“Bill Requiring Stop Work Orders Be Disclosed to Potential Homebuyers”

stop-work-order

From Councilmember Elissa Silverman’s Office:

“Today, D.C. Councilmember Elissa Silverman (At-Large) introduced a bill requiring property sellers in D.C. to disclose knowledge of any Stop Work Order issued on a property under consideration for purchase. The “Stop Work Order Disclosure and Regulation Amendment Act of 2016” will increase consumer protections by providing homebuyers with necessary information to make an educated purchase decision. The bill, which was co-introduced by Councilmembers Anita Bonds (At-Large), Mary Cheh (Ward 3), and Jack Evans (Ward 2), came as a result of resident testimony at oversight hearings on the District’s Department of Consumer and Regulatory Affairs (DCRA).

“This legislation is a basic consumer protection for homebuyers,” said Silverman. “DCRA Director Melinda Bolling and her staff are working hard to improve the permitting and inspections systems to ensure renovated homes are safe and up to code when they’re sold. Still, bad actors find ways to slip through the cracks. This bill will create a safety net for homebuyers when that happens.”

A Stop Work Order indicates that a DCRA inspector found the renovation of a property to be substandard, or otherwise in violation of issued permits.

A physical notice is posted at the property, which requires all construction work be stopped until the violation is resolved. At a DCRA oversight roundtable in July, residents testified that, in some cases, the property owner or general contractor removed the Order notice and continued work in violation. The homebuyer then purchased the property with no knowledge of the Stop Work Order or the underlying violation.

Currently under District law, sellers are required to disclose any knowledge of problems with plumbing and electricity, infestation, appliances, and other potential issues; however, there is no requirement to disclose knowledge of a history of Stop Work Orders. If a property has been subject to one or more Stop Work Orders, homebuyers would subsequently have an opportunity to pursue any additional inspections needed to determine if all deficiencies in the construction process have been adequately corrected.

The bill will not prevent developers from selling homes that have had Stop Work Orders. Rather, the disclosure requirement aims to incentivize developers to follow the District’s current law.

The legislation was referred to the Committee of the Whole, Subcommittee on Consumer Affairs.”

38 Comment

  • This would save me a google search. Any cognizant buyer, and agent worth their fee, should be checking for stop work orders, proper permits, etc, on any new or recent construction.
    .
    That said, I’m for it as many buyers won’t know to take this step. It might also prompt better behavior by developers if they realize illegal construction might dent their profit margins.

    • Agree. Its also somewhat shocking to me how many renovations I have looked up where there was never a final inspection before everything was closed up. That would make me veeeeery nervous as a buyer.

    • +1. I’ve made several “don’t buy in that building!” mental notes when I see stop-work orders, but it’s an easy thing to not think of. I’m for this, as well.

    • You’d be surprised how many high profile and reputable agents don’t do this on behalf of their clients.

    • I think this is a good thing. I certainly didn’t know before I started reading PoPville that you could look up this sort of thing online.

    • 3 years ago I bought a house. I work with DCRA for my job (not for DCRA) and now all about PIVS. I checked PIVS before putting an offer in on my house and once again before closing. They had permits and inspections for the obvious things. Their was never a SWO in PIVS. 2 weeks after buying my house an inspector showed up to perform a re inspection on our SWO. Being confused as F@#$ we argued with them that we just bought a house and weren’t doing any construction so couldn’t have a SWO. She showed us the inspection report from her previous visit (done before we bought the house). Turns out our house flipper did unpermiteed and not up to code work and got caught. They sold us the house instead of dealing with the SWO. DCRA never updated PIVS. And now I own a house with a DC sized mortgage with 2 SWOs.

      It happens. Even with a good realtor, a good home inspection, and a smart home buyer.

      • So what do the SWOs mean for a future sale?

        • As I’ve been told by DCRA lawyers and my own lawyers it basically means I have an unsellable house. Or if I am lucky to find a buyer willing to take on the risk I might be able to sell at a huge loss.

          So if a flipper gets a SWO he or she would now have a big incentive to fix the underlying problem and get the SWO lifted. Or at least hope they fall into my house flippers dumb luck where DCRA inspectors don’t enter the SWO into the system until after the house sells.

    • Is there an easy way to find these permits? The DCRA site is not easy to navigate

  • Oh, great. More power for DC bureaucrats to manipulate real estate prices.

  • Seems like getting around this would be fairly easy, llc1 that develops “sells” to llc2 which claims no knowledge of the history and sells to ignorant consumer. Given the cozy relationship between third party inspectors and developers making bad work disappear is trivial. Personally I’d like to see some type of developer liability that has real teeth combined with a massive streamlining of zoning and dcra to make the permitting and inspection process actually useful. The homeowners center is a start, but really, it shows how dysfunctional the whole thing is if you need a concierge office to help folks navigate it.

    • If your theory is that LLC 1 and LLC 2 are owned by the same person, then I’m pretty sure you could just write the law to get around that issue. If LLC 1 is required to inform LLC 2 in the sale of the stop work order, then LLC 2 cannot claim no history of the stop work order. Now, obviously if the ignorant consumer buys the house without being told, it won’t matter unless they find out later, but if they find out later, LLC 2 would be liable for failure to disclose.

      • HaileUnlikely

        Yes but LLC 2 (and LLC 1 for that matter) would likely have vanished into thin air by then.

        • Well, I think that is an entirely separate but equally important issue the city needs to tackle. The entire LLC structure is how people like these local developers all the way up to Donald J. Trump get to continuously defraud people and use their fraud to write off paying taxes.

          The city should start to publicize the governance of LLCs that get sued so that people can start to learn the names of the shoddy developers bilking people in the city. And Congress needs to blow up the LLC structure altogether.

          But baby steps…

          • If the developer behind an LLC doesn’t name themselves, that’s a red flag in and of itself. A good developer wants to use their brand name to sell properties and are usually pretty open about who they are.

        • @Duponter, the disclosure reads: “Does the seller have actual knowledge that one or more stop work orders were issued for construction performed during the sellers ownership or control of the property?” The llc is the seller, not the parties which own the llc. The language is probably enough to get disclosure for casual flippers, but folks that do this professionally will easily game the system w/o repercussion. Look no further than the Hofgards for how far you can go before DC will actually do something.

          • Sure but that means LLC 1 would need to disclose to LLC 2 (or a regular buyer). I understand the issue her is the LLC disappear, but I think that probably happens far less than you think, or at least not as quickly as you think. If LLC 1 fails to disclose a stop work order (which would be silly to do if a buyer can simply look it up publicly and if found could back out of any deal because of the failure to disclose), they are liable so long as they still exist. I agree it happens that people like the Hofgards game that system. I had issues with my home when I bought it (it was a flip) and I was VERY fortunate the developer from whom I purchased was really focused on keeping reputation intact and went out of their way to fix the issues. I got lucky. But I also learned to pay careful attention to the prior ownership of a home that was renovated.

            At some point, this is why you pay for a RE agent. Make sure you get one who knows which developers are shady af. It’s a small enough city I think you’re hard pressed to get a terrible reputation and be able to successfully hide it for long with shadow LLCs.

          • fwiw, its the seller paying the agent out of the final sale, not the buyer so the incentive structure doesn’t work in your favor. Even among reputable agents I have yet to find one that does a deep history check on the house looking for an swo or permit history. Sure, they know and can recommend or avoid based on reputation, but for a one-off how deep have you heard of them digging? It would be nice to have this as part of a home inspection, but you see more and more people waiving the inspection clause to get in to a house they love. You mention that you paid attention to prior history, was that your own initiative or the RE looking out for you?

      • What if the law was drafted to require the seller to query a database and disclose stop work orders that occurred within the past 1 or 2 years? Form XYZ1 then becomes a standard document within the sellers disclosures that every agent gets used to seeing and requesting.
        .
        +1 to Haile. The whole reason developers set up LLCs is to shield them from liability. However, I heard a case where a homeowner successfully sued the developer who set up an LLC to develop/sell a building, but had been dissolved by the time of the lawsuit. If I remember correctly, the developer was the sole owner and operator and the courts ruled that it was essentially an instrumentality of the developer and could not be used to shield the developer from liability.

    • Yes, but the developer would have to pay the transfer tax to hide the stop work order. That’s a decent disincentive.

  • While well intentioned, this seems like window dressing legislation.

    DCRA is completely outmatched and incapable of controlling the breakneck building process occuring in the City. Developers are not incentivized to follow the law because there are so many ways around it, including plying staff in the Permit Center with, ahem “lunch money.” And DCRA is hard-pressed to even apply its own laws or regulation properly when it has the opportunity to do so. And then there’s the third-party program where “trusted” third parties step in instead of DC Government to certify that things are up to code.

    Disclosure of SWO’s is completely useless to consumers without context.

    • I gotta say, they do pretty well. If good citizens report to the named staff on the DCRA website, you’ll usually get action in a day or two. (Okay, yes, sometimes it takes a couple of tries.) I file a bunch of these in our neighborhood in 20001. Not to name names, but the biggest violator seems to be some outfit named Douglas Development. DCRA doesn’t hesitate to inspect and slap up the orange Stop Work orders.

  • This is a feel good measure masquerading for reform. Property disclosures are generally unenforceable because virtually all homes in DC are sole “as is” and don’t incorporate the disclosures in the sales contract. So, if the seller lies on the disclosure about stop work orders, and you find out after closing, your recourse is to sue for fraud if you find out, and then you have to show financial damage from the failure to disclose. This will require you to prove that the stop work order was causally linked to some defect in the house. If the work was eventually permitted and approved by DCRA, then you probably won’t be able to show damage from the stop work order.

    • Sure, but the scenario you lay out is not the one trying to be fixed her. The one trying to be fixed here are situations where the work order was not eventually permitted. Obviously if the stop work order was due to something unrelated to the issue you might want addressed after the fact, this wouldn’t help you, but it is also not intended to.

      And I’m not sure honestly how many homes are sold as is that are flips. I had all contingencies in my contract for mine and I was also in a bidding war with another buyer. And I don’t have any friends who did that either. I tend to hear about this only in homes that aren’t flips or recently renovated, to be honest.

  • If there is information provided about the reason for the stop work order (and the duration of it) maybe this is ok.

    Often times noisy neighbors who don’t know anything/ are angry about you building an addition – will call you in. You are fully in your rights with regards to permits etc and then it is lifted immediately.

    • The Stop Work Orders often have some information provided, but it can be difficult to understand the full cause. For example one SWO at a property in my ANC district (414 Shepherd) says “Supplemental SWO Hold on Parcel” versus “STOP WORK ORDER – ILLEGAL CONSTRUCTION/WORKING WITHOUT A PERMIT”. I have no idea what the first “hold” SWO is about. It would be a good next step to require DCRA to file plain english SWO causes. For anyone who wants to look these up google DCRA PIVS and it will let you search by address. Beware its a little clunky to use.

  • ThIs also doesn’t take on the rampant bribes paid to DCRA inspectors. So corrupt.

  • I am glad to see this and am a believer that a good start is better than the current situation. I am not naive enough to think this will address DCRA issues or prevent developers from doing illegal or poor construction. There are two notorious house flips in my ANC district (4C10), 431 Quincy and 414 Shepherd St NW. Both sat gutted, without foundations, without exterior walls, without full roofs, and the list goes on. 414 Shepherd is on its third Stop Work Order on top of a Dept of Health violation for standing water under the house due to having the foundation removed. If a developer has to reveal this to potential buyers it *may* provide some incentive for future development to not be this terrible. I certainly would want a potential future neighbor to have this information.

  • This is great. One less reason to spend thousands on a private investigator before I buy my next home.

  • Problem sometimes is DCRA incorrectly issues stop works… Ive had it happen 2 times and the Stop work was thrown out

  • Seems to me a reliable database for this information is key. PIVS could be that source, if it was reliable. I am a realtor and use PIVS all the time, but I must always add the comment to my clients that: this is what we know, but this might not be all there is. Useful, and not useful at the same time.

  • What are the consequences if the deficiency was corrected (SWO no longer active on PIVS and final inspections passed)?

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