There are so many things to be aware of when it comes to buying and selling real estate. One topic that most buyers and sellers are not experts on is the topic of permits. The lack of knowledge on this topic can cause challenges in the buying and/or selling process. Given the potential legal nature of this, getting attorney guidance is important. Below is some guidance shared from one of our area real estate attorney's, Don Ross, related to un-permitted work and how that is handled.
The purchase/sales contract addresses many areas including permits.
Contractual Consequences of unpermitted work:
The NABOR (Naples Area Board of Relators) contract treats un-permitted improvements as a Defective Inspection Item. If the Seller refuses to pull a permit and close it out, the Buyer then has five (5) days to terminate the contract and receive the deposit back. Un-permitted work is not a title defect and permit issues does not automatically prevent a closing from happening however it is important to note that Mortgage companies may require all permits to be closed in advance of home purchase closing if open permits are flagged in the process.
FR/BAR treats un-permitted improvements in the same fashion as open permits. The prior article explains the process in more detail (see below).
Solutions to Consider:
Here are a few approaches Don Ross has seen;
DISCLOSE: Both NABOR and FR/BAR contain Seller representations that the Seller has no knowledge of un-permitted work. Disclose any un-permitted work on the Seller’s Disclosure and get the Buyer to sign it. If the Buyer signs the NABOR Seller’s Disclosure, then the un-permitted work is no longer defined as a Defective Inspection Item. Sellers are the only ones that should be filling out the Seller's disclosure, NOT real estate agents.
CASH TRANSACTION CONTRACTS: If you have a contract for a cash purchase, add language to the contracts stating “Buyer shall take title subject to the following un-permitted items:_______. Buyer shall not be permitted to object to these items under the contract.” Be careful adding this language to the contract if the Buyer is getting a mortgage, as un-permitted work may cause problems with the loan so this is not recommended for sales contracts with mortgage deals.
MARKETING/MLS: Do not put un-permitted work in MLS (Multiple Listing Service) under “Confidential Remarks” only on the seller's disclosure. The Seller has a duty of disclosure to the Buyer. You may also want to be careful in how an "improvement" is advertised if it is work that would have required a permit but one wasn't obtained.
RESOLVE PERMIT: Consider hiring a contractor to properly permit known, un-permitted work. Again, If the Owner is unwilling to have the work permitted, comply with your ethical duty and disclose the issue to the Buyer.
Un-permitted work does happen, especially with the number of people who have relocated from other parts of the world not as versed in our code and requirements for permitting. I urge you to lean on me if you encounter a problem. Balancing legal, ethical, and moral responsibilities requires experience and an attorney is the one qualified party to provide that guidance. Real Estate agents are not permitted (no pun intended) to provide legal counsel on permit or other legal matters.