuse/disconnection is a responsible step by the muni, and WILL BE found in their ordinances relative to their establishment/adoption of building and property maintenance codes and public works/services regarding administration of the public water and sewer services.

Illinois is a home-rule state and entites do have the right to require local licensing of contractor entites and individuals for example, which are not state issued (plumbers, plumbing contractors; roofing contractors, roofers) and require local review of the businesses/individuals and require registration of those which are state-licensed, including collection of certificates of insurance, named additional insured, and completion bonds.

The occupancy status (water, sewer service, electricity, ability to heat adequately, overall property maintenance status, safety to occupy) will have to be corrected to Joliet's satisfaction before anyone can be allowed to occupy it - then you'll have to be actually living in it as your primary residence, for an owner-occupied exemption, actually perform the work yourself that you're permitted to do so, and for the purpose of continued personal occupancy exceeding 6 months following the inspected cleared completion of the work. Intent has a great deal to do with the issuance - as a known "flipper" or multiple property owner/rentor, you'd have to overcome the burden of proof due to your history which makes a case you aren't an owner occupier. Yes the muni can refuse to grant you permits based on that history and cirumstances of both the property status of not being presently habital and require licensed, insured, and bonded contractors to apply for the permits and perform the work required to restore it to a legal occupancy status.

And as a non-occupying owner you may be further prohibited from performing maintenance type work otherwise regulated by local ordinance/code adoptions and state plumbing and roofing laws.

Garry Sorrell,

The fees involved are not anywhere near the realm of a profit center for the muni, FAR FROM IT.

They do not cover the time, expense of even the mere record keeping activities, let alone the actual cost of inspection time for the muni.

The muni has a responsiblity to enforce the state plumbing laws, public safety, the operational requirements (responsiblities) of the safe drinking water act, etc. and the PUBLIC SAFETY issues regarding work performance to standards, and that it is completed in a timely manner, not create a public nusiance, AND ASSURE the TAX BASIS of the property for itself, and the myriad of taxing bodies which in Illinois, are based on the maintenance of the real property (city, schools, township, county, roads, community college, mental health district, mosquito abatement, etc.), and the protection of the real property of the area, the neighborhood, the immediately adjacent properties, etc.

It has nothing to do with revenue generation! The raw REAL cost of providing even a single property visit inspection FAR exceeds the cost charged for a permit application. (One only has to "get a clue" about the cost of the varios shared muni-state pension systems and their gross underfunding in Illinois, to get an idea as to how expensive the cost of time is for anything in local government in illinois; not to mention the actual payroll, insurance (benefits & liability), etc.) to understand the "cost" of the permit doesn't even come close to "covering" the costs involved...far short of ever coming close to a profit center...and then there's the issue of enforcement/compliance when all doesn't proceed as declared/intended on the permit plan, schedule, or completion).

Proof of financial responsibility, and assurance the work will be performed as required and in the manner prescribed and assuring public safety regarding same, is far from a profit center for Joliet. The participation fees (permit application fees) are barely a cost sharing fee by those wanting the service, not covering the actual costs at all, and no profit for the muni, that's for SURE. The fee schedules are public record.

Originally Posted by John Mauzer

My wife and I purchase foreclosed homes as a hobby to rehab and sell. The City of Joliet, Illinois building dept. are refusing water service turn on until a city inspector inspects the house. They say there are ordinances and state laws that say we cannot rehab homes for profit. Is this true? They say we cannot do any work ourselfs without using licensed people. Is this true?We have done 4 other homes in Joliet and they asked to inspect and we refused and they sold us the building remodel permit. We always buy the building permits for the work we are doing. We use unemployed unions friends for the work we cannot perform ourselves.
My question is:
Can a government agency refuse water turn on service to a homeowner?
Has anyone heard of this before?
Are there laws saying we cannot rehab a home for profit?
Please email jmauzer@att.net or call 815-325-2809

Public Heath, state law and local enhancements, muni is proceeding exactly as they should, regarding Plumbing and Sanitary.

Home was unoccupied/foreclosed, you make tis clear.

You have also indicated you have a history of refusing inspections, and going beyond the circumstances of an owner/occupied permit your other projects.

They are absolutely correct. Public record regarding local adoption of codes and ordinances Plumbing and Roofing are based on state laws. Public Heath and safety.

The exemptions for owner/occupant permits are EXEMPTIONS for one occupying the property as a primary RESIDENCE. You cannot legally occupy/habitate that which is technically not occupiable (no water/sewer service, for example).

Protection of the public health and safety is what the muni must enforce as a home rule muni which has taken on that responsibility by the establishment of codes and enforcement.

HG,
There is a little difference in being taxed on profit and paying fees for services, though there are real profit in certain inspections and the fees paid beyond the permit processes in many areas. Many jurisdictions load up what requires an inspection only so they will generate permit and inspection fees. But that is another discussion.

You need to work like the rest of the "investors". Turn the utilities on, as though it is your residence. then quietly work the improvements, without the permit. If you don't replace a meter base, or a water main to the meter, then there will be no need for an inspector to approve connections. Then, collect on your investment. The new buyer and/or the real estate agent will not notice the fresh receptacles, or fresh wiring, or fresh plumbing. Asides, those improvements were done before you bought it.

Originally Posted by Garry Sorrells

Don,
Can you buy a boat, fix it up and sell it as a hobby? Many do. Called upgrading. Business lic. is questionable depending on jurisdiction.
Costly hobby with allot of money at risk ? How about gambling at a Casino?

There are many people who purchase a house and while living in the house make improvements and then sell to purchase another project to work on. They enjoy the process. To many this is a little crazy, but so is sailing to many. Where you go slow with no other purpose than the act of sailing the boat.

Hi Gary,

Yes, CA also has laws regarding the need for contractor licenses, the root of the original questions. The CA Department of Consumer Affairs and CA Contractors State License Board have rules about flipping regarding the home being a principal residence and the length of prior to the completion of work.

Basically a builder/owner 'flip' must be a principal place of residence for 12 months prior to the completion of work. Also, one can not 'flip' more than 2 homes in a three year period. Yep, I suppose this is designed to limit the hobbyists. I doubt if the state and local governments make much profit from permit fees. Of course, the 'big goverment' rally cry is that they are taxing the blood out of 'us'.

More info: What Is An Owner/Builder - Contractors State License Board

California Business and Professions Code Section 7044 - California Attorney Resources - California Laws

I'll leave further interpretation to the lawyers and judges.

I believe that there can be more confining regulations regarding some home components like electric and gas plumbing. I think most of us see reasons for these regulations every day! And we have pictures!

Gary, similar laws may apply to boaters acting as dealers which was off-topic.

FYI: I have a power boat, not a sail boat. Nope, can't justify the 500 gallons of diesel that it takes to fill up the tanks. And of course, it takes too long to get there and is too expensive. 2MPG is way optimistic, but it beats crawling under a house.

Originally Posted by Don Burbach

Basically a builder/owner 'flip' must be a principal place of residence for 12 months prior to the completion of work.

Don,

I find that interesting as a comparison to Florida's requirement that they not lease or sell, or offer for lease or sale, for 12 months AFTER completion of the work.

I don't see what owning the house 12 months PRIOR to completion of the work has to do with any risk involved with living with the work after completion of the work. Florida's wording is basically requiring the owner/builder to be responsible for the work for the next year (like a builder's warranty is) and that anyone living in the house for that next year is the owner/builder or his family or relatives, or anyone he wants to let live there for FREE , which means those people are not putting any financial risk into the house for the next year.

The 'prior 12 months' confounds me as to the reasoning why that was chosen.

That means that I could buy a fixer-upper, 'live' there for the 12 months that I was taking to fix it up, then immediately upon completion of the work I could sell it ... makes not sense to me ... ???

I would think the rational of the ownership period is based on an owner being able to perform work on their own owner occupied home (with permits and inspections). But would put a holding cost burden on a flipper. Same reasoning on FHA mortgages requiring owner to occupy home to obtain mortgage.

As apposed to saying that no work can be done by the owner. A few rights left to the owner, at least for now.

Originally Posted by Garry Sorrells

I would think the rational of the ownership period is based on an owner being able to perform work on their own owner occupied home (with permits and inspections). But would put a holding cost burden on a flipper. Same reasoning on FHA mortgages requiring owner to occupy home to obtain mortgage.

As apposed to saying that no work can be done by the owner. A few rights left to the owner, at least for now.

I still prefer the wording in Florida's owner/builder exemption in that if you do the work as an owner ... youse da one dats gotto lib wid it ... for the next 12 months.

Garry, I have a different take on the CA rules.

IS THE GLASS HALF FULL OR HALF EMPTY?

I don't see it as a home owner not being able to work on his home.... I see it as CA considering a home owner to be working as a contractor if he 'flips' homes and it is not his primary residence for a year, or does more than 2 in a 3 year period. He then needs a contractors license and is subject to the contracting regulations, etc.

Jerry, I agree with you.... live in it for a year after completing the work. CA just doesn't seem to take their law far enough. Neither law says that a owner can't do work, but they do clarify the position of the owner/builder, which was my original intent here.

In my part of Canada (probably true for all, but we never know what's up in Quebec), if you sell your principal residence, there is no capital gains tax owing.
But, if you've owned the home for less than 2 years, there is capital gain tax owing on the proceeds of the sale, and that is big bucks.