Improvement done without permits?
Question:
I own a 4-plex on which various improvements have been made during the 8 years I have owned it. Many of these improvements were done without permits. Will this cause me problems when I sell, presently planned for next year?
Answer:
It would be best to correct this problem before marketing your property for a number of reasons and I will briefly discuss some of the issues.
Some jurisdictions now require a physical inspection and record search by the city or county building department before any escrow can close. Depending on the specific jurisdiction, the result may require getting the improvements
permitted at a cost that will include the current permit fees and may include penalties, sometimes the penalties accrue from the year when the improvements were made. Code violations found during the inspection must usually be corrected
and re-inspected in such jurisdictions. So, failure to take care of the problem before signing a contract can create significant problems when escrow is scheduled to close. At a minimum it will result in a significant delay while
getting permits, even a longer delay if the inspection discloses code violations that must be corrected. At worst, the seller may be sued by the buyer.
Sometimes an electrician, plumber, or other licensed contractor called in by a new owner long after close of escrow discovers code violations. Some unpermitted improvements could result in being sued. At the worst would be an improvement that was improperly done that results in injury or death following close of escrow, for which you would almost certainly be sued, possibly even criminally charged. or if the problem is only discovered when the buyer has a licensed contractor work on the property at some date after closing escrow and the contractor points out previously performed work that does not meet building codes.
Also, many states require sellers to furnish the potential buyer with a boiler plate disclosure document that will include a question regarding whether any improvements were made without permits, sometimes whether or not completed by
licensed contractors.
If you decide to market the property without correcting the problem, you should disclose the issues up front, at least before signing a contract, even if the location is in a jurisdiction that does not require building permits (as is true for some
rural counties) in order to reduce ramifications of any issues occurring at some future date. Not making a deal is far better than defending against a lawsuit for failure to do so when (probably not if) the buyer discovers the issue, particularly if discovered after closing escrow rather than in the course of performing due diligence. Even if discovered by the potential buyer’s due diligence and he/she invokes a contingency to cancel the offer, you may have a couple of angry real estate agents whose time you’ve wasted.