Lack certificate of occupancy; crackdown coming
Jim Heath thought opening a bakery in the former home of a bakery would be pretty straightforward.
It’s not like turning a pickle factory into a cakery, he thought. The equipment is there; the shop was successful before. So he bought the building, which included an insurance agency next door.
But when Heath opened Marco’s Patisserie, 3308 E. Grant Road, four months ago, he found unforeseen twists in the path to opening a legally operating business, especially one in midtown.
The difficulties revolve around getting a certificate of occupancy, a document that states the building the business occupies is up to city codes.
About half of the city’s businesses operate without one, either because they don’t know they need one or because they would rather avoid the bureaucratic wrangling and potential expense of getting one, said Jessie Sanders, deputy director of the Department of Development Services, which issues the documents.
The implications in the number of businesses that skirt the process are broad. The red tape, whether they own or rent, has discouraged at least some owners from operating legally, but that doesn’t account for the businesses that decided not to open.
Because buildings in midtown tend to be older – generally built in the 1970s or ’80s – they are often expensive to bring to code, according to commercial real estate brokers. They also are the very buildings the city would like to see occupied as part of its goal of “infill,” the opposite of sprawl.
The high number of businesses without certificates means only about half of city businesses are inspected for safety, let alone code compliance, and the city may be losing sales tax revenue, its main revenue source, Sanders said.
Committees are looking at revamping the land use code and the list of “life safety” issues inspectors check, such as electrical systems, removing the requirement that certificate applicants present architect-drawn plans and issuing certificates that allow businesses to operate as long as they meet deadlines for bringing buildings into compliance.
A group of business owners and planning specialists for the city has been meeting since January to decide the details of the new certificate of occupancy process before new rules go into effect Oct. 15.
On that date, an ordinance that requires landlords to tell tenants they need the certificate will be in effect.
That could mean higher rent for tenants whose landlords will be forced to make improvements to lease their properties. It could mean making mandated improvements will be part of the tenant’s contract, said Paul Hooker, a broker with Picor Commercial Real Estate.
Midtown monthly commercial rents run about 80 cents to $1 a square foot, including real estate taxes, hazard insurance and maintenance of a common area, Hooker said.
The ordinance could double the cost of rent for midtown properties of about 1,000 square feet, he said.
The ordinance also affects small businesses that own their property.
For Heath it could have been the difference between buying the property or not.
“I may not have bought it,” he said. “Small businesses are the engine of this community. They should be helping us.”
Revisions to the land use code, whose convoluted rules are at the heart of complaints, will likely take years.
“We’ve started a process that quite frankly I don’t think will ever end,” said Councilwoman Nina Trasoff, who initiated the changes. “What we are creating is an approach and a willingness to constantly revisit these issues to create a more business-friendly climate.”
Heath is being asked to demolish what he considers critical equipment – a walk-in refrigerator that was built as an extension of the building – because the previous business didn’t follow city rules.
Heath is required to take out the fridge by a provisional certificate of occupancy contract with the city’s Development Services Department.
Signing the contract, which also listed a handful of other mandatory modifications including adding more parking, was the only way he could get the shop operating. The provisional contract is part of the city’s plan to make the process easier.
But the fridge was part of the reason Heath opened a bakery, and he considers it integral to his business. He worries that demolishing it and finding a legal refrigeration solution could put him under. He’s already sunk $4,800 into maintenance for the fridge and taken out about $150,000 in loans to get the business started. About $50,000 of the loans were borrowed against his house.
“I can’t take it (the refrigerator) out,” he said. “I can’t go bankrupt. I can’t go home and tell my wife, ‘Look, honey, we have to move out. They’re taking our house.’”
The way Heath sees it, receiving a variance that would allow the fridge to remain is the only way out.
“I don’t see why this is happening,” he said. “The bakery was here for 15 years and the fridge about 10 years.”
Raena Janes met a similar dilemma when she tried to open a charter school in a midtown church. The church, near the intersection of Grant and Country Club Road, had housed a school for the previous 47 years.
Though Janes had 300 kids enrolled to attend the school starting this month, the school never opened. Some of those kids were sent to two other schools Janes operates, La Paloma Academy. Others had to find a new school just weeks before the academic year began.
The reason Janes was denied is complicated. The previous school was operating without a certificate of occupancy, the necessary improvements were expensive and at least one neighbor actively opposed the school because of the traffic it would bring, Janes and city officials said.
Representatives of the neighborhood and the Ward 6 council office said the timeline for the bureaucratic process, which generally takes about eight months, was too crunched.
“I don’t know what I’m going to do,” Janes said. “I need it to be profitable . . . I was just so disappointed with the process.”
Other than Heath, eight businesses have received provisional certificates as part of a pilot program, said Sanders of Development Services. Many had good things to say about the revised procedure.
Jack Dodson, owner of Dodson Photography, 5009 E. Fifth St., was among the first to be allowed to submit drawings of his property that were not drawn by an architect.
In the process, he saved about $2,000 in architect fees.
Dodson’s business, which he runs with his wife, has been open about 27 years, but they recently moved their office from their home into a strip mall.
“We were overwhelmed,” he said of the certificate of occupancy process. “Our experience once it was explained to us, though, was good.”
A committee of city staff, landlords and small-business people is looking at the rules that govern parking and the adaptive reuse of old buildings.
To open a business
To open a business, you must first apply for a business license. You will receive a license number with a pending status. The number has no expiration date, but it allows you to operate and pay sales tax.
During that time, “We are under the impression they are working with zoning,” said Beverly Moe of the city Finance Department’s business licensing section. “We wouldn’t necessarily check with other departments. We’re not that regulatory.”
Next, you need approval from the Zoning Department. If you satisfy those requirements, you will be issued a permanent business license number.
Then, you need a certificate of occupancy, which ensures that your property has been inspected for health and safety issues.
If you are a tenant, you must be notified by your landlord that you need one. The Department of Development Services may work out a timeline with you for making the necessary improvements.
If you don’t get a certificate of occupancy, the Department of Neighborhood Resources may find out and hold you responsible. When responding to any property-related complaint the city receives, inspectors check for valid certificates of occupancy at businesses. Penalties range from fines to business closures.