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Lacking permit or certificate of occupancy can cause major problems

By
Real Estate Broker/Owner with Turn Key Real Estate 31RA0874656

Over the years I have experienced various situations where major and minor problems in which the lack of COs (certificate of occupancy) delayed or even lost deals.  The problem is every time you perform an upgrade or improvement, you need to determine do you need a permit.

Some will have done things 10, 20, or even 30 years ago, with or without a permit, but without finalizing the process and not realizing the future ramifications when it comes to selling their home.  Let’s face it. We don’t want to pay any more real estate taxes than we already pay, so adding space or any other item that might increase them without a permit or a final CO is the reason we do it.

I can understand and sympathize with everyone who takes that route as we are being over-taxed, especially today.  But it can come back to cause unneeded stress and complications.   When things are done without a permit, and especially not by code, the potential for harm or death by fire, electrocution or flood could occur.

I am currently involved in a transaction where the seller added a structure without a permit.  They had bought the home from me years ago without any issues.  I did not remember that a structure had been added since he had purchased it.  So a buyer came along, made an offer that was accepted, contract signed and we were on our way in the process.

The inspection was completed without any major issues.  Then the appraisal was completed.  However, the survey revealed that a specific structure was not apparently noted.  A problem arose that had to be resolved.  Although some banks will look the other way in certain situations, this particular bank would not.  It took some time, but the issue was settled by the seller by having to remove the structure and a small adjustment was made to reduce the sale price.

It is imperative that when you want to add something to your home, you need to determine whether or not a permit or a variance needs to be applied for.  A variance is an approval for something that is not within a specific building code.  When you don’t apply for the necessary permits, a municipality and the building department can essentially order you to remove that structure.  Even if you are able to complete a project but get caught, there could be a very hefty fine attached.  When selling, this will cause a delay in closing until the fine is paid.  More importantly, that structure might have to be removed, lowering the value of your property.  This will cause your buyer to either back out or renegotiate the agreed-upon price.

If you add a deck, shed, pool, or any external structure, you might need a permit in most municipalities depending on its height and size.  As I mentioned, some banks will look the other way and not be too concerned.  But if there are fines noted on the title, that will be an obvious sign that a permit was not filed.  Some buyers might look the other way as they are not concerned and surely don’t want their taxes raised.  Also, if you have an above-ground pool or structure that is too close to the property line, that might be another monkey wrench in your transaction that could cause a major delay in closing.

Adding living space without a permit can be the greatest problem.  I had experienced this many years ago when a home we were selling had an extension added without the proper paperwork.   There was a $50,000 escrow that was held until the permit was filed and the final CO was received, which took almost one year.

Unless you are just replacing appliances, but not doing any electrical or plumbing, then there shouldn’t be any problems.  If you are not sure, then seek out advice from an architect who will have the expertise about your local building codes to determine if you need a permit. This will go a long way in eliminating major headaches later on when it comes to selling your home years from now.

Buyers should make sure that their purchase has all the necessary permits and COs.  Ask about any external structures, whether it is a deck, pool, garage, or shed that may not show up on the survey.  Most important are extensions to the home to make sure everything was legally filed and completed.  No one wants surprises and we all want the closing to be a successful event with everyone smiling.

Posted by

Sincerely,

Philip A. Raices, Pres/CEO, 

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Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

What an awesome post this is a problem not just in your part of the world but here in Los Angeles, CA too:)Endre

Oct 20, 2023 10:01 PM
Philip A. Raices

Hey Endre,  thanks for your compliment and yes, I would imagine it happens all over.

Oct 23, 2023 09:33 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Very good blog, Thanks for sharing, enjoy your weekend. Bill

Salvatore Arizona Elite Properties.

Oct 21, 2023 05:47 AM
Philip A. Raices

Hey Bill, thanks for your compliment and hope you had a good weekend too!

Oct 23, 2023 09:31 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Hello Philip... I keep a sharp eye out for things in a house that might indicate work by a homeowner and always insist on confirming it was done with permits and to code.

Oct 21, 2023 05:47 AM
Philip A. Raices
Turn Key Real Estate - Great Neck, NY
1 of the Most Knowledgeable Brokers on the Net!

Hi Nina,

Yes, we all try to confirm those possible issues.  However, homeowners/sellers sometimes seem to forget what they have done whether by absentmindedness or on purpose!  We become the responsible entity for making sure we provide the most accurate up to date info to our purchases, so we are on the hook too!

Oct 21, 2023 11:44 AM
John Pusa
Glendale, CA

Hello Philip A. Raices very good helpful report for lacking permit or certificate of occupancy can cause major problems.

Oct 21, 2023 01:55 PM
Philip A. Raices

Thank you, John, appreciate your compliment. It seems to occur with older homes that have upgraded .

Oct 23, 2023 09:34 AM
Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Oct 22, 2023 03:35 AM
Philip A. Raices
Turn Key Real Estate - Great Neck, NY
1 of the Most Knowledgeable Brokers on the Net!

Thanks Rich, and you enjoy the rest of your weekend!

Oct 22, 2023 06:40 AM