No Permits for Basement Renovation

mdfaccMarch 31, 2010

I would like to buy a house which has a finished basement, including a full bath and a mini-kitchen. However, the owner did not obtain permits and inspections for the basement renovation.

I have confidence that the work was done properly, but worry that I will have difficulty selling the house later without permits and inspections. How much trouble and expense can I expect if I obtain the permits and inspections after the fact? Will the inspectors require me to rip out drywall? What are my options?

I believe this situation is common in my area. Many owners don't realize that they are supposed to obtain permits and inspections with renovations.

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I have confidence that the work was done properly

Of the homes I've bought with finished basements, the only one not rife with Code defects was just two years old and part of the original construction.

If non-permit compliant finished basements are typical in your area, it would be unusual for a future buyer to single out yours as their biggest objection.

Be aware that including a kitchen or bedroom in the basement may also be a zoning violation. The kitchen might have to be removed if the buyer requests a pre-purchase by-laws inspection. This is standard in my area; an inspector dropped by last week in conjunction with our current sale.

It would be a wise idea to have any non-permit installed electrical work checked out. Among the dangerous defects I've found over the years: lampcord buried in a groove in the plaster to power extra outlets; entire basement circuits tied directly into a 60AMP breaker; homemade wood receptacle and switch boxes in place of steel boxes; a bare bulb dangling in the shower for lighting; an electrified main fuse box etc, etc.

    Bookmark   March 31, 2010 at 11:03AM
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Each town/city/municipality treats this issue differently.

For example, here in NJ, some will just rubber stamp the job, for the cost of permits and final approvals. Others will also charge a fine. Yet others will make you tear out drywallÂÂwhich is the only responsible thing to do, as there is no way to know if the wiring, framing, plumbing (if applicable) and insulation was done properlyÂ.unless of course the inspector possesses the magic of x-ray vision.

That said, it is not clear how you know the work was performed in accordance with code. Are you a code official who inspected all phases during the processÂÂor do you know one who did perform all of the inspections on the processÂÂwho was appropriately licensed in all disciplines involved?

If not, you are making an assumption that could prove to be very costly to you, at the very least, in the event of a fire.

That said, the biggest issue is if there should be a fire. Lack of permits and final approvals is the PERFECT excuse for an insurance company to deny the claim. It happened to two homeowners in our town alone.
Final approvals from the building code office protect you from that problemÂÂeven if the work was done incorrectlyÂas you can prove that you did all that you could to insure otherwise.

A house is a big thing to gamble on vs. the cost of the hassle of getting the permits and final approvals, and the raise in property taxes.

Last but not least, some lenders will ask for the finals as well...when they see an appraisal that indicates a finished basement where the CO does not reflect that as being part of the original construction.

It's akin to cheating on one's can go a lifetime and never get caught and remain ahead of the game; however, you need to know the risks going in, and make an informed decision as to whether or not you are willing to deal with the worst case this case, a house that goes on fire...with no insurance reimbursement...and most assuredly a very hard time getting insurance for a reasonable costÂ...if at all... on another house in the future.

    Bookmark   March 31, 2010 at 11:06AM
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If you get it inspected, it will be at the discretion of the inspector as to how much of the finish work needs to be removed for him to perform his job. If everything that is visible looks to be done in a workmanlike manner and he doesn't see any violations, you may luck out. However, if he sees anything improper on the surface, you can bet he is going to want to see what might be hidden below the surface.

As for resale, it depends on the area. I live in an older neighborhood. Almost every home has some sort of addition or garage and very few are recorded with the city. When we sold our house in a newer, suburban neighborhood, we had people ask about permits for the deck.

    Bookmark   March 31, 2010 at 11:17AM
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Worthy, Logic, and Billl:

Thank you for the useful insights. I appreciate the help.

    Bookmark   March 31, 2010 at 12:06PM
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In Los Angeles County, the owner has to get permits, have it inspected, and yes the inspector may ask for walls to be removed, and it is very expensive and again may not allow it to be like a apt. Check with the building dept first, then go from there. Get names, badge numbers and everything in writing. Verbal means nothing.

    Bookmark   March 31, 2010 at 1:42PM
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what marie said.

    Bookmark   March 31, 2010 at 5:18PM
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Are realtors required by law or professional code to inquire about permits? Is it legal to list a house for sale with finished basement square footage and bathrooms if permits were not obtained for the work?

I might be wrong, but it's my impression that many sales occur in my area even though homes contain renovations without permits.

    Bookmark   March 31, 2010 at 5:55PM
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Why not write into your purchase offer a clause that the current owner obtains all permits for the basement project? That's what I'd do - put it on the owner's back.

    Bookmark   March 31, 2010 at 6:42PM
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As far as I know, no state or code requires a Realtor to check into permits, setback lines, easements, liens, deed restrictions, plumbing leaks, sagging floors, or leaky roofs.

Sellers must provide a disclosure statement to buyers, which details what the seller knows about the condition & a certain amount of history of the property.

There's just no way for a Realtor to police the seller.
or the buyer.

The buyer's inspection will reveal structural & systems details, the title search will turn up liens, & the survey should tell you if the garden shed has been built on the neighbor's lot.

If there have been room additions, or if you suspect that there have been, or if it looks like, say, the water heater has been replaced, *check with the city*.

As far as I know, there's no law against offering any property, in any condition, for sale.

As long as the buyer isn't purchasing a marijuana farm, I'd be happy to list any property in any condition.

    Bookmark   March 31, 2010 at 7:01PM
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I just talked with two experienced local realtors. Both said that many local sellers have renovations without permits, but that has never been an issue in completing a transaction. In fact, one of the realtors bought a house with a renovated basement that didn't have permits for the work. She still lives there, and still doesn't have permits for the renovations.

    Bookmark   March 31, 2010 at 8:03PM
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Many homes have renovations without permits..My opinion is if no walls were moved,no change to the footprint of a home/room, then i would not be too concerned about it..For example, if a bathroom were remodeled by replacing everything in the same spot as previous, toilet/sink/tub etc...Or putting sheetrock and lighting in a basement..I have NEVER seen a remodel/renovation,as i describe, that was second rate or not to code...That said,most homes i have been interested in or purchased were on the expensive side, so owners were less likely to cut corners,they just saved the tax increase

    Bookmark   March 31, 2010 at 10:24PM
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In Los Angeles County, the owner has to get permits, have it inspected, and yes the inspector may ask for walls to be removed, and it is very expensive and again may not allow it to be like a apt.

I know in LA County many houses are sold with non permitted work. It need only be disclosed in writing to the buyer. I've bought and sold non permitted work with out a problem.

    Bookmark   March 31, 2010 at 11:31PM
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Be aware that some states do not require the seller to disclose ANYTHING.

In NJ for exmaple, disclosure is not required.

Although in NJ Realtors are supposed to perform due diligence in verifying that any improvments have all of the approvals but from what I have seen, that rarely happens.
However, if it comes to a lawsuit, they are then facing consumer fraud charges, treble damages, and their insurance (E&O) does not cover them for fraud.
They either are unaware of the law...or they simply don't care.

In NYS, for $500.00, you can buy your way out of having to disclose.

Last but not least, do not let the price of the home fool you into thinking that it is any better than a lesser priced home.

It would be foolish to assume that the sellers hired good contractors who did not cut corners...and if they did, and if the work has all the final approvals from the township, at least you are off the hook in the event of an insurance claim.

Unless you have x-ray vision, it's best to remember to heed the old adage, "When you assume...".

    Bookmark   April 1, 2010 at 12:03AM
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Wow, very different in my area of NY. Just sold my home and the first thing my Realtor asked for was whether I had a permit for the sunroom. She had gone to the Town before our first meeting and said there was no permit for my sunroom. I contacted the Town (as it was done legally) and the permit was filed. Realtors in my area will not list a home without permits.

I have a friend who wants to sell her home and has a small child's playhouse on her property. She has been forced to hire an architect to make drawings of this little house apply for a permit. This playhouse was built 40 yrs ago by her husband for their daughter. She needs a permit to sell her house.

Amazing how different areas handle permits. They are very strict here and unless someone is paying cash for a house, permits need to be filed.


    Bookmark   April 1, 2010 at 12:12AM
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Here is an example of "permit" nonsense..Years ago i replaced a set of brick steps and landing to my home..Got the permit and the mason went to work...Years later our home went into contract to be sold,and being the honest person i am,i called the Borough Hall and asked if i had any open permits,just to be certain..They said the permit for the steps was never closed..

I asked why and they said there was a notation on the file that a dog was in the yard..Funny thing is i didn't have a dog then,it had passed away years earlier!!!The inspector must have saw an old rusty sigh attached to the chain link fence saying "Beware of Dog"..It wasn't like the inspector couldn't see the yard, as the property was wide open,and tiny..In any event, he came to close the permit,took out his ruler, and said the risers were 1/8" too high!!!

I said what should be done, he said rip them out!!! Then he said,"Who called the Borough Hall about the open permit?" I said i did, and he said, and i quote " If it wasn't the purchaser,ignore the fact i was even here!!"
Did just that, and it never came up again...what a crock of BS

    Bookmark   April 1, 2010 at 8:55AM
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In my area they are cracking down on permits at the time of sale. there are things I'd worry about and things I wouldn't but it really depends on how mechanically inclined, or how knowledgable.

I wouldn't worry about a deck or shed. I would worry about a room addition, bathroom in a basement etc.

In my area a lot of people don't get permits. It is very uncommon to get one for a bathroom or kitchen remodel although they are required. I personally wouldn't unless you are moving walls.

regarding the playhouse, it sounds like they should get another realtor. the realtor isn't the be all and end all on permits. Maybe the town "requires" a permit, but for minor issues most buyers will overlook an issue like this. Whenever you see a listing "pool as a gift" or "shed as a gift"

    Bookmark   April 1, 2010 at 11:51AM
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Insist - in the contract - that the current owner obtain all the permits that should have been issued and clear any deficiencies.

Otherwise you are buying trouble.

    Bookmark   April 1, 2010 at 2:26PM
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When we sold in LA county, we had a inclosed porch and the first thing our 3rd and best realtor asked if we got the permits. We had and that was listed in the write up. In fact, we left the permits with the new buyer (kept copies) and she was very appreciated of them.

    Bookmark   April 1, 2010 at 3:20PM
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I've always gotten permits when I've had work done but I've decided it's a farce - at least the inspection part of it. My roof was inspected from the ground while it was covered with snow. The inspector who came to inspect newly installed doors and windows never got out of his car. What a joke.

When they inspected my kitchen remodel the contractor made sure he'd installed the newly required smoke detectors in every bedroom - which of course has nothing to do with a kitchen. Installed on a vaulted ceiling that I had no ladder long enough to reach when the low battery indicator started going off in the middle of the night. I was PO'd to say the least. When I finally found a way to get up there I removed the batteries permanently. I have smoke detectors elsewhere and that is good enough for me.

    Bookmark   April 1, 2010 at 10:53PM
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20 yrs ago my next-door neighbors decided they wanted a full size tennis court put on their property. Our Town requires 25 ft side setbacks so our neighbors decided to go for a variance. That same summer we were replacing our old deck and decided to put stairs from the deck to the yard. We didn't require a permit because the replacement deck was the same as the old.

When we found out that our neighbors tennis court would be 5 ft from our property line, we decided to object to the variance. It would have impacted trees and shrubs along our property line. We tried negotiating with our neighbors but they refused to make the tennis court a little shorter.

The Town Building Inspector came to inspect the area for the tennis court. He then came to speak to me and asked us to drop our objection, that the Town would give them the permit to build. My husband and I refused and said the Town should uphold the law.

The Inspector looked at our deck and said he noticed we added stairs to our deck. He said the wrap-around deck bordered three door-ways creating three entrances to our house. This required a permit. He said the Town could make us tear down our stairs. We were shocked as it was a direct threat.

We continued to fight the Tennis Court and the Town did refuse the variance because of our objections. The owners continued to pursue the variance all the way to the NYS Appellate Court where it was finally granted. It cost a small fortune for our neighbors to continue the fight for the Tennis Court. Our Town dropped out of the fight when they took it to the Supreme Court.


    Bookmark   April 1, 2010 at 11:21PM
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Jane...your town may have an ordinance regarding this issue which is why the REA's perform due in New York State, by law, in lieu of filling out a property disclosure form, the seller can give the buyer a $500.00 credit.

In our NJ town, they passed an ordinance a few years ago that all open permits must be satisfied prior to the title change...and all REA's were notified of such.

Consequently, this takes care of those folk who applied for permits...but never called for the final approvals. It still does nothing in terms of those who never applied for permits in the first place.

That said, once again, final approvals...valid or otherwise, are key to CYA in the event of a insurance claim.

Here is a link that might be useful: NYS Property Disclosure

    Bookmark   April 2, 2010 at 4:22PM
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I've spoken to five local residents since my original post. All five have done renovations without permits. One described me as "anal" for worrying about the issue.

    Bookmark   April 2, 2010 at 10:40PM
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People I know have also said it is anal to not fudge on your taxes.

    Bookmark   April 3, 2010 at 1:07PM
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From what you've mentioned, the main potential problem is if an insurance company were to deny a claim related to the basement because of the illegal work. I'm not saying it's likely, just a possibility. It sounds as if it permits aren't that important to buyers in your hometown.

    Bookmark   April 3, 2010 at 10:47PM
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Logic, you could be right. All I know is the Realtor's in my area go straight to the Towns to pull permits before listing a house.

It was recommended I not sign the disclosure so I gave the credit. I had no problem signing it, but my agent said she never recommends doing that.

When my house was on the market, I attended Open Houses in my area to see what was for sale. One house had a beautifully, finished basement with kitchen and full bath. The Agent explained that the sellers did not have permits for the construction but had filed. She explained that a credit would be given to any buyer for the legal costs involved in getting the permits.

I thought to myself, I'd never buy a house in that situation. That house is still listed, 2 years later with multiple price drops. I can't believe it hasn't sold as it was very nice for the price.


    Bookmark   April 3, 2010 at 10:56PM
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A few years ago, a deck of a rental house collapsed from the weight of young people having a party. Multiple people were severed injured. Unfortunately, it was discovered that the deck was built without a permit and the owner is SOL.

    Bookmark   April 3, 2010 at 11:09PM
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