How to Disclose “No Building Permits”

How to Disclose “No Building Permits”

DEC
04
2010
The House Detective: by Barry Stone, Certified Home Inspector

Dear Barry: We just listed our home for sale and are worried about disclosure liability. In the past year, our home has been completely remodeled without building permits. Some of your articles have stressed the importance of disclosing non-permitted work. We plan to follow your advice but are worried that this may not eliminate our liability. What can we do to sell our home without problems turning up later? Eugene

Dear Eugene: You are wise to approach this issue with caution and concern. In today’s business world, liability lurks around every corner. We can be sued for doing something wrong or doing nothing wrong, and in either case, attorneys are waiting to be hired. Liability can never be fully eliminated, but it can definitely be reduced, and real estate disclosure is a sure way to practice this principle.

When selling a home, every defect you disclose is removed from the list of potential liabilities. But beware: With non-permitted additions and alterations, the ways that you frame your disclosures can make a critical difference. Many sellers make a fatal mistake at this point in their transaction. Instead of simply declaring that the work was done without permits, they state or infer that the work was all done “according to code.” Disclosures of that kind are often made with utmost sincerity, but with little or no actual knowledge of building codes.

Sellers who are not professional contractors, building inspectors, or architects have no idea whether improvements were done according to code. The code books are voluminous, exhaustively complicated, and not easily understood by persons outside of the construction professions.

When you disclose that work was done without permits, you should state that “no guaranty is made regarding compliance with building codes.” You should also recommend that buyers hire a qualified home inspector to evaluate the condition of the improvements, as well as the rest of the property. With that kind of disclosure, you should be reasonably safe from complaints after the close of escrow.