Open Permits: A Homebuyer’s Nightmare
ANY open permits and or code violations need to be fully addressed and resolved by the potential home buyer, prior to closing. Failing to do so can be very costly for a homeowner.
Open permits remain with the property, despite any change in ownership. Failure to uncover any open permits prior to closing means that these permits become the responsibility of the new owner. Requirements to remedy an open permit can include fines, fees, and completion of pending work and removal of work that does not meet building requirements. Open permits can be quite costly and time consuming.
Q. What is an open or expired permit?
An open or expired permit is a permit which has been issued by a County or Municipal building department but has not been formally finalized in accordance with established guidelines, typically by means of a final inspection, within the time provided. Once the time has lapsed for the permit to be closed by the issuing department it is referred to as open or expired.
Q. Why do I need an open permit search?
One of the biggest obstacles for home sellers these days is the issue of open permits. Since many Counties have declared war on open permits, homeowners are finding themselves at the mercy of county inspectors when the time comes to close on the sale of their home. Attorneys and title companies may recommend that buyers not close if a permit search reveals open permits
Q. Will title insurance cover open or expired permits?
A good title company or real estate closing attorney will take care of this for you but you have to ask for it because it normally is not done. Title companies can close the sale on a property with an open permit on it, and most will never even conduct an open permit search; it’s not the same as a lien search. You should order an Open Permit Search at the same time you schedule your inspection.
This is a service that I provide for my Buyers. I usually go to the Building Code department of the town or municipality where the home is located and pull the record on all permitted activity on the home. If there is work that has been done that has not been permitted that is an issue that should be addressed by the home inspector.
Q. Will my closing agent check for open or expired permits?
Oftentimes the person selling the home or their listing agent has no idea about his or her own permit situation. They may have had some work done and their contractor told them everything was good to go and somewhere down the road they will find out that the permit is still open and if you are the new owner this is now your problem to deal with. Sometimes work was done before the current owner bought the home and they have no idea anything could still be open.
The best way to protect yourself is to do an open permit search. If you are selling your home it is a good idea to make sure your home has all of its permit issues in order because nothing can kill a deal faster than when a buyer finds out there are open permits If you are the buyer, take care of it before you face a potential issue in the future.
Q. Who is responsible to close an open permit?
Open permits can be grounds for the title company to balk or the lender to renege on financing. Uncovering open permits and closing them typically falls on the shoulders of the SELLER but may not be written in a standard contract. Every State or County’s standard contracts vary. Make sure you understand the terms and conditions involving permits in whatever contract you are using. It often can be grounds for terminating a contract.
Q. Is it really that important? What is the worst that can happen?
If open and/or expired permits exist and are not closed prior to closing, these permits become the responsibility of the new homeowner. The new owner will be responsible for paying all fees and/or fines and will be forced to complete the pending work. If the permit is not properly closed, the building department may be able to order the removal of the work on the property.
Q: Found an open permit. Now what?
If there are any open permits on your home the Building and Zoning Department can provide you with the name and contact information for whomever pulled the permits. You can then contact the contractor to get the permit closed.
Q:Â What if the contractor is no longer in business?
If your contractor is no longer in business, you have a couple of options:
You can close the permits yourself.Â This involves contacting the Building and Zoning Department; arranging for any missing inspections; following up with inspectors and the department to make sure that the permit is closed on the computer. Or, you can contact a local permit expeditor to close the open permits for you.