Have seen this on two buildings recently, so figured I’d share.
On modern buildings, all of the electrical meters are grouped together on one big panel, called a “combo” panel. It’s usually in the front of the property near where the electric wire drops from the nearest utility pole to provide power.
Back in the 1920s, when a lot of buildings in Silver Lake / Echo Park were built, the City allowed you to install meters directly inside the units, usually next to the subpanel where the fuses were. Here’s a pic:
Those 1920s electrical systems used cloth wiring which has by now far exceeded its intended useful life. However, the Department of Building and Safety considers the original systems grandfathered in as long as you don’t touch them.
The problem is that the cloth wiring is really not safe. And, there is generally not enough power in those systems for modern tenants with their plasmas, computers, industrial-strength curling irons, etc. So, a lot of building owners want to re-wire. But they don’t want to pay for a new combo panel (one which centralizes all the meters in one place), the purchase and installation of which can run into the low five figures, depending on the number of units served and the distance between the new panel and the units themselves.
What these owners do instead is re-wire without permits. They leave the meter in place but swap out the sub-panels with glass fuses for modern panels with breakers. This allows them to add circuits and, therefore, power for the tenants. And it arguably makes the building safer, because they swap out the deteriorated cloth wiring for new, plastic-insulated wiring.
The problem, from the buyer’s perspective, is the Housing Department’s Systematic Code Enforcement Program, which sends LAHD inspectors into all apartments in the city every 2-3 years. While the inspectors definitely vary in terms of their knowledge of building codes (remember, these are Housing Department inspectors, not Building and Safety inspectors), even the inexperienced ones can spot the new sub-panel underneath the old meter placement and know, without a shadow of a doubt, that the re-wiring was done without permits.
If you get written up by one of these SCEP inspectors, you will end up having to re-wire your entire building and bring it up to code, at a cost of approximately $2-4k / unit, depending on the quality of the un-permitted work (how much of it your electrician can salvage). That’s real money. So the question is: “Who should cover the cost of this – buyer or seller?”
Sellers never want to give you credit for this scenario. Their perspective is that the wiring has been upgraded. They’ve already spent the money to improve the building. Why should they have to, in effect, pay again by giving you a credit (price reduction). Instead, they want you to take the risk with the SCEP inspector. After all, they’ve probably had a SCEP inspection or two since they did the work, and they weren’t busted.
As a buyer, you want to push back on this, because you’re planning to own the building for a long time and the likelihood is that you may eventually get caught. The expected value to you is a 100% chance of getting caught multiplied by the cost of re-wiring the building: 100% x $2-4k per unit is $2-4k per unit.
Will you win the argument? As always, that comes down to who wants to do the deal less.