[WSBARP] RCW 18.27 Contractor Registration - Flipping Properties - L&I Enforcement

Tue Mar 24 07:47:36 PDT 2015

Rob

I have clients who have been caught in this, but like most things L&I, enforcement is very selective.  If House Bill 1749 passes this legislative session, rehabbers won’t have to be contractors so long as they hire a qualified general.  Here’s to hoping…

Scott Hildebrand

Attorney at Law

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Rob Rowley
Sent: Monday, March 23, 2015 3:30 PM
To: WSBA RPPT; wsbapt at lists.wsbarppt.com
Subject: [WSBARP] RCW 18.27 Contractor Registration - Flipping Properties - L&I Enforcement

Good afternoon,

Anyone had any experience with enforcement action by L&I seeking to force individuals who are buying and flipping properties to be registered contractors under RCW 18.27?  I'm exceedingly familiar with RCW 18.27 and the effect upon individuals who are in the process of buying, rehabbing and reselling residential properties within one year of purchase.  

What triggered this inquiry is that I'm looking at a notice of infraction from L&I in which they indicate that the particular investor had violated RCW 18.27.200(1)(a) by advertising for sale a property that they had rehabbed and listed for sale within one year. (RCW 18.27.010(1))  Apparently the L&I inspector had got caught wind of the pending sale and issued a notice of infraction for $1000. 

It is my observation that real estate investors will generally purchase properties to be rehabilitated inside of an LLC and one or more members of the purchasing LLC will be a licensed contractor.  The licensed contractor who is a member of the purchasing LLC then obtains the appropriate permitting from the local municipality for the repairs. The property is then sold from within the purchasing LLC.

In particular, this particular L&I inspector is taking the position that this conduct is a violation of the Act in that an LLC is an improper entity for holding the property, and that the property should be held within a partnership or joint venture as set forth in below RCW 18.27.065.  Put another way, had the same fact pattern occurred where the purchasing entity was a partnership or joint venture then no violation in the eyes of L&I.  However, because the purchase had occurred within an LLC where one of the members was an general contractor this is a violation worthy of a notice of infraction.

It appears to me that that particular L&I inspector cannot backup this position with anything substantive.  Any thoughts on the subject?

Thank you.

RCW 18.27.010 (1) "Contractor" includes any person, firm, corporation, or other entity who or which, in the pursuit of an independent business undertakes to, or offers to undertake, or submits a bid to, construct, alter, repair, add to, subtract from, improve, develop, move, wreck, or demolish any building, highway, road, railroad, excavation or other structure, project, development, or improvement attached to real estate or to do any part thereof including the installation of carpeting or other floor covering, the erection of scaffolding or other structures or works in connection therewith, the installation or repair of roofing or siding, performing tree removal services, or cabinet or similar installation; or, who, to do similar work upon his or her own property, employs members of more than one trade upon a single job or project or under a single building permit except as otherwise provided in this chapter. "Contractor" also includes a consultant acting as a general contractor. "Contractor" also includes any person, firm, corporation, or other entity covered by this subsection, whether or not registered as required under this chapter or who are otherwise required to be registered or licensed by law, who offer to sell their property without occupying or using the structures, projects, developments, or improvements for more than one year from the date the structure, project, development, or improvement was substantially completed or abandoned.

RCW 18.27.065

Partnership or joint venture deemed registered, when.

A partnership or joint venture shall be deemed registered under this chapter if any one of the general partners or venturers whose name appears in the name under which the partnership or venture does business is registered.

[1983 1st ex.s. c 2 § 16.]

Robert R. Rowley | Attorney at Law

505 W. Riverside Ave, Suite 500

Spokane, WA  99201

Telephone: (509) 252-5074

Mobile: (509) 994-1143

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