Residential Rental Inspection Programs: New Authority and Limitations

Residential rental registration, inspection, and licensing programs are employed by local governments to ensure that residential rental properties are maintained in a safe and decent condition.  Such programs range in scope from comprehensive inspection and certification of every rental unit prior to occupancy by a tenant, to programs that focus only on properties with a history of problems, to spot-check systems that inspect a randomly-selected portion of the total number of rental units in a community. Several North Carolina local governments have enacted variations of these programs pursuant to their authority to perform periodic building inspections for unlawful or hazardous conditions (G.S. 160A-424 (cities) and G.S. 153A-364 (counties)) and to regulate and license businesses (G.S. 160A-194 (cities) and G.S. 153A-134 (counties)). Inspection standards are typically taken from building codes, minimum housing codes, and the statutory requirements for providing fit premises to tenants under G.S. 42-42. S.L. 2011-281 clarifies and limits local government authority to conduct residential rental inspection programs. This post evaluates the new rules for residential rental inspection programs and explores local government authority in the wake of this new law.

Perhaps the most significant change under the new law is that it establishes a statutory regime of graduated enforcement mechanisms to be applied to problem residential properties. An overview of the three available regulatory mechanisms and the events that trigger them are illustrated below: Table 1: Permitted Residential Enforcement Mechanisms in Response to Code Violations

 Table 1 above captures the essence of the graduated mechanisms available under S.L. 2011-281, but it obscures some of the nuance that is illustrated in Table 2 below. Further explanation follows. Table 2

Several general points should also be made. Change in law affects inspections of residential structures, not commercial structures Under prior law, local government inspection departments were authorized under G.S. 160A-424 and G.S. 153A-364 to conduct “periodic” (or regular interval) inspections of all structures, residential or commercial. Additionally, inspection departments were authorized to conduct other “necessary” (or ad hoc) inspections when unsafe conditions were believed to exist in a particular building. Revised G.S. 160A-424(a) and G.S. 153A-364(a) retain this general inspection authority for all structures, but they clarify when inspections of residential buildings may be conducted. Specifically, inspections are now permitted only when there is “reasonable cause,” as defined, to believe that unsafe conditions exist in a residential building. Commercial buildings do not receive this special statutory protection and therefore local governments may continue to inspect commercial structures as they did under prior law. Duration of the inspection program and periodicity of inspections are not defined Under the new law, G.S. 160A-424(a) (cities) and G.S. 153A-364(a) (counties) describe specific conditions that must exist before a residential property can be inspected. Once those conditions are met, the troubled residential property may be subjected to “periodic” inspections. As explained in the preceding paragraph, the term “periodic” encompasses all types of inspections and is not further defined, so presumably the governing board has discretion to set the periodicity or interval of inspections—essentially placing the property into a program of “periodic” inspections. Additionally, no guidance is provided as to when a troubled property must be released from the periodic inspection program, so it is reasonable to conclude that the governing board may also determine under what conditions a property will be released from the inspection program (e.g., no further violations over a 24-month probationary period).  Scope of application varies: specific rental units in a rental property, the entire rental property, or all properties owned by a landlord? As illustrated in Table 2 above, the scope of application under the new law varies according to the triggering event and the regulatory mechanism that is employed. For example, the new law uses three different terms—“rental unit,”  “property,” and “landlord”—as the units of analysis for triggering events, and therefore presumably makes a distinction between, say, a single unit on a multi-unit property and the property as a whole. For example, under the new law, when a landlord has a history of more than two code violations in a 12-month period, G.S. 160A-424(a) (cities) and G.S. 153A-364(a) (counties) appear to authorize periodic inspections of all of the landlord’s properties within the territorial jurisdiction, but no fee may be levied. However, under G.S. 160A-424(d) (cities) and G.S. 153A-364(d), when a specific rental unit has more than two code violations in the previous 12-month period, that unit—not the entire property—may be placed into a registration program and a fee may be levied.  Furthermore, , when a unit has more than three code violations in a 12-month period, a county under G.S. 153A-364(c) can prohibit that rental unit from being rented until a permit is obtained. A city’s authority under G.S. 160A-424(c) is slightly greater in that it can impose a permit requirement on all units of an entire property when that property experiences more than three violations. These are subtle but important distinctions. Discrimination not permitted between housing types When a local government implements a residential inspection program under new G.S. 160A-424(a) and G.S. 153A-364(a), it is not permitted to discriminate between single-family and multi-family buildings. New authority to conduct periodic inspections within defined geographic areas New G.S. 160A-424(b) and G.S. 153A-364(b) authorize local governments to require periodic inspections within defined geographic areas that are designated by the governing board. A process for defining the geographic area is established, to include notice, a public hearing, and a requirement to establish a plan “to address the ability of low-income residential property owners to comply with minimum housing code standards.” No discrimination is permitted in the selection of areas or housing types to be targeted. The reference to discrimination between housing types, taking its ordinary meaning, can reasonably be assumed to refer to single-family versus multi-family buildings as described in the preceding paragraph. Discrimination in the selection of areas is presumably a reference to equal protection concerns and a reminder to local governments to avoid actions that could result in a disparate impact on protected classes under equal protection analysis. Inspection programs that are not affected by the new law As previously noted, commercial building inspection programs are essentially unaffected by the new legislation. Additionally, the legislation pertains only to inspections conducted by city or county inspection departments, so inspections conducted by other entities, such as public housing authorities or state agencies, are not covered by this statute. UPDATE: This legislation is the subject of a Community and Economic Development bulletin published by the School of Government in November 2011. The bulletin can be downloaded at no charge here.