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Unpermitted Additions
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Randolph Kinney
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Cities tend to grandfather in unpermitted work after a while because there's so much of it, but they don't have to do so. As I've noted here in recent years, enforcement of unpermitted work has intensified as revenue-strapped cities scramble to generate more fee income.
As you may know, there are loads of unpermitted additions in Southern California because permitted renovations tend to cause steep property-tax hikes. Hence, many California property owners and their contractors willingly skip permits, which spares you fees and review costs but can, as you now see, create complications later. Such work often goes undetected unless a permitting authority has cause or duty to inspect, which it often does every few years in the case of multiunit rental properties.
Some code authorities will simply agree to sign off on an unpermitted addition on an "as-built" basis if it's safely constructed -- as long as you pony up the fees and, occasionally, fines. Sometimes, modifications are required. However, seldom will code authorities make someone tear down such work, though it does happen! Find out from the building department what steps you need to take. If the city's demands seem excessive, you may need an attorney to run interference. If you seek professional counsel, you might try doing an Internet search for "legalize unpermitted work" where you'll find several real estate and construction attorneys specializing in such problems as well as home-design firms that may offer to walk you through the remediation steps and remap your property. Check references, consumer reviews and Better Business Bureau ratings before proceeding, please.
http://www.bankrate.com/finance/real-estate/town-unpermitted-work.aspx
Most of the cities, here, allow retro permitting. The city of San Diego is the most lenient concerning unpermitted work because of the high number of hispanics that come from south of the border where there are no such things as building permit or inspection. They tend to live here like they were in Tijuana.
Improvised construction marks much of Tijuana's residential landscape.
As you may know, there are loads of unpermitted additions in Southern California because permitted renovations tend to cause steep property-tax hikes. Hence, many California property owners and their contractors willingly skip permits, which spares you fees and review costs but can, as you now see, create complications later. Such work often goes undetected unless a permitting authority has cause or duty to inspect, which it often does every few years in the case of multiunit rental properties.
Some code authorities will simply agree to sign off on an unpermitted addition on an "as-built" basis if it's safely constructed -- as long as you pony up the fees and, occasionally, fines. Sometimes, modifications are required. However, seldom will code authorities make someone tear down such work, though it does happen! Find out from the building department what steps you need to take. If the city's demands seem excessive, you may need an attorney to run interference. If you seek professional counsel, you might try doing an Internet search for "legalize unpermitted work" where you'll find several real estate and construction attorneys specializing in such problems as well as home-design firms that may offer to walk you through the remediation steps and remap your property. Check references, consumer reviews and Better Business Bureau ratings before proceeding, please.
http://www.bankrate.com/finance/real-estate/town-unpermitted-work.aspx
Most of the cities, here, allow retro permitting. The city of San Diego is the most lenient concerning unpermitted work because of the high number of hispanics that come from south of the border where there are no such things as building permit or inspection. They tend to live here like they were in Tijuana.
Improvised construction marks much of Tijuana's residential landscape.
Randolph Kinney
Elite Member
- Joined
- Apr 7, 2005
- Professional Status
- Retired Appraiser
- State
- North Carolina
Inman - Selling a home with unpermitted add-ons
Q: How do you handle a gigantic unpermitted addition when needing to sell?
A friend of mine (I know what you’re thinking, but really it’s not me) has taken his 1,500-square-foot house and made it a 3,000-square-foot house plus two-car garage, completely without permits of any sort. He lives in a million-dollar neighborhood. –K.C., Danville, Calif.
A: I’m sure you’ve heard the adagé that all that matters in real estate is "location, location, location," and the life cliché that "time heals all wounds." Reality check: When it comes to a flawed home being sold, the adage should be "disclosure, disclosure, disclosure," because that’s the transactional cure to whatever ails your friend’s home.
First off, it is not at all strange in your area for people to sell properties with unpermitted construction work. Homeowners do work without permits, most often, to save money — not necessarily on the actual construction work or even on the permits, but on the property tax increases that go along with permitted additions, especially those that add significant square footage and value to the home, like your friend’s.
In California, a large addition can cause a major hike — thousands of dollars per year — to the home’s property taxes on an ongoing basis. Accordingly, many homeowners hire licensed contractors and have construction work done to code without obtaining permits for it.
However, even when the construction quality is impeccable and complies with the municipal building codes, it absolutely must be disclosed on sale to have been completed without permits. If the unpermitted construction is an addition that increased the number of bedrooms, bathrooms or square footage, the listing and marketing documents should represent the property as having only the permitted number of beds, baths and square feet. The MLS listing and marketing materials can reference the unpermitted space, but should reference it as just that: "unpermitted" or "unwarranted" extra rooms.
If your friend prices the property attractively, taking the unpermitted space issue into consideration, there are many buyers who will take on such a project, even knowing that there are code and permit issues. But let’s be clear, by attractive pricing, I mean he’d have to price it lower than a home of similar size where all the rooms and square feet were "legal."
If he prices it right, buyers may bite. Many San Francisco Bay Area buyers are unafraid of unpermitted additions. Why? Well, it may cost a buyer less to take on an unpermitted addition and correct it than it would to construct the addition themselves or to buy a fully permitted home of the same size.
And, the fact is, many buyers simply don’t care whether the space is permitted if they are satisfied with the condition — and everyone has different standards about what condition is satisfactory to them.
Under California’s standard purchase agreement language, the buyer cannot report the seller or bring government inspectors into the property to call attention to the unpermitted addition.
Many homes with unwarranted work are sold every year in California without the sellers being subject to any governmental action for it; the key issue is to ensure that adequate and accurate disclosures are made to the buyer before sale.
http://www.inman.com/2010/08/06/selling-a-home-with-unpermitted-add-ons/
Q: How do you handle a gigantic unpermitted addition when needing to sell?
A friend of mine (I know what you’re thinking, but really it’s not me) has taken his 1,500-square-foot house and made it a 3,000-square-foot house plus two-car garage, completely without permits of any sort. He lives in a million-dollar neighborhood. –K.C., Danville, Calif.
A: I’m sure you’ve heard the adagé that all that matters in real estate is "location, location, location," and the life cliché that "time heals all wounds." Reality check: When it comes to a flawed home being sold, the adage should be "disclosure, disclosure, disclosure," because that’s the transactional cure to whatever ails your friend’s home.
First off, it is not at all strange in your area for people to sell properties with unpermitted construction work. Homeowners do work without permits, most often, to save money — not necessarily on the actual construction work or even on the permits, but on the property tax increases that go along with permitted additions, especially those that add significant square footage and value to the home, like your friend’s.
In California, a large addition can cause a major hike — thousands of dollars per year — to the home’s property taxes on an ongoing basis. Accordingly, many homeowners hire licensed contractors and have construction work done to code without obtaining permits for it.
However, even when the construction quality is impeccable and complies with the municipal building codes, it absolutely must be disclosed on sale to have been completed without permits. If the unpermitted construction is an addition that increased the number of bedrooms, bathrooms or square footage, the listing and marketing documents should represent the property as having only the permitted number of beds, baths and square feet. The MLS listing and marketing materials can reference the unpermitted space, but should reference it as just that: "unpermitted" or "unwarranted" extra rooms.
If your friend prices the property attractively, taking the unpermitted space issue into consideration, there are many buyers who will take on such a project, even knowing that there are code and permit issues. But let’s be clear, by attractive pricing, I mean he’d have to price it lower than a home of similar size where all the rooms and square feet were "legal."
If he prices it right, buyers may bite. Many San Francisco Bay Area buyers are unafraid of unpermitted additions. Why? Well, it may cost a buyer less to take on an unpermitted addition and correct it than it would to construct the addition themselves or to buy a fully permitted home of the same size.
And, the fact is, many buyers simply don’t care whether the space is permitted if they are satisfied with the condition — and everyone has different standards about what condition is satisfactory to them.
Under California’s standard purchase agreement language, the buyer cannot report the seller or bring government inspectors into the property to call attention to the unpermitted addition.
Many homes with unwarranted work are sold every year in California without the sellers being subject to any governmental action for it; the key issue is to ensure that adequate and accurate disclosures are made to the buyer before sale.
http://www.inman.com/2010/08/06/selling-a-home-with-unpermitted-add-ons/
Mike Kennedy
Elite Member
- Joined
- Sep 28, 2003
- Professional Status
- Certified Residential Appraiser
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- New York
http://www.bankrate.com/finance/real-estate/buyer-beware-work-done-without-permits.aspx
http://www.bankrate.com/finance/real-estate/new-homebuyer-must-fix-old-illegal-work.aspx
P.S. The Journalist is not a Licensed Broker, Agent, Appraiser, Home Inspector, or Attorney. Readers must qualify his opinions with a Municipal Building & Zoning Official and an Attorney who will review the specific local, city, county, and state Building & Zoning Laws to ascertain legal remedies for illegal improvements and uses.
http://www.bankrate.com/finance/real-estate/new-homebuyer-must-fix-old-illegal-work.aspx
P.S. The Journalist is not a Licensed Broker, Agent, Appraiser, Home Inspector, or Attorney. Readers must qualify his opinions with a Municipal Building & Zoning Official and an Attorney who will review the specific local, city, county, and state Building & Zoning Laws to ascertain legal remedies for illegal improvements and uses.
Last edited:
Randolph Kinney
Elite Member
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- Retired Appraiser
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Not in California, Mike. Unpermitted construction on existing homes sell every day of the year. Your myopic view of building permits represents your knowledge of your area and experience that you have in such matters.
I especially enjoyed the Inman article that describes, "... has taken his 1,500-square-foot house and made it a 3,000-square-foot house plus two-car garage, completely without permits of any sort. He lives in a million-dollar neighborhood."
And that will sell as-is.
Did you take notice of, "Under California’s standard purchase agreement language, the buyer cannot report the seller or bring government inspectors into the property to call attention to the unpermitted addition."?
Mike Kennedy
Elite Member
- Joined
- Sep 28, 2003
- Professional Status
- Certified Residential Appraiser
- State
- New York
Purchase Agreement language is not binding on a Licensed Appraiser.
Appraisers in this situation should remember a few things:
(1) The Uniform Standards of Professional Appraisal Practice
(USPAP including HABU "legal" use/improvements") apply;
(2) neither a seller or a buyer or their Agent, or their Lender has authority to exempt you from USPAP; and
(3) you “must not
advocate the cause or interest of any party or issue".
.
Appraisers in this situation should remember a few things:
(1) The Uniform Standards of Professional Appraisal Practice
(USPAP including HABU "legal" use/improvements") apply;
(2) neither a seller or a buyer or their Agent, or their Lender has authority to exempt you from USPAP; and
(3) you “must not
advocate the cause or interest of any party or issue".
.
Last edited:
Randolph Kinney
Elite Member
- Joined
- Apr 7, 2005
- Professional Status
- Retired Appraiser
- State
- North Carolina
Yep, and if you, acting as an appraiser, report accurately what is there and how the market reacts to the unpermitted work ... and the assignment condition is for as-is market value and the lender has no restrictions on valuing unpermitted work other than safety, soundness, security ... and the MLS listing fully discloses the unpermitted work ...
You seem to imply that you would report to the local authorities the contract sale of a home with unpermitted construction. Is that what you mean?
Mike Kennedy
Elite Member
- Joined
- Sep 28, 2003
- Professional Status
- Certified Residential Appraiser
- State
- New York
Review of local/applicable Laws governing both zoning and building ordinances, review of existing Municipal Property Records (Assessment, Zoning and Building requirements and property compliance), solicitation of property renovation/expansion/conversion etc. history with a current owner, review of prior MLS subject property history, is a requisite of HABU analysis and credible reporting in an appraisal. Municipal Inquiry to review (online and in person) both Assessment records and BZ records without revealing results of a site observation visit is required. The responsibility for legal compliance rests on the shoulders of an owner/seller. The responsibility for reporting accurate, reported municipal information and apparent compliance or non-compliance (EA, HC) as the basis for an opinion of HABU legal use (which includes Improvements) in an appraisal report rests on the shoulders of a Licensed Appraiser. "Don't ask" is not an option.
Randolph Kinney
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- North Carolina
As soon as the appraiser covers the unpermitted work in the appraisal report, and the effect it has on market value, legal or illegal, how it was marketed, enforcement by the local authorities or lack thereof, retro permits, etc., the job is done.
I know that is how I operate Mike, are you suggesting that I don't?
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