By Jeffrey S. Lapin, CPM, ARM, DREI
Owners of rental properties (commercial and residential) often purchase these properties years or even decades after the structures were first built and permitted by local building departments. That means that frequently, depending on how old the structures on the property are, certain elements of the property will not meet current building codes or standards. Methods, materials, uses and what is acceptable and safe in residential and commercial construction are changing all the time. In other words, some elements of the property do not comply today with current code, law or standards because of their age.
The term of art used in the industry for property elements that do not meet current codes, but may be allowed to continue to exist is “grandfathered”. The technical term for such improvements is “non-conforming.” But most in the industry simply use the term grandfathered to refer to such non-conforming elements. Grandfathered is a legal provision that sometimes allows certain existing conditions or uses of a property to continue, even if new regulations or laws are enacted that would otherwise prohibit such conditions or uses.
Most property owners and property managers have heard this term and many believe that they understand what it means. In this article, I will discuss the concept of grandfathered property elements, what the term means in practical use and perhaps most importantly, some exceptions to the ability of property owners to leave such elements unmodified, even if a condition has existed since the property was originally built and approved and no significant modifications have ever been performed to that component.
Examples of Non-conforming Elements
The existence of non-conforming property components is very common. They can include zoning violations such as a structure that is used as residential but the current zoning is commercial. It can also include a structure that is built closer to the road than current setbacks allow, a structure that is encroaching on neighboring property lines or a property element such as a set of stairs that do not meet current building codes.
It is often the case that the property owner is unaware of the non-conforming condition. Most property owners and property managers are not building code experts (but should be safety experts) and comparatively few have a survey or Property Condition Assessment (PCA) conducted before purchasing the property in order to determine from experts whether there are any pre-existing violations, encroachments or other issues that the owner should be aware of before purchasing the property (which is highly recommended).
The reality is, that in most areas of the U.S., meaningful inspections by the authority having jurisdiction (city Building and Safety Department, etc.) after the original construction is permitted are rare, absent significant renovations or modifications of the property requiring building permits or complaints from residents. It is also true that often, these non-conforming uses and property components exist in their original configuration during the entire life of the structures with no issues, especially if no one is injured by the condition either financially or otherwise.
In many areas, local building and zoning codes are interpreted such that, if the owner performs significant alterations or modifications to the property, an element that is considered a non-conforming use may be required to be brought up to current codes and standards. Most owners know this or will be informed of it by a contractor, architect or other professional such as the plan checker at the city or county in which the property is located.
When a non-conforming use is “grandfathered” but not Safe
There are instances however, in which an element of the property that has existed, relatively untouched since the original construction of the structure and which the owner may believe is “grandfathered”, is demonstrably not safe for use by tenants, visitors, staff or other members of the public even if that element is not being substantially modified. In such cases, the owner may not rely on the concept of grandfathering for failing to modify the unsafe feature, especially if someone is injured by that element.
Frequently, codes and standards that existed 30, 40 or 50 years ago, which allowed certain construction methods or materials, or did not even exist at that time, were substantially different than what is allowed today. The construction industry has evolved as newer, safer and more efficient methods have been developed. Grandfathering of those non-conforming elements will depend on specific conditions being met including safety and the continuous use of the property in a particular manner or adherence to previous building codes.
In other words, a non-conforming use such as a stairway that met the codes and standards when it was constructed, but would not meet today’s codes or standards, usually due to better and safer design and materials, may or may not be grandfathered depending on multiple variables, including safety.
Rental property owners and managers are or should be very concerned about keeping their properties safe. The aforementioned stairway, built 50 years ago when there were likely no specific building codes, may not be safe to use now because it is too narrow, has stair riser heights or stair tread depths that are inconsistent or has improper, unsafe or non-existent railings. Such stairways are very common in older residential properties. In many areas, there were no building codes relative to stairway construction until the 1970’s or later. Nevertheless, this is not a safe condition and cannot be allowed to continue to exist.
Rental property owners and managers are required by the national standard of care and/or local ordinance to put and keep their properties in a reasonably safe condition at all times to protect the health and safety of the public. This is the national standard of care recognized by courts and taught by real estate or property management organizations such as IREM® in its maintenance course (MNT 402 – Managing Maintenance Operations and Property Risk).
Sticking with our exemplar, 50-year-old stairway, if the stairway, which is required for ingress and egress to upper floor rental units is not reasonably safe (the recognized standard of care), as determined by a safety audit or inspection by a qualified party, or has actually injured people through normal use, that stairway cannot remain unrepaired. It does not meet the standard of being reasonably safe regardless of the grandfathering concept.
Courts usually apply what is known as the Reasonable Person theory when determining whether a rental property owner or manager acted in a way that can be seen by the jury as rational or justifiable. In short, this means that such an owner or manager is expected to act in a manner consistent with what a reasonably trained, knowledgeable and careful owner or manager would when acting carefully under the same circumstances. (The standard of care is discussed in detail in my other articles).
Therefore, if an owner or manager knew, should have known or had reason to know of an unsafe condition on a property, such as the aforementioned dangerous, non-conforming stairway, and fails to act swiftly to warn the public of the unsafe condition, reasonably prevent injuries and have the unsafe conditions remedied in a reasonable period of time, that owner and/or property manager may be found guilty of negligence if someone is injured on the unsafe stairs.
The property owner and/or manager should not use as a defense, that the unsafe stairway was not addressed because a) these parties did not know of the unsafe condition or b) the stairway was approved when the property was originally permitted and has not been modified since the original construction. In other words, simply stating that you did not know or that the stairway was grandfathered and therefore did not need to modified to be made reasonably safe will likely not absolve the property owner of liability if the court finds that the stairway was unreasonably dangerous and that the owner knew or should have known about it and fixed it.
How Does the Owner or Property Manager Become Aware and Act?
It has been my experience as a rental property owner, professional property manager and expert witness, that very often, an unsafe condition such as our non-conforming stairway, goes undetected until someone is injured. This is contrary to being a proactive and careful property owner or manager and should not occur. Inspections or surveys are necessary in order to find and fix unsafe property elements.
How should such conditions be found and corrected in order to put and keep the property in a reasonably safe condition? If the property is under contract to purchase and the buyer has the opportunity to perform “Due diligence” (the buyer’s investigation of the property before moving forward with the purchase), it is wise to have a property safety audit done by a qualified professional engineer, architect, inspector, etc. who is knowledgeable and then act on the findings. These reports, known as Property Condition Assessments or PCA’s, are standard practice when performing due diligence or lender underwriting and usually follow a specific standard issued by ASTM (formerly known as the American Society for Testing and Materials).
Such audits or professional investigations can and should be performed at any time that a hazardous condition exists or is suspected of course, not just when the property is first acquired. Lender’s inspections, usually conducted annually by a mortgagee, will usually not include a detailed examination of all property elements for safety issues and are therefore not a reasonable substitute for a professional safety inspection. The same holds true for REAC-type inspections of properties with government financing and/or Section 8 tenants. These inspections will usually not call out unsafe, non-conforming elements and passage of such inspections is not evidence of safety.
If an unsafe element is found during such an inspection or audit, or if someone is injured as a result of the hazard, the owner must be made aware of the condition (and injuries) and steps must be taken immediately in order to warn the public and remedy the condition. Failure to act reasonably to try and prevent injuries or other injuries can and often do result in a finding of negligence or gross negligence against the property owner.
In addition to professional safety inspections, careful and responsible property owners and managers should perform frequent, documented inspections and act responsibly on the results of such inspections. Proper inspections using a customized checklist for the property, acting reasonably upon the results of such inspections and making safety the number one priority are the cornerstone of any good property maintenance program. In the IREM® Maintenance course, we teach property owners and managers how to conduct such inspections and what to do with the results.
Is grandfathering ever a reason to defer improvements?
The short answer is a qualified “Yes”. There is little or nothing that exists in local codes, standards or legislation that specifically uses the term “grandfathered” or explicitly allows a rental property owner to defer certain types of property improvements. If the property met codes and standards when originally permitted, it is generally understood in our industry that if a non-conforming property element which has not been substantially modified is safe, it can usually remain as-is. Local laws can, of course, take precedence over the grandfathering concept. If in doubt, owners and managers of rental properties should do further investigation.
In the case of our exemplar stairway, if it was demonstrably safe as it was originally constructed, not substantially modified and then was maintained safely, it can be argued that the owner has met their obligations. But if the health or safety of the public is endangered by using the stairway as intended, grandfathering is not valid as a reason to fail to make it reasonably safe.
Usually, performing cosmetic-only improvements to a safe, but non-conforming property element without changing structure, configuration, emergency exiting routes and such will not trigger a requirement to bring that element up to current codes and standards. But be advised that local inspectors have a great deal of discretion with regard to these things and may require substantial modifications even if the element is reasonably safe. This is especially true with regard to modifications to access by disabled persons related to the Americans with Disabilities Act (ADA).
Once again, if the property owner or property manager is not sufficiently trained and experienced to recognize unsafe conditions during routine inspections (they should be), it is incumbent upon the owner to bring in a safety expert. A whole-of-property safety survey or PCA is a wise investment that may avoid injuries, higher insurance premiums, and adverse judgements.
Conclusion
Grandfathering is a reasonable and well used concept when applied properly. After all, rental property owners should not have to constantly bring their properties up to current code every time the code changes, which is often. Few owners would purchase rental properties if they were unable to reasonably project capital improvement costs out into the future.
Property owners and managers however, should be very careful when applying these concepts. As is always the case with safety, erring on the side of the well-being of the public is the wise practice. If a property element is not or does not seem reasonably safe, as determined by careful inspection and testing by the trained owner, property manager or staff, or by actual reports from tenants or others that the element is dangerous, that element should stop being used or warnings posted to protect users until a professional safety survey can occur as quickly as practicable and the element made reasonably safe in a reasonable period of time.
We should not rely on the concept of grandfathering in order to justify leaving a dangerous condition unrepaired, regardless of how long it has existed in that condition or whether anyone has been injured (yet). And certainly, once the owner or property manager has actual or constructive notice of someone being injured or nearly injured by that condition, the public must be warned appropriately, and the condition made reasonably safe.