Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Inspections

Let us assume that your plans and specifications (P&S) have been completed, and that they have gone through the planning committee and all required modifications have been made. The P&S have also passed through all of the applicable city departments, such as the building department and the fire department. The controversial matters went before the city counsel and acceptable compromises were worked out. You have hired a construction company and it has started to build the improvements. Now your general contractor is in the process of putting up drywall for the central corridor and a city building inspector says, “This doesn't work, you need to have a fire-rated wall here with the drywall going to the ceiling.” Your contractor responds “The P&S have been reviewed by your fire department and fully approved. The P&S do not call for a fire-rated wall here, just three-quarter inch dry wall.”

The reality is that approval of the P&S is a conditional approval. It is conditional on interpretation of the applicable code provisions and subject to the city changing its mind. At some point in time, there is justifiable reliance on the part of the developer, but, in general, the developer remains subject to an inspector saying that, regardless of the prior approvals, a modification is required. As with other governmental officials, it is helpful to maintain a good working relationship with the city inspectors.

In addition to city building inspectors verifying that the build-out is ...