Unpermitted Additions

[Randolph Kinney]

But, but, but the HABU is ILLEGAL

and illegal is as illegal does!

Yes, illegal additions have a market value when these sales without building permits are occurring in the open market with full disclosure by appraisers and Realtors. It simply means that the local authority is not enforcing the building code or that the permitting process allows for retro permits.

And, Fannie Mae has no problem with buying mortgages on these same properties that have additions without building permits.

I like the phrase that Fannie uses in its allowance for properties without the required permit: "If the appraiser identifies an addition(s) that does not have the required permit, the appraiser must comment on the quality and appearance of the work and its impact, if any, on the market value of the subject property."

It is clear to Fannie Mae that properties can have additions without the required permit and they can be acceptable to the market. Therefore Fannie Mae will buy these mortgages.

 

[Pam Wyant]

Yes, illegal additions have a market value when these sales without building permits are occurring in the open market with full disclosure by appraisers and Realtors. It simply means that the local authority is not enforcing the building code or that the permitting process allows for retro permits.

And, Fannie Mae has no problem with buying mortgages on these same properties that have additions without building permits.

I like the phrase that Fannie uses in its allowance for properties without the required permit: "If the appraiser identifies an addition(s) that does not have the required permit, the appraiser must comment on the quality and appearance of the work and its impact, if any, on the market value of the subject property."

It is clear to Fannie Mae that properties can have additions without the required permit and they can be acceptable to the market. Therefore Fannie Mae will buy these mortgages.

And probably later go after the appraiser if somewhere down the road the governing authority requires the addition to be removed...

 

[Meandering]

And probably later go after the appraiser if somewhere down the road the governing authority requires the addition to be removed...

Actually,
The permit officer, township, Boro, parish, whatever, has a DUTY to enforce their codes. And they are paid with taxpayer funds, their budgets come from taxpayer funds, so they have a FUDICIARY DUTY TO THE TAXPAYERS to enforce the permit and zoning codes.

How old is this addition?

Can we find a bigger pocket than the appraiser?

Would stink for the municipality to issue a fine and get a lawsuit instead.

.

 

[Randolph Kinney]

And probably later go after the appraiser if somewhere down the road the governing authority requires the addition to be removed...

Not likely. The appraiser is not the permit police. All the appraiser can do is report what is there and how the market values it. Full disclosure including discrepancies with public record and measured GLA and knowledge of permits or the lack thereof. If the buyer goes through with purchase and the lender makes a loan on the property, and the appraiser makes a full disclosure of what is there, any action taken by the local authority after that falls on the buyer and the lender.

If the real permit police were actively enforcing that requirement, there would never be a case where a property transferred with lack of permits, especially a sale in the open market with full disclosure by the Realtors and the seller.

 

[23Degrees]

I think Randolph has covered most of the salient points on this. A report with full disclosure, proper valuation methodology, appropriate CMA language, and without unnecessary expansion of scope (read - workman like manner) is something that can be done in these no permit situations without the sky falling. And I say this as a former Chicken Little on this issue to some extent (possibly even within this thread but I didn't check) but would still caution that there is probably a whole separate discussion that could be had regarding adequate CMA and clarification when proceeding with one of these. Inadequate CMA could turn something that should not have been a problem into a problem if you get an unlucky assignment.

One caveat - When the no permit addition or conversion results in a change of use as defined within the zoning of a particular municipality it might no longer qualify under the permissible test for HABU depending on the zoning laws. This is where it is possible for appraisers to mess up on this and be subject to liability from a number of sources. A change of use where I reside would include moving from an SFR to a duplex or from a duplex to a triplex. If the new use is not allowed either within zoning entirely, or for the subject property for any specific reason then the point made by some that it needs to be marked "illegal" and is therefore not eligible as HABU becomes valid. IMO the illegality of a "feature" such as a no permit pool, no permit room addition, or lack of garage needs to be addressed within the report per statement 1 but does not necessarily result in an illegal use that would negate HABU eligibility and therefore disqualify the property.

Speaking of garage conversions, I was stuck on whether or not these constituted a change in use but I think I might have come to an opinion for my area on this. In the major cities where I work there is a use documented as SFR. There is no documented use "SFR with Garage" that I am aware of in the cities where I have looked. Conversions, assuming an apartment was not created, are therefore an illegal feature that present challenges and problems that need to be properly addressed within the report but not necessarily a change in use and therefore not an "illegal" use as would need to be clarified within the zoning compliance section. And yes I've done a 180 on this but hopefully we can all be allowed to learn and grow here.

 

[Mike Kennedy]

Standing Invitation to all Interested Parties:
Kindly post from a recognized Appraisal Source (Appraisal of Real Estate, Dictionary of Real Estate, USPAP etc.) an industry accepted Definition of Highest and Best Illegal Use. Thanks in advance.

http://apps.americanbar.org/litigat...3-real-estate-appraiser-highest-best-use.html

 

[Randolph Kinney]

So everyone encountering a residential property where a building permit cannot be verified should check the illegal box for zoning compliance on page 1 of the 1004 form? And, check the "NO" box for highest and best use?

And be sure to cite #1 under Statements of Assumptions and Limiting Conditions that it is your opinion on matters of a legal nature.

From the article: "Highest and best use means the most profitable use that can be made of real property. This determination drives the selection of comparable sales, if the market approach is used to value property ... "

"The appraiser should review the existing and proposed use by reviewing the zoning and planning designations for the property, as well as any permits that apply to it. If the use is allowed under existing zoning, this element is satisfied."

"If the use requires a conditional use permit (CUP) or a variance, the appraiser should determine whether it is reasonably probable that the applicable zoning authority would issue the CUP or variance."

The article clearly defines use as a building permit? As determined by comparable sales?

 

[Mike Kennedy]

Another example:

San Diego County - CA

SEC. 91.1.111.1. ILLEGAL TO USE OR OCCUPY WITHOUT CERTIFICATE OF OCCUPANCY.
It shall be unlawful for any person to use, to occupy or to change the existing use or occupancy of a building or structure or portion thereof until the building official has issued a certificate of occupancy as provided in this chapter.

EC. 91.1.111.4. REVOCATION OF CERTIFICATE OF OCCUPANCY.
The building official may suspend or revoke a certificate of occupancy issued under this chapter whenever the certificate is:
(a) issued in error,
(b) based on incorrect information supplied or
(c) when the building official determines that the building or structure or a portion thereof is in violation of this chapter or any other County ordinance or regulation. Whenever the building official suspends or revokes a certificate of occupancy the building official shall provide written notice to the owner and occupant of the building or structure.

SEC. 91.1.112.3. AUTHORITY TO DISCONNECT SERVICE UTILITIES.
(b) The building official may also authorize disconnection of utility service to a building, structure or system regulated by this chapter when the building official determines that any connection was made without a permit required by this chapter or that a permit was obtained based upon inaccurate or incomplete information or in violation of this chapter,
this code or any other County ordinance or regulation.

Any utility installation (1) without a proper permit, (2) with a permit obtained based upon inaccurate or incomplete information or (3) with a permit issued in violation of this chapter, this code or any other County ordinance or regulation shall be considered hazardous or potentially hazardous to life and property.

(c) The building official may also authorize disconnection of utility service when the building official has previously granted a permit to connect to utility service, but determines there has been an illegal or dangerous use of utility service. The building official may order the person illegally using the utility service to immediately cease using the service on receipt of thenotice and not to reconnect until the building official authorizes the connection.

SEC. 91.1.114.1.UNLAWFUL TO VIOLATE COUNTY BUILDING CODE, COUNTY ELECTRICAL CODE, COUNTY PLUMBING CODE AND COUNTY MECHANICAL CODE.
It shall be unlawful for any person to use any property or erect, construct, enlarge, alter, repair, move, remove, improve, convert, demolish, equip, use, occupy or maintain any building or structure, or cause the same to be done, contrary to or in violation of any of the provisions of this chapter, the County Building Code, County Electrical Code,County Plumbing Code or County Mechanical Code.

SEC. 91.1.114.2. DUTY TO CORRECT VIOLATION.
Paying a fine or serving a jail sentence shall not relieve any person from the responsibility for correcting any condition which constitutes a violation of section 91.1.114.1.

A property owner shall be considered to have allowed any use or improvement of property occupied by, or under the dominion and control of the owner and the owner shall be responsible for the discontinuance and removal of any violation of section 91.1.114.1. The responsibility under this section shall include property leased to another person.

A property owner shall also be responsible for the discontinuing and removing any violation of section 91.1.114.1 that existed on the property at the time the current owner purchased the property.


EC. 91.1.114.4. CITATION AUTHORITY.

The building official may arrest a person without a warrant Pursuant to Penal Code section 836.5, whenever the building official has reasonable cause to believe that the person arrested has violated this chapter. The person making an arrest under the authority of this section shall follow the citation-release procedures prescribed by the Penal Code or any procedure enacted by the State of California after the effective date of this section. No person shall exercise the power to issue a citation authorized by this section unless the person has completed a course of training that meets the minimum standards prescribed by the Commission on Peace Officer Standards and Training established in Penal Code section *32(a).


SEC. 91.1.114.5. REFUSAL TO ISSUE OR SUSPENSION OF BUILDING PERMIT.
The building official may refuse to issue or may suspend any building permit, including a plumbing, electrical, mechanical or structural permit, if the building official determines that there is a violation of this chapter or any other ordinance or regulation involving the property upon which the permit was applied for or was issued. The building official shall provide written notice of the suspension or refusal to issue to the permit holder or applicant, as the case may be. The written notice shall identify any violation being committed and the action necessary to correct each violation. The building official shall rescind the suspension or refusal to issue a permit upon submission of evidence satisfactory to the building official that each violation has been corrected. While a permit is suspended under this section it shall be unlawful to perform any work of any kind on the project. Each day a person continues to work on the project after a permit has been suspended under this section is a separate offense.

CERTIFICATE OF OCCUPANCY If a building or structure was completed before the permit was issued it shall be unlawful
to occupy or use the building or structure until all inspections and approvals required by this chapter have been completed.
(b) When the building official reviews a building permit application or issues a permit to a person who commenced work without a permit in violation of this chapter, the building official may impose a deadline within which the applicant is required to correct deficiencies in the application or obtain a final inspection. The deadline shall be no more than one year from the date the permit was issued. The building official may grant a one time permit extension
under this section for up to one year for good cause.
n unsafe condition. shall be deemed an unsafe condition.

(c) If each deficiency in the application is not corrected within the deadline, or the permit does not receive inspections within the deadline, the project associated with the plan review or the building permit shall be considered to be in violation of this chapter.
The County may abate the violation including removing or razing any building or structure, issue citations, assess civil penalties, and take other Enforcement action for reasons of inadequate progress until such time that the violation has been corrected.

SEC. 91.1.116.1 UNSAFE BUILDINGS OR STRUCTURES.
A building, structure, or electrical installation that is or becomes unsafe, unsanitary or deficient because of inadequate means of egress facilities, inadequate light and ventilation or which constitute a fire hazard, or are otherwise dangerous to human life or the public welfare or inadequate maintenance, shall be deemed or
that involve illegal or improper occupancy or inadequate maintenance, shall be deemed an unsafe condition. Unsafe structures shall be taken down and removed or made safe, as the building official deems necessary and as provided for in this section.

EC. 91.1.117. JUDICIAL CIVIL PENALTIES.
As part of a civil action filed by the County to enforce provisions of this Code, a court may assess a maximum civil penalty of $2500 per violation for each day during which any violation of any provision of this Code is committed, continued, permitted or maintained by such person(s).

As part of a civil action, a court may also enjoin a person from violating any provision of this Code and assess a maximum civil penalty of $6000 for each day any person intentionally violates the injunction."
http://www.sandiegocounty.gov/content/dam/sdc/dplu/docs/amended_code_05-13-2011.pdf

 

[Mike Kennedy]

P.S. HIGHEST AND BEST USE
The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.

 

[Randolph Kinney]

And yet homes around here sell and resell with additions that don't have the required permits.

See the attached MLS listing disclosing addition without permits.

See the attached county record showing both the MS GLA and the TAX GLA.

I appraised this one as-is. Fully disclosed with other comps that also had additions without permits.