Washington State has recently made it more expensive for the Average Joe to do a Flip.
For the purposes of this, 'Flipping a House' happens when you buy a fixer-upper, fix it up, and sell it without living in it.
18.27 is the RCW which regulates the business of Contractors, and requires licensing and fines of non-licensed contractors.
SHB 1843 updates and changes especially those portions of 18.27 pertaining to the definition of Who is a Contractor and Who is Exempt. (Yes, even painting it something you have to be licensed to perform.)
Part of the reasons given for the changes were the rampant problems with non-licensed contractors doing sub-standard work, and no recourse for the people who hired them. Just go to Craigslist and look at all the job offers there, and you can bet a lot of those handy-man type work is supposed to be licensed here in Washington State. (Take a look at the law for the list.)
What does that mean to Buyers and Sellers?
If you plan to 'flip' a house, you now have to be a licensed and bonded General Contractor.
Specifically it applies to an entity who does "...offer to sell their property without occupying or using the structures, projects, developments, or improvements for more than one year from the date the structure, project, development, or improvement was substantially completed or abandoned."
Actually, not much of this is new. RCW 18.27 has been on the books since the 1960's, and it is updated every few years. If a person was doing any work on that Flip even last year, this law already required them to be licensed as a general contractor.
Up until July 23rd, there was a loophole that allowed the Average Jo a chance to invest and profit from this kind of transaction, without having to act like a contractor. Average Jo could purchase a house, hire a General Contractor to do the work, and then Sell the property for hopefully a good return on their investment.
They did not have to be a contractor unless they did some of the work on the property. (And many will be surprised to see what kind of work is regulated by this RCW.)
It effectively identifies a flipper as a business owner, depending on their Intention. And it requires them to have the same liability coverage as any other builder.
But this may be the bigger issue- Let's say you bought a house 8 months ago. Let's say you discover some fundamental structural defects in the house. Who would you go after? The person who did the work, or the person who sold you the property?
The Good Thing About This Change:
Unlicensed contracting is a big issue in our state, as well as many other states. It has cost a lot people their life savings. This may help to serve notice to the state's intent in this arena. And I can understand the perspective that someone who looks like a duck is a duck, so to L & I, someone fizing up a property as a business venture is in the business of contracting.
The Bad Thing About This Change:
This change was trumpeted as a consumer protection. Great, everyone can get behind that type of law- let's help the little guy!
Yet... Washington State has no law requiring a contractor to Warranty their work for any period of time. Also, there is no competency testing for a General Contractor. (In fact getting a license is pretty easy- post a Bond, proof of Liability Insurance, and the fee for the license. Take a look here to see the L&I how-to.)
Unfortunately, any noble intent intended by these changes is overshadowed by the appearance that the state sees Home Flippers as Deep Pockets and they want a piece of the Pie. I doubt this will have very little impact as a measure of consumer protection. It will instead have an impact on state coffers.
Just a point of clarification: The majority of this law is not new. A year ago, it would have been illegal for a flipper to do any of the work on their property. And this law now gives a specific time frame for holding the property. There is a lot of further clarification that needs to be done on the state level, in order to understand how these rather muddy rules will be enforced and interpreted.