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California State AuditorReport Number : 2015-134

Residential Building Records
The Cities of San Rafael, Novato, and Pasadena Need to Strengthen the Implementation of Their Resale Record Program



Summary

HIGHLIGHTS

Our audit concerning the administration of residential building record (resale record) programs by the cities of San Rafael, Novato, and Pasadena revealed the following:


Results in Brief

The cities of San Rafael, Novato, and Pasadena have each adopted a residential building record (resale record) ordinance that requires property owners who intend to sell their property to obtain a review of the city’s records of that property, including an inspection for health and safety concerns, before the sale or transfer.1 More specifically, the ordinances of San Rafael and Novato require that property owners of single‑family dwellings and multifamily dwellings obtain an inspection of the property from the city and that the city prepare a resale record report (report) and make it available to prospective buyers before the sale of the property. Pasadena’s ordinance requires that a property owner obtain a city inspection of the property and that the city issue a Certificate of Inspection (inspection certificate) before the property is transferred. If Pasadena identifies violations during the inspection, it issues a report to the property owner and follows up on corrections of the violations before issuing the inspection certificate. The reports for all three cities identify violations of the California Building Standards Code (code) and their municipal codes. The code identifies a wide range of building requirements, from regulating electrical work to requiring that handrails be a specific height. If the cities identify violations, they can require the property owner to correct the violations and, if necessary, obtain the appropriate building permits from the city.

The three cities we reviewed are not fully complying with their respective resale record ordinances. Specifically, none have procedures in place or are monitoring to identify properties that are sold or exchanged, which limits their ability to ensure that inspections are being performed as required. In addition, Pasadena’s records for inspection certificates were missing or incomplete for 10 of the 17 properties we reviewed that had application dates from July 2014 through October 2015. Without an inspection certificate, the city lacks assurance that the property is in compliance with the ordinance related to the health and safety of its residents. Furthermore, San Rafael and Novato are unable to document in certain instances that buyers are aware of health and safety violations that exist at their new properties, as their respective ordinances require. According to the three cities, their priority is conducting inspections and identifying violations, and the owners are responsible for requesting and obtaining the appropriate documents. However, because each city requires that property owners obtain certain documents before the sale or exchange of a property and the cities have specific responsibilities, we believe the cities should take steps to monitor compliance with their local laws, such as working with their county assessors to be aware of property transfers.

In addition to not complying with all aspects of their ordinances, none of the three cities have formal processes to address complaints consistently nor do they track the complaints they receive or their resolutions. For the purpose of our review, we defined a complaint as a statement of dissatisfaction with an action or request the city made of a property owner pertaining to the program. The lack of formal complaint processes raises concerns about the cities’ ability to readily demonstrate fairness and appropriateness in resolving complaints. We also noted that none of the three cities have a designated location in their databases for documenting information about complaints and resolutions.

Furthermore, although San Rafael, Novato, and Pasadena have policies and procedures for following up on inspections that identify violations requiring action from property owners, none of the cities consistently follow them. Specifically, for violations that require permits or reinspection, the cities should be issuing a reminder letter (notice letter) to the property owners of the corrections needed and then monitoring the promptness of owners’ correction of the violations. Despite these policies, each city has a backlog of properties with unresolved violations that require permits or reinspection. Novato and Pasadena generated reports that identified numerous cases—more than 300 in Novato over the past nine years and nearly 4,600 in Pasadena during the past 15 years—that appear to still have outstanding violations from an inspection. However, we identified some cases within Pasadena’s report in which the violations appear to have been resolved, so the actual number of resale record cases with outstanding violations is likely less. San Rafael cannot generate a summary report to identify all properties with outstanding violations because it did not identify the status of inspections of its resale record cases in its database until December 2015. However, it estimated that the backlog of properties with unresolved permit violations was about 150 cases as of November 2015 for properties that had resale record inspections in 2015. San Rafael does not know how many cases may still have unresolved violations until staff review each of the older cases in its database. The three cities cite staff workload as the primary cause of their backlogs, although they have taken some action over the past two years to temporarily bolster their efforts at directing property owners to correct violations. However, they need to take more action.

The cities have established time goals for their resale record programs, but they are not monitoring compliance with them, and San Rafael and Pasadena do not always meet their goals. San Rafael and Pasadena have a time goal that measures the date an individual submits an application for the resale record report to the date of the inspection of the property (application to inspection), and then from the inspection date to the date the report is issued (inspection to report issuance). San Rafael’s goal is 12 business days from application to inspection and two business days from inspection to report issuance. Pasadena’s goal is seven calendar days from application to inspection and one calendar day from inspection to report issuance. Novato measures only the period from inspection to report issuance with a goal of 10 business days. Based on our review of 20 resale record reports from each city that were initiated from July 2014 through October 2015, San Rafael and Pasadena had some instances where they did not meet their goals, ranging from one to two additional business days and two to 20 additional calendar days, respectively. Novato met its time goal of 10 business days from inspection to report issuance for all 20 properties we reviewed, although this goal appears to be much longer than the city needs.

The three cities have based the fees they charge for their resale record programs on cost studies that were prepared many years ago. Additionally, San Rafael and Pasadena were unable to provide the detailed support for the cost studies they used to establish their fees. Novato was able to produce the detailed support for its current fees, but it did not perform an analysis until January 2016 at our prompting, in which it concluded that the city had subsidized its program by $30,200 in fiscal year 2014–15.

To assess the reasonableness of the cities’ current fees, we calculated the basic costs the cities incur to conduct an inspection. Our analysis showed that San Rafael and Novato are likely undercharging for inspections of single‑family and condominium dwellings, which are the most common types of fees these cities charge. However, we could not determine if Pasadena was undercharging property owners because it was unable to quantify its overhead costs pertaining to the resale record inspections. Subsequent to our closing conference, Pasadena provided us with a draft cost study in which its consultant concluded that the city is currently undercharging for inspections. The city relied on the consultant’s expertise to identify overhead costs, which the consultant was able to extract from the city’s accounting system.

Finally, we determined that most of the resale record inspection staff the cities employed during the past five years either met or exceeded the minimum qualifications for their positions. We were unable to verify the qualifications of one former city employee and three contracted inspectors in San Rafael because the city did not have the applicable supporting records. The responsibilities of resale record inspection staff vary among the three cities, which accounts for differences in the minimum job qualifications each city established. Although resale record inspectors at the three cities have attended continuing education sessions regarding building standards, the cities have not established continuing education requirements to ensure that their staff remain current on code requirements. Because these code requirements are subject to change and have changed every three years, the frequency of these changes directly impacts the inspectors’ responsibilities, which emphasizes the importance of participating in relevant continuing education.


Recommendations

To ensure that the cities are aware of the degree of property owners’ compliance with the cities’ ordinances, San Rafael, Novato, and Pasadena should implement procedures that can help them monitor the sale or exchange of properties that require resale record inspections. San Rafael and Novato should also develop a process to verify that new property owners are aware of health and safety concerns regarding their property and any corrective actions they need to make. In addition, Pasadena should develop a process to ensure that staff sign the inspection certificates and add them to the city’s database.

To ensure that the three cities can monitor stakeholders’ satisfaction with their respective resale record programs and to ensure that they each have a uniform approach for resolving complaints, San Rafael, Novato, and Pasadena should develop a formal process for tracking the types of complaints they receive and how well they resolve those complaints.

To ensure that property owners correct violations in a timely manner, each city should develop a work plan by July 2016 to identify and address its respective enforcement backlog by April 2017, so that the cities are up to date with their enforcement actions, such as issuing notice letters and monitoring property owners’ actions to resolve violations.

To ensure that the cities conduct their resale record inspections and complete the reports in a timely manner, they should establish a process to monitor how they are meeting their established time goals from application date to report issuance, such as developing a reminder report or using an automated feature of their databases. Novato should also establish an expectation that is significantly shorter than 10 business days for the period from inspection to report issuance; further, it should establish a time goal for the period of application to inspection.

To ensure that the resale record fees the cities charge are appropriate, San Rafael should conduct a formal fee study by December 2016 that incorporates the actual costs associated with the issuance of a resale record report by dwelling type, and Pasadena should finalize its formal fee study by April 2016.

All three cities should develop a process to maintain continuing education attendance records and ensure that staff receive periodic continuing education through internal and external sources to enable them to remain current on code requirements, especially when the requirements are updated.


Agency Comments

San Rafael and Novato generally concurred with our recommendations. However, Novato questioned the feasibility of monitoring property owners’ compliance with certain aspects of its resale record ordinance, but the city stated it will explore options to implement the recommendation. Although Pasadena also concurred with most of our recommendations, it disagreed with a few of them because the city believes its current processes are sufficient.




Footnote

1 Pasadena’s ordinance is known as the inspection ordinance, and its application is triggered when a property is vacated and then reoccupied. For the purpose of this audit report, we refer to it and the program the city administers—the Occupancy Inspection Program—as resale record ordinance and resale record program. Go back to text

2 If the property owner wants to sell the property “as is,” the buyer can sign a Transfer of Responsibility form (transfer), which states that he or she will resolve any outstanding code violations. When the city receives a signed transfer, it issues a temporary inspection certificate. Go back to text



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