Selling a House With Code Violations or Unpermitted Work

There are two different problems here that get lumped together. A code violation is a notice from the city that something on the property breaks a rule, usually with a fine attached and a deadline. Unpermitted work is a change that was made without the permit it needed, which the city may not know about yet. Both can be sold with, both must be disclosed, and both shrink the buyer pool in ways worth understanding before you list.

Open violations

A recorded violation follows the property, not the owner. Many cities record a lien for the fines, which the title company will find and require paid at closing, and some cities will not issue the certificate of occupancy or resale inspection the sale needs until the violation is cleared. Fines that accrue daily can grow into a figure larger than the repair. The first call is to the code enforcement office to find out exactly what is open, what it costs to close, and whether the fine can be reduced if the work is done. Reductions are common and rarely offered unless asked for.

Unpermitted work

A finished basement, a converted garage, an added bathroom, a deck, an enclosed porch, a rewired kitchen: any of these done without a permit creates three risks for a buyer. The city can require it to be permitted retroactively, brought up to code, or removed. The buyer's insurer may refuse to cover it. And the buyer's appraiser will not count unpermitted living space at full value, which means the lender will not lend against it.

That last point is the one that costs sellers. A four-bedroom house where one bedroom is an unpermitted conversion appraises as a three-bedroom, and a buyer who needs a mortgage cannot pay the four-bedroom price even if they want to.

Your disclosure duty

If you know work was done without a permit, or you know a violation is open, you must say so in almost every state, and "I did not do the work, the previous owner did" is not a defence if you knew. Buyers can and do check permit history with the city, and a discrepancy between the disclosure and the record is the kind of thing that turns into a lawsuit after closing. Disclose what you know, in writing, and let the buyer price it. This is general information, not legal advice.

What the city can demand at transfer

A growing number of municipalities inspect a house when it changes hands and require repairs, or an escrow for repairs, before the deed can be recorded. Where that applies, unpermitted work and open violations are not merely a buyer's concern; they are a condition of closing. Ask the city, or the title company, whether a resale inspection or certificate applies to your address, and get it scheduled early. In many places it takes weeks and fails on things as small as a missing handrail.

Fix it, permit it, or sell it as it is

Legalising is worth doing when the work is close to code and the space adds real value, such as a well-built addition. It is rarely worth doing for a garage conversion that would have to be torn out to meet setback or parking rules, or for anything the city has already signalled it will not approve. The city's building department will often tell you, informally, which of those you have.

What a cash buyer does with it

A cash buyer does not need an appraisal or an insurer's approval to close, so unpermitted space does not stop the sale and does not have to be removed first. What the buyer does is price the cost of legalising or removing the work, and any open fines, into the offer. That is the whole of the transaction: you take a lower number and stop dealing with the city; they take on the permit process. If the violations carry daily fines, the speed alone can be worth more than the price difference. Related: the house needs repairs you cannot afford and selling a house with a lien, since recorded fines are liens.

Do first

1. Request the permit history and any open violations from the city, in writing.
2. Get the payoff figure for any recorded fines.
3. Ask the building department, before spending anything, whether the unpermitted work could be permitted as built.
4. Write the disclosure now, while the facts are in front of you.