Many homes do not comply with all current building codes which are subject to periodic change or amendment. Some of the violations or non-conforming issues are minor and inconsequential, posing little or no risk and concern to owners; however some have the potential for far greater concern. Some non-permitted items construction features or repairs can add to the value of the property, while others will detract from the value. In San Mateo County (CA) the issue of non-permitted improvements is becoming more significant as county and local governments seeks to uncover monies from every available source.
Buying a home with unpermitted additions or improvements can present serious risks and potentially costly consequences. Some of these risks are:
- City or County agency may require, at Buyer's expense, the remediation or removal of the un-permitted or non-complying item, may prohibit its use as a "habitable living space," or may deny permits for other unrelated building projects at the property.
- If violations involve zoning, use and/or occupancy limit ordinances, such as, the existence of illegal "in-law" unit, the agency may require removal or discontinued use;
- Hazardous condition may be caused by the non-conforming or un-permitted construction;
- Lender's appraisal and decision to extend financing could be adversely affected;
- Homeowner's insurance might be unavailable, excessively costly, or future claims denied and/or coverage cancelled.
Homeowners are subject to the building permit and inspection requirements of the laws when the work is done to prepare a house for sale within one year of the work.
Buying an REO is particularly problematic, since the bank is not required to disclose permit issues unless it has actual knowledge which they probably don't have. So, part of the prospective home buyer's due diligence and investigation process should include an examination of the risks posed by non-permitted construction or "un-finaled" building approvals.
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