If you ever meet an introverted real estate investor and want to get him/her to show emotion right now, all you have to do is ask about code enforcement inspections.
Yup, compliance with code is one of the most "favorite" topics with investors.
There are codes for EVERYTHING.
In theory, all you have to do to avoid problems is comply with all codes (unless a code inspector decides to make up his/her own).
What’s the big deal? After all, how many codes can there be?
Well, the current building code is only 615 pages long (https://codes.iccsafe.org/public/chapter/content/5135/).
The current plumbing code is only 530 pages (http://epubs.iapmo.org/NSPC/2015/mobile/index.html#p=10)
I don't know how many pages of fire code and electrical code there are but there are actually a few hundred codes, not just a few hundred pages (https://www.nfpa.org/codes-and-standards/all-codes-and-standards/free-access).
In case you have more reading time left over, those are not all the codes...many others in our state are referenced at http://www.state.nj.us/dca/divisions/codes/codreg/
Here's the rub.
Not all code inspectors know all the codes, just like not all accountants know the many thousands of pages of the IRS code and not all lawyers know every statute and every case of case law in the jurisdictions they serve.
But that's not even the biggest problem.
The problem is that different townships enforce different parts of the codes with more attention or less attention.
On top of that, different inspectors from the same township enforce different codes.
On top of that, an inspector can decide to redirect his/her enforcement focus in a given year and then generate a whole lot of "gotcha's".
On top of that, when an inspector changes, the new inspector can choose what he/she wants to inspect.
That happened to me 2 years ago when one of the several inspectors changed in a township in which I have 5 rental properties and have done several flips. I have a reputation of very high compliance in that township. After having rentals there for several years, I learned what they were looking for and whenever I bought a new property as a rental or for a flip in that township, I would notify the inspector exactly what work I was going to do and what permits I was going to pull BEFORE buying the property, often during the pre-sale inspection. I had and still have a great relationship with all the different code officials. But then the new inspector for annual rental inspections came in and he found in three of my five rental houses, high quality doors to the garage in great shape that needed to be replaced according to the code. It cost me a bunch of money and I complied immediately. Those doors were his thing and they were not an area of focus for the previous inspector. A year later, all of my rental properties passed with the new inspector like in all previous years with the previous inspector.
Someone in our local REIA posted a question if anyone has a list of codes required by each township in our area. The “answer" to the question is that there sort of is a list of codes and it is several thousand pages long.
Another answer is that if you go to each township before you buy, many of them will give you a list that is 1-4 pages long of codes to which they pay special attention which brings us to the next paragraph.
Yet another answer is that the code officials can enforce any code on the books, whether it’s on their handout or not.
Yet another answer is that sometimes code officials get overzealous and make up stuff. While this is apparently somewhat rare, the inspectors sometimes do get caught doing this. Several years ago, my electrician challenged the electrical inspector of a certain township at the state level and won. Unbeknownst to me, I used that electrician in that township and my inspections failed multiple times despite my efforts to get the job done right and I had the best diagrams they ever say. Could I have proven retaliation? I don’t know, I simply went ahead and complied with their requirements…then I never bought another house in that township because they don’t deserve my money, my effort and my strong desire to do the right thing.
While there are some townships that are more of a nuisance than others, if we as investors attempt to do our best for compliance with code and if we communicate often with the township code officials, we usually do well. However, if you invest long enough, you will eventually encounter a seemingly unfair situation and then the solution is to deal with it. I also have a positive attitude that I will learn something new from every inspection if the inspector says anything but “nice job.”
Like most people you meet in life, most code inspectors are not bad people while a few are on a power trip. If you show an attitude of compliance and take corrective action promptly, you will earn the respect of most code officials. When you encounter unreasonable code officials, remember that you always have a choice which houses to buy and in which towns to invest your time, expertise and money.
