 I'm your host, Krista Stadler. And welcome to the Condo Insider Show, where we discuss all things relative to condo living in your condo investment. Today, we will discuss the pitfalls of not having renovations permitted and how that can affect your ability to sell your unit or even insure it. Our special guest today is Randy Traeger with Traeger Design. I saw Randy present at a recent industry event and knew we really needed to have him on the show. Randy, please let us know a little bit about yourself and your experience. Thank you, Krista. Basically, I'm in the business of doing building permits for people throughout Oahu Island. Been doing this since 2008 on this island, but other experience on the West Coast for several years before that. I largely work through contractors, and they will bring me into the process in order to prepare a building permit so they can do work in whatever the project might be. Thank you so much for being here. Well, let me ask you. I saw your presentation at the industry event and it was really something I felt our viewers needed to see. What are the differences or are there any differences between permitting a condo or a town home versus a single family home? Well, yes, there is. There's quite a bit of difference. Slide one is an example of how they can be, residential versus commercial. You'll see the unequal sign. They mirror absolutely not related what's aware of how you go about it. So they have different requirements and the requirements for commercial are much more stringent than the requirements for residential. And even though they have the same set of codes, the townhouses, condos were all converted to commercial buildings about the end of 2017. So they're no longer classed as residents. All right, so you're going to basically a completely different desk or counter when you go into the permitting office than you would go to for your single family, I would imagine, with different rules. And honestly, they have two crews. Oh, OK. They have a crew for a residential, and then they have a crew for commercial. And the crew for commercial is a different group of people. They have different goals and things that they're trying to achieve. And they have a wider group of things to do on their checklist than the residential ones do. So that makes the job more interesting, at least for someone. How much unpermitted work do you feel is out there? Do you come across? Is it a very large percentage of what you see? Unfortunately, the answer is yes. It's a fairly significant piece. Primarily, the reason has been people are very hesitant to get a permit because how long historically it is taken to get a building permit. Even when condos and townhouses were classed as residential, they were very long in coming. They could take anywhere from four months to a year, depending on complications. The other thing is at the condo and townhouse level, they enacted some new rules towards the end of 2018 and the beginning of 2019 that just make it more step by step requirement is much more elevated. In other words, there's just many more things to do. Because it went to the commercial and not just residential, because you're basically having to permit it as if it was an office building or something like that. Right, but the rules for a commercial building are the same for all commercial buildings, whether it's used as condo units for sleeping and housing or if it's used for restaurants and businesses. How do you define, and we talked about this a little before the show, something like in my business with property management that's a repair, and at what point am I looking at that particular scope of work and saying it's going from a repair to oops, now you're getting into permitted work? What kind of signs are we looking at that's going to define it as something that needs to have a permit? The basic thing that defines it is something referred to as chapter 18, and that's our permitting code. So it spells out in there when the dollar value of a work exceeds $1,000 in 12 months, then it now needs to be a permitted work. Now they have a list of things to exclude, like if you're just changing the flooring, if you're doing painting, taking out curtains, and things like that, no permit required. But if you're taking out the windows to enclose a line, no, that's a permitted process. And if you're taking out a tub and you want to put in a shower, very popular conversion nowadays, that requires a permit. And the common thing is they'll do it the kitchen in one or two baths, they'll do them all at the same time naturally because it's a mess, that requires a permit. And you have to move something like electrical panels in most situations, and there's reasons for that, and we can talk about that when you're ready, if we can. So when you're going to, say, for example, sell your property, that's a good example, and you're having your realtor come in or you're getting ready to list it or you've even listed it, how does it come about that it's found that what you have done is not permitted? Because it sounds like the contractors, in some cases, maybe are steering the homeowner or condo owner to, oh, you don't really need to get that permit. I can do this and that. And then when it comes to a time when you want to sell the property, you're kind of stuck holding the bag and having to deal with a whole litany of expenses and issues. So tell us a little bit about that, because that's what I really want the people to hear about. OK, that's super good. So what really happens is, realtors who specialize in the sale of condos and townhouses tend to operate in five to eight buildings within a geography, like Waikiki, for example, or down in the Kakaako area or wherever. Well, they're familiar with the standard units before alterations are made versus units that had alterations made. And visually, they can sense this one is different. Then they have to decide how they're going to present that product, or let's say they're just listing the property, for example. So then they have to decide how are they going to put the disclosure papers together in order to properly represent the property. So normally, on the disclosure statements, the statement says, where any changes, alterations, remodels are done to this property, and the owner has largely three basic answers they can give. Yes, no, or I don't know. And how would that affect? So let's say they say yes. Let's say they're really proud of it. They went and they renovated this. They have a beautiful kitchen and bathrooms. Exactly. None of it's permitted. They got a great deal on it. They're so happy they're getting ready to sell. How will that affect the selling process? In other words, how will that affect a buyer coming in from a loan perspective or other perspective? A lot of times, buyers of condos represents not always, but amazingly, how many arts their first real estate purchased. They're young buyers. So they're getting a loan. They're going to do a down and they're going to get a mortgage. And somewhere along the line, a title company is going to do a title search. And if the disclosure says yes, things are changed, then title companies may dig in and go look for the permits for that particular unit. I've actually had this happen on certain projects that I've done. And then what happens is once they get that, then they realize there's no permit. And now the bank says, and I've had it happen, where people have called. The whole transaction stops. Or fall just literally can fall out of escrow. It just falls out of escrow, yeah. Because normally the buyer goes, oh, OK, I'll go look for another property. Because it's a legitimate reason to not go through with the purchase. And so that happens. And that happens a lot more than what people might think. What about also from a liability standpoint, again, I'm going to go back to a rental property, a rental unit, that wasn't permitted properly. And maybe the electrical work wasn't permitted. And there was a fire that took place. From an insurance standpoint, if the owner then turns to the insurance company to be compensated and have the repairs done to bring it back to the condition, what can happen if it's not permitted? Well, oftentimes what will occur is the adjuster from the insurance company will be there to inspect the property and see what needs to get done, et cetera. And they'll also, likewise, may be familiar with the units and the building, et cetera. And they can say, it says here changes were made, and it says no permit was secured. So they'll go back and ask, was the permit secured for the changes? And if it's no, then unfortunately, if the thing that caused the problem was a result of the work that was performed, then all insurance policies basically say they only ensure things that are permitted work would be blessed by the authority having jurisdiction. And in this case, it's the city of the county of Honolulu. But they don't have that. Then there's not much the insurance company could do. They just pack up their briefcases. And you're left with whatever the problem is. Lord knows how much money he expenses, especially in a condo or a town home where it's going to affect possibly other units from water damage, especially, but obviously fire as well. Well, fire always has water damage. Yeah, well, yeah. They go together. That's true. Fire always has water damage because firefighters love to put stuff out with water. What about, and I know you have some great slides for us, so I want to make sure we see some of them. I don't know if you have one you wanted to look at. But what about when people say, oh, well, I'm safe. It's grandfathered in. I'm fine. Well, that's a very common problem. What do they mean by that? What do they mean to be grandfathered? In days gone by, this is literally true, many jurisdictions up and down the West Coast, Hawaii was no different, et cetera. People would say, well, if it was such and such so many years ago, and it's been like this since I bought it, then they think it's what they call grandfathered. And indeed, things used to be like that in some situations. What's actually happened is I tell people, grandpa has passed away. He's no longer around. And what that's all about is at the end of 2017, the city in County Honolulu basically said, nah, we're not doing any more grandpas. Yeah. Oh, if you have something that was done 10, 12 years ago or 20 years ago, it was never permitted, then you have to do what's called an after-the-fact permit. Because your lender now, or the buyer, wants the property, the unit, permitted in order to secure the loan. So then they go, well, how do we do it when it was done 20 years ago? Well, the answer is you have to bring everything up to today's code as if you're doing the entire remodel today. And that all has to be reflected on the drawings that are prepared and submitted. So when I work with my architect, we together review the project. We review what needs to get added to the drawings. And together we work out what needs to go in and be submitted for the building department so they can approve it. If someone went through the proper permitting process 15 years ago, and codes have changed, but they did it properly, they are not required to bring it up to the current code if they did it per code 15 years ago. That is correct. Correct. So in a weird way, that could be considered grandfathered. But it's not. It just says it was approved at the time the work was performed and the drawing submitted and it was all approved and signed off and inspected and it's approved. So that stays approved as long as the house is there. Right. Well, I want to talk a little bit in the second half or I'm not going to talk about it. You're going to talk about what folks can do to either go into a project the correct way, how that will help them in the long run, and what they can do if they do have unpermitted work and they're wanting to retroactively go back and not retroactively, but bring it up to code. One of the steps, how can they do that and any other fabulous information that you're going to be able to share with us. Very good. Thank you so much. All right. I think that I'm still on and we're still chatting for a couple of minutes. Hi, I'm Rusty Kamori, host of Beyond the Lines. I was the head coach for the Punahou Boys Varsity Tennis Team for 22 years, and we're fortunate to win 22 consecutive state championships. This show is based on my book, which is also titled Beyond the Lines, and it's about leadership, creating a superior culture of excellence, achieving and sustaining success, and finding greatness. If you're a student, parent, sports or business person, and want to improve your life and the lives of people around you, tune in and join me on Mondays at 11 AM as we go Beyond the Lines on Think Kauai. Aloha. Aloha. I'm Keisha King, host of At the Crossroads, where we have conversations that are real and relevant. We have spoken with community leaders from right here locally in Hawaii and all around the world. Won't you join us on thinktechhawaii.com or on YouTube on the Think Tech Hawaii channel? Our conversations are real, relevant, and lots of fun. I'll see you at the Crossroads. Aloha. Thank you and welcome back. We're here with Randy Traeger with Traeger Designs, and we're going to continue talking about some ways to protect yourself by getting your property properly permitted or dealing with it after the fact. Randy, I know you did bring some great visuals, and there was one in particular that we were going to look at that might be able to help explain. Sure. We have a visual that shows something that looks like an architect drawing with some notes around it, and the reason I wanted to show that is there's three things. Well, that's a good one, too, but I think it's the one before that. That's it. This is an apartment. This is a live real apartment in Waikiki, and viewers may not be able to see it on their screen, but we got three blue arrows and a red arrow. And each one points to something that's not correct in this apartment. And what happened was somebody made a complaint, a neighbor in this case, required a building inspector to come. The building inspector, familiar with the building, because he's out there all the time, and so he saw these three things that are not correct because the first thing that was there, one of the yellow was a access door where the key block was installed in a place that it wasn't supposed to be installed. There was a new bathroom for a kitchenette, vanity, and refrigerator, countertop, and lights, and things like that. Like a little mini kitchen that they made? In a bedroom. In a bedroom? Oh, interesting. Like a little Ohana bedroom or something. Yeah. And then there was a divider installed by the original contractor who built the building, but it was never on the original architect plans approved. And then so the inspector said, hey, he issued a notice of violation, said you have to correct these. And the owner, after digging into it for a while with them, they decided it was more cost-effective for them to simply remove the non-permitted items and put it back to its original condition prior to anyone making any changes to the apartment. So that's one of the options available to a person. However, if they redid the entire kitchen, like you suggested, that option is not available. And so now they have to put in a set of plans and apply for a building permit to remodel the kitchen from what it was originally to what it is today under all the new building codes, electric codes, plumbing, mechanical, everything. And then even if they bought the building unit that way and it was done by a prior owner, the current owner is the one that gets to bear all the costs to do all this work. Wow, that's something to think about. If you do sign off and pay cash and purchase something that's unpermitted, you really have to think. I mean, that's something to really consider. Oh, yeah, yeah. And the key term you just said was pay cash. Because you get around having the lender have to sign off on the unpermitted. Exactly. And we have a number of people who come from different parts of the world. They have the cash to buy, write a check literally to buy an appondo. And it's just recently remodeled. But it was never permitted. And so sometimes the contractors don't do things as they should. And sometimes they even create hazardous situations that people aren't even aware of. But the cost to get it corrected is sometimes a lot more pricey than what they might be willing to have. So having to address a non-permitted situation is just as simple as a neighbor reporting a neighbor. And once it's brought to the inspector's attention, you have to address it then. Yes, yes. You get an actual notice of violation from the department. That's just mind-boggling. And the notice will list the name of the actual property owner, unit owner. And if it's managed by a property management company, then they will be listed on there as the agent representing the owner. And they have 30 days to submit a building permit to handle all the change, things that need to be corrected. 30 days. Oh my god. No. The inspectors know they're not possible to get a permit in 30 days. But they do anticipate to see positive efforts made to do that. And there is a mechanism that I use to show the inspector that, yes, we are making positive steps to secure a building permit for that, those changes. But then also, the owner has the option of taking it all out and putting it back the way it originally was. And have you seen that done very often? Only in cases where it's not very costly. OK. So if it's less expensive to put it back to its original than to bring it up to code and money's a factor, that might be a reason that they do that. Yeah, you're talking $30,000 to $50,000 to at least the work would cost $30,000 to $50,000. And we would have to supply a contractor to handle whatever is missing to bring it up to today's code. And that could be 10, 12. The biggest problem is the electrical panel is in the wrong spot. What are I'm going to ask this on behalf of all my HOA and AOAO friends out there and board members who are hopefully watching. What can associations do to alleviate owners from going in and doing these unpermitted renovations? What kind of things can they put in place? I know sometimes they say they're in place, but they're really not in place. Well, diligence as paying attention to detail and diligence is always the best. That's what it's really all about. So management companies tend to have an internal policy that they give to the associations that actually run the building. The rules, and they typically include, all tenants have to get a building permit to do renovations all versions. Now it's up to the association or maybe the building manager to turn it into a reality. And so historically, they tend to have not done that over the years as efficiently or expeditiously as they could have. And so that's how a lot of people have problems today. I'm starting to see in a few of the buildings that we manage. And it comes from the resident manager, really. I mean, the minute they see someone on site, they're out there asking, what are you doing? And then they have a whole litany of insurance information that the contractor has to provide, building permits, which is great. Yeah, some of the buildings are very proactive on their building management are very proactive and they just simply don't allow it. The biggest thing is, all contractors have to talk to the building manager in order to schedule elevators. Right. You cannot get anything up or out of these buildings without an elevator. And then also, if you're doing any plumbing work, you must turn off the water for that stack. And that's, again, organized through the building manager or maintenance manager or such. Right. But it's through the management of the building that that actually gets done. So they know every unit that's got something happening. They know. So it's how they internalize their own policy. So for our board members out there that are working with associations, and a lot of the boards are really involved with having things done properly or wanting things done properly and helping to ensure that those things are put into place, really working and communicating with their resident managers about what the expectations are, putting these type of things in place if they see folks requesting to have the water turned off. You might want to ask why. What's going on in that unit? Oh, they know why. No, no, they know exactly why they're doing that. Yeah. So because you can't park a truck on the property without getting permission. And so that's really what triggers it. I need to park my truck. I got a crew coming in. I got two trucks. I have stuff to dispose of. They have to carry it up and down the elevator. The building manager knows every unit that's got work going on it just because he has to coordinate with the building, the elevators, the water and trash removal and stuff like that. What kind of things can a company like yours or others like yours provide? What type of services can you provide when someone comes to you? Let's just say they're coming to you with an issue that they have to get it permitted. The work's already happened. What type of help do you provide? Well, the first step is to physically go see and do an inspection and basically write up what we would call a scope of work for the contractor. Then we use that information, compare it to the original layout of the property or the unit, and see how it's changed. Then based on those two steps, then we can prepare information for the homeowner or the property owner to make a decision on it if he wants to move forward with it or not. But it can be involved and it can be extended. It also sounds like because of your experience, you might be able to, I don't want to say make things happen faster, but avoid maybe some of the pitfalls that they may run into if they attempt to do it by themselves or just with the contractor. First of all, you cannot submit plans for a condo remit model unless it's signed and stamped by an architect, period. So there's no such thing as owner builder. That's done, that's done. Ever? Not in the condo. In this county? Well, as far as Honolulu County and City and County is concerned now. And not counting single family, that might be different. Single family is a little different. But the same thing is true for townhouses. They cannot get an owner builder permit. They used to, but so many things went wrong. They just don't do it anymore. That's why it got converted to commercial, taken away from residential. It's now hands of commercial and they just simply say, nah, because it's actually a statute in the state under HAR 464 that states specifically that it has to be signed by an engineer or architect or both depending on the condition situation. So in some jobs I have an architect, he signs off on everything. He reviews, signs, and stamps the drawings. Then sometimes I have an electrical engineer that needs to do the same thing. And so they do their particular drawing, sign and stamp it. Once that all goes in, then it's amazing how fast it can actually go through the system. Now it might take two months at work or three months work to prepare all those drawings. But once they're done and they can turn in, if they're complete, then they can get through the system pretty fast. Once the work gets started, let's use another example. Let's say we're starting from scratch. We haven't done a bit of renovating. Yay. And yay, right? Yay. A lot easier. And they come to you and, hey, I don't have the first clue, and we want your expertise. And you move forward. I'm just kind of curious about that process. Keeping in mind we only have about a minute and a half left. And also kind of, I think you mentioned before, certain steps, certain like the electrical plumbing, I may be getting this backwards. Yeah. All good. The best, it's the same process. The only thing that's added is now you have to do the design. Otherwise everything's the same. Oh, it's the same, all right. Yeah, everything's the same. You just now have to add the design work and do, okay, how do you want to change it? Yeah. Once you get all that figured out, then you can follow through with all the permit requirements of those drawings. And which branch goes out first? Is it plumber, the plumbing inspector goes out first? No, everything gets done all at once. All at once. Oh, okay. This is, the contractor schedules his inspections based on the kind of work that's done and et cetera. So they do that, the contractors do that. I just want to thank you so much for coming out and sharing all of your great information with us. I'm sure we didn't even touch the top of the knowledge that you have, but I appreciate it very much. And thank you all for being here with us at Condo Insider. I want to say a special shout out to our wonderful audience member, Margaret, who is a faithful watcher. And we hope to see you in the new year and have happy holidays. Aloha.