Residential real estate laws could impact commercial ventures

Two policy aspects concerning residential real estate are also impacting commercial building in the Tri-Cities and statewide. The first is related to contractor registration and is covered under RCW 18.27. It requires all contractors to be registered prior to beginning work on a building.

It had the consequence of turning any home improvements, including work done by the owner or property developments, into contracting work, said Brian Lewis, a real estate attorney with K&L Gates Law Firm in Seattle. “In order to put an improvement on a property, RCW 18.27 says you must be a registered contractor,” Lewis said. “It adds development to a list of activities which require a contractor.”

Improvements can include standard home additions, such as a shed or renovated bathroom – work often done by the homeowner, who would now need a contracting registration. Any improvements over $1,000 require registration, as do projects lasting fewer than 12 months, both of which are changes. While the revisions are intended to protect consumers, they could have the effect of opening them up for trouble, Lewis said.

The law was changed in 2007 to protect homebuyers and to define them from home “flippers,” who buy a house only to renovate and sell it for a higher price. The issue is that RCW 18.27 was not intended to engage in the development of property by the owners. The intent of this was to give the consumer protection from ‘flippers.’

The issue is that the rules were not meant to deal with property development or for people planning to remain in a home for more than 12 months. According to RCW 18.27.114, any contractor working on a project for four or fewer residential units or structures above $1,000, or of a commercial building when the bid or contract price total $1,000-$60,000, must provide the customer with disclosure statements and registration.

The other recently incorporated rule on property is a seller disclosure statement, known in Washington as a Form 17, which is used on residential purchases to verify property condition during the sales process. It is a multiple-page document in which the seller is supposed to reveal all known information about the property. Problems arise for the Form 17 when an unimproved property with a nixed or residential zoning distinction is sold.

Typically, commercial real estate does not deal with the form. If no form is provided, the buyer can rescind in the deal up until closing until one is shown. The intent of the legislation there is that certain environmental conditions are not getting disclosed, and this would provide the same amount of disclosure for empty lots as for developed ones.

For residential home purchases, a completed Form 17 has been required since 1995.

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