All Forum Posts by: David Horowitz

I am currently renovating two out of four vacant units on my property, and one of the tenants in the occupied units (not being renovated) has sent over a formal complaint regarding the noise that it produced, stating that it disrupted their quiet enjoyment of their space.

They are also alleging that I have rendered their unit uninhabitable, and that they are owed additional payment for this.

The one area where I made a mistake is trusting my contractors regarding permits, I asked them repeatedly if they were necessary and was assured that they were not, but the tenant called code enforcement and they had a difference of opinion. I’m currently going through the permit process now. Booking this one as a very annoying lesson learned, it always needs permits, even if you don't think it does.

While I understand that the tenant is upset, I don’t think that they have much of a legal leg to stand on - no work was being done in their unit, and I don’t think that merits much penalty from me. The one thing I’m maybe liable for is that I have to cut the rent by 1/3 for the days that the workers were present, which is also what I think is fair.

Am I correct in that is all the legal liability I currently face? Lawyers I've talked to seem to think that there is also the potential for a bad faith claim which triples liability, and that I started work without permits represents liability.  

- This is in Alameda county.
- All work was done during normal hours and following county rules around noise levels and when construction can be done. 
- No communal spaces were affected during the renovation.
- The city inspector looked over the work and has said everything is up to code - so no issues there I just have to get the permits processed. 

I would love to hear from anyone who has been through something similar, or has has similarly frivolous legal issues. 

The specific part of HUD 4000.1 that caught my eye was the eligible properties section:

The Property must be an existing Property that has been completed for at least one year prior to the case number assignment date. If the Mortgagee is unsure whether the Property has been completed for at least one year, the Mortgagee must request a copy of the Certificate of Occupancy (CO) or equivalent.

A Property that is not eligible for a 203(b) Mortgage due to health and safety or security issues may be eligible under 203(k) if the rehabilitation or repair work performed will correct such issues.

A Property with an existing 203(k) Mortgage is not eligible to be refinanced until all repairs are completed and the case has been electronically closed out.

The following property types may be financed:

• a one- to four-unit Single Family Structure;

• an individual Condominium Unit, meeting the following requirements:
  • the unit must be located in an FHA-Approved Condominium Project and must comply with all other requirements for condominiums;
  •     rehabilitation or improvements are limited to the interior of the unit, except for the installation of firewalls in the attic for the unit;
  •     no more than five units per Condominium Association, or 25 percent of the total number of units, whichever is less, can undergo rehabilitation at any time; and
  •     after rehabilitation is complete, the unit is located in a Structure containing no more than four units. For townhouse style condominiums, each townhouse is considered as one Structure, provided each unit is separated by a one and one-half hour firewall from foundation to roof;
• a Site Condominium unit;
• Manufactured Housing where the rehabilitation does not affect the structural components of the Structure thatwere designed and constructed in conformance with the Federal Manufactured Home Construction and Safety Standards and must comply with all other requirements for Manufactured Housing;
• a Mixed Use Property with one- to four-residential units, provided:
  • 51 percent of the Gross Building Area (GBA) is for residential use; and
  • commercial use will not affect the health and safety of the occupants of the residential Property; and
• a HUD Real Estate Owned (REO) Property:
  • the Property is identified as eligible for 203(k) financing as evidenced in the sales contract or addendum. Investor purchases of HUD REO Properties are not eligible for 203(k) financing.

Hi Everyone!

I've been doing some research, and landed on a question that I don't know the answer to. It is clear that an FHA 203(k) loan can be used to purchase a mixed use property under the following conditions:

1. No more than 49% of the total floor space is devoted to commercial use
2. There are no more than 4 residential units

Following this logic, a building that had four residential units, and one commercial unit, would be able to be financed under FHA.

Can anyone here confirm or comment on this? Or ever seen it before? I realize it is a rather niche question.