When we list a property where all or a portion of a structure was built without permits, we as real estate professionals note that fact in the listing, as it has consequences for property valuation and for the ability of a lender to finance the property. Similarly, the legally mandated Sellers Real Property Disclosure Form requires the seller to note any violations or variances.
Anyone who suspects a violation of County code can file a report online or in person. And one recent Saturday, someone (or perhaps three “someones” as reports were filed under three different aliases) took the time to comb through active and pending listings that mention unpermitted residential structures and file complaints on them. Approximately 150 complaints, as many as the Building Department might typically receive in a year, according to the inspector serving as complaints officer.
Hawaii County Code Enforcement – Building Permit Violations Procedures for Filing and Response
It is easy for anyone to go on the Hawaii County website and file a Building Code complaint. Once the complaint is entered, the Building Department is required to follow up as follows:
So what is going to happen as a result of this avalanche of complaints?
For one thing, we already know that the Hawaiʻi County Department of Public Works is running behind in processing building permits. Due to the high volume of new construction, as well as holders of old open permits rushing to meet deadlines before their open permits are canceled, building inspectors are scrambling to keep up with inspections. Now added to the workload will be initial and follow up inspections for the new complaints.
In some cases, owners will need to file for “as built” permits, which then will add to the permit application backlog. The new EPIC permit system makes it easier for anyone to see the status of permits on a property, but has also created delays in processing of new permit requests.
The bottom line is that our County resources will be stretched even more thin. This will create additional delays in getting permits and closing them out, unintended negative consequences for anyone building or remodeling with permits – people who abided by the rules. The process for the owners who built or bought without permits and are now cited in the complaints could take years to resolve.
What Does This Mean for Buyers and Sellers of Big Island Real Estate?
The complaints were specifically filed against easy targets: listings that stated residential structures were built without permits. Some of these listings were already in escrow, meaning those transactions are likely to be delayed in closing unless the buyer is willing to assume all the risk and effort associated with the Building Divisionʻs enforcement process.
For active listings with unpermitted structures, whether or not they were included in the complaints already filed, sellers and prospective buyers both will need to evaluate their next steps. Given the low inventory market conditions with many cash buyers coming to Hawaiʻi, buyers have been more willing than usual to overlook permit issues. That may no longer be the case. If owners decide to apply for “as built” permits, they are looking at a years-long process, and another whole slice of real estate inventory disappears from the market.
Whoever filed these complaints, however legitimate, is going to be awfully unpopular with a whole lot of people if their name comes to light. At a moment when we have a housing crisis on the island, they have just exacerbated the problem. On the other hand, perhaps some of these owners will sell at bargain prices reflecting the risk and cost the new owners will bear.
Stay tuned for updates!