Sue’s News: Latest Santa Barbara Real Estate Market Update

Association of Realtors Sues City of Santa Barbara over Mandatory Interior Zoning Inspections
By Sue Irwin, Realtor, Berkshire Hathaway HomeServices
Several weeks ago the Santa Barbara Association of Realtors filed suit against the City of Santa Barbara to stop mandatory interior zoning inspections whenever a house goes on the market. The law suit was filed after many years of the Realtor Association trying to negotiate with the City to remedy some of the problems faced by the public with respect to the zoning inspection mandate.

Santa Barbara is one of only about a dozen municipalities in the state of California that requires such searches be done by the City when someone wants to sell their home. My understanding is that the lawsuit is based on interior zoning inspections being an invasion of privacy and singles out people who are trying to sell their homes. (See links at end of this article).

The intent of the city regulation was, years back when it went into effect, to make sure there were not willy-nilly additions and conversions done to properties without permits, particularly illegal and potentially unsafe living spaces such as room additions or converting garages to rental space. Over the years, the zoning inspection process has become more complex and expensive ($475 per inspection now), and some big problems have arisen. The costs and time and hassle to work with the City and contractors to remedy zoning violations has become prohibitively expensive to many homeowners, and it seems that the zoning reports have gotten more and more detailed, sometimes having very little to do with safety or creating unpermitted habitable space (i.e. I recently saw a wine cooler called out as not being permitted).

Most likely, City employees are doing their jobs as best they can, for the good of the public, but the system has evolved and is now causing a lot of problems that could, I believe, be handled in a different way. Other communities have found ways to protect buyers but not require interior inspections. They require that zoning information be provided to buyers by having the seller pay for the city’s record of what the property is permitted to have on site. (In Ventura, this is under $100). That way a buyer will know if something at the property is not permitted, and can decide for themselves if they want to purchase the property and take on the risk of having to remedy it should there be a neighbor complaint or if the buyer might want to get permits in the future (at which time unpermitted items might have to be rectified). In that system, the safety of unpermitted structural changes is checked by the professional home inspector (usually a contractor) who is hired by the buyer to check the structure’s condition and integrity.

I personally feel that this is adequate protection for buyers without unduly burdening sellers, who are also required by law to disclose anything changes they have made to their home without permits. The buyer has the information they need to decide whether or not they want to proceed with the sale.

While Santa Barbara’s intent may be to keep up neighborhood integrity and make sure buildings are safe — something we all can agree is a good thing — there are several problems that are incredible frustrating and sometimes unworkable under current zoning inspection regulations.

The most problematic issue revolves around changes that were made before the current owner purchased the property but that were not noted on previous city zoning inspections; these come as a surprise to an unsuspecting seller and can cost tens of thousands of dollars. For example, if someone purchased a property in 1997 and the zoning report did not mention an unpermitted garage conversion that was there at the time, the homeowner bought the property thinking everything was OK. Then when they go to sell their home, a new zoning inspection report can bring up that item for the first time and require that the violation be remedied. The seller, who relied on City-provided information when they purchased the property, now has the burden of time and energy and costs to fix the unpermitted item before they can sell their home (and not just making it safe, but bringing the item up to current building codes). Or a seller can try to negotiate with their buyer to credit them an estimated amount for fixing the problem after the sale is completed. They buyer has no idea how long it will take, how much it is really going to cost, and how much hassle it will be going through the process with the building department. There is no way to know ahead of time.

The City’s refusal to honor their past inspection reports has cost home sellers incalculable amounts of money in credits to their buyers and in repairs. It is usually not possible to fix something during the escrow period, since it takes a while to getpermits through the city for the violations to be corrected and then another length of time to get work done. I have had a seller credit $40,000 to a buyer for something that was not on a previous zoning report, so we aren’t talking chump change. Some people also worry that they could never sell their home at all because they could not afford to deal with a problem that they are aware of. Some even choose to foreclose rather than deal with the issues.

Sometimes City records or old plans have been lost, so there is no way to prove that a room or other part of a home was original or not. Once I just happened to come upon plans that a neighbor had for an original subdivision, proving that the home I listed next door had indeed been a 4-bedroom home rather than a 3-bedroom home that was on city records. The City no longer had the plans. I’m not making this stuff up!

Recent changes allowing from-the-sidewalk exterior zoning reports have only made matters more difficult for sellers and buyers. If a seller does not want an interior inspection, they need to still pay for the city to provide a report, which has a bold, red,all-caps notice at the top stating that the seller “refused” to have the inspection, which makes the seller seem suspect. Some buyers may not care, or they can decide not to purchase a property if that makes them feel uncomfortable.

Hopefully this comes to a win-win resolution that keeps Santa Barbara homes safe and preserves the integrity of neighborhoods without costing sellers a fortune and without criminalizing sellers and scaring buyers.

Here are a few links of news reports about the suit:
KEYT: Santa Barbara Association of REALTORS filing suit against ZIR’s WND: California City Asserts right to search residence without warrant
Santa Barbara News Press: Realtors Challenge city inspection ordinance
Santa Barbara Independent: SB REALTORS Sue City Over Property Inspections

CORRECTION TO THE LAST SUE’S NEWS (on proposed income tax reforms):
I mistakenly said that the average homeowner in the U.S. would pay approximately $815 more in property tax, but that should have been income tax. My apologies. Later I saw information from the California Association of Realtors that estimatedthe income tax increase would be more like $3,000 on average for California homeowners.


— Sue