SEATTLE RENTAL HOUSING INSPECTION ORDINANCE WILL CHANGE LIFE FOR LANDLORDS

At a recent investor meeting I was asked about the recent Seattle rental housing inspection ordinance. This was a good question because for Seattle landlords of all types, life will not be the same after the ordinance takes full effect. The ordinance which was adopted October 9, 2012 replaces the existing Seattle business license requirement for landlords with a registration and inspection program. Each rental unit, from a mother in law unit in a home to a two hundred or more unit apartment building, must be registered with the city, and inspected on average once every ten years. Registration fees will be collected by the city from all landlords to pay for the bureaucracy necessary to handle the registration system. The city is developing rules to specify the amounts of the fees. Inspections are to be performed by privately contracted inspectors who have credentials that meet the city’s standards. These inspectors will be known as Qualified Residential Housing Inspectors. There are some exemptions from the inspection requirement, such as units that are inspected by government pursuant to housing subsidies or by lenders, vacation home rentals and hotels or school dormitories.

The registrations are good for five years and certificates of compliance issued after successful inspections are also good for five years unless a violation is found in the unit later. The program phases in. The registration requirement begins January 1, 2014. Ten unit and above buildings must all be registered by July 1, 2014. Five to nine unit buildings must be registered by January 1, 2015. The remainder must be registered by December 31, 2016. Newly constructed units after January 1, 2014 must be registered within one year after a certificate of occupancy is issued. If a unit is sold the new owner has sixty days from closing to pay a transfer fee to the city and change the registration record.

Applications for registration shall contain the owner’s declaration that the unit meets the standards in the ordinance and state whether that declaration is on the basis of an inspection by a Qualified Residential Housing Inspector, or not. The city will randomly select units for inspection and also it will inspect after receiving a complaint. If a violation is found after a complaint has been received, all other units owned by that landlord at the same location may be inspected as well. The city will audit certificates of compliance for collusion between inspectors and landlords and may send its own governmental inspectors into units for this purpose. Any collusion will result in enforcement action against both the landlord and the inspector.

The standards the inspectors will use are quite broad: minimum floor area for habitable rooms, minimum sanitation, minimum sheltering, minimum maintenance, minimum heating and ventilation, minimum electrical, minimum emergency escape window and door, requirements for garbage removal, extermination of pests, required keys and locks and smoke detectors. Civil penalties for violating the standards are steep: $150 per day for the first ten days of a violation and $500 per day for each subsequent day. A false application or certificate of compliance will generate an additional penalty of $5,000 and failure to register a unit carries a penalty of $1,000.

In 2007 a somewhat similar ordinance by the City of Pasco was challenged in court by both landlords and tenants as a violation of the Fourth Amendment. The state Supreme Court upheld the ordinance on the basis that no state action was involved in the inspections because the landlords were pursuing their private interests to maintain their business licenses (required by the ordinance) by hiring private inspectors who did not provide their reports to the city. The Seattle ordinance differs in a way that may cause the court to think about this issue if there is a challenge because the Seattle enforcers can directly inspect units in the course of auditing compliance certificates issued by the private inspectors.

Based on a 2008 city study there were approximately 140,000 rental units in the city, of which about 20,000 were subsidized housing. Probably the numbers are larger today. So there will be at least 12,000 rental unit inspections per year once all units are registered, and all of these will be paid for by landlords in addition to the payment of the registration fees every five years. The ordinance stated that it had “no fiscal impact because fees will be collected to cover the cost to the city.” Fiscal impact depends on whose ox is being gored. It looks like being a Qualified Residential Housing Inspector is a growth occupation in Seattle.

The preceding is intended to be educational and should not be considered legal advice.

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