On October 31, 2021 I updated this post for the new, version (6), of the FAR BAR As-Is changes. The AS-IS clause 12a did not change but the permits clause did slightly BUT it really does not affect how permits are handled in the last version of the Contract.
I also did THIS post on Buying or Selling a home with non permitted work. But for this post we are assuming that the property is under contract and is using the most recent Far Bar As-Is contract.
Sometimes there’s a building permit (or many) that were pulled by the current, or former owner, that was not properly closed. Or, there was work done at the property which should have been permitted but it was not.
First, if the Owner or their agent has knowledge of any of these cases then they are required to disclose it to the Buyer. AND, the Contract states in it that:
Second, and again assuming we are using the Far Bar As-Is, Section 12 basically states that if the Buyer does NOT cancel the Contract then they are accepting the property with any permit issues:
So basically, the Seller/Agent is required to disclose any permitting issues and assist the Buyer in closing any permits but are NOT required to spend any money to do this.
Here’s the problem. Most Sellers have no idea there are open permits, or work that would have required a permit, during the Inspection Period. Now a good inspector should be able to tell a Buyer: “This looks new and it would require a permit…you should check.” But most Buyers do not look for open permits DURING the inspection period as they should. These are often found when the Title Agent requests Municipal Lien Certificates (MLC’s) from the local town and these come back showing open permit(s). But by then we are a week or so before the Closing. It’s silly they even do this because it does not affect title but they do it anyway. Bottom line, walk around the house and look for anything that has changed since the property was first built. Ask: Did that require a permit? Was one pulled? Was it closed? The trust but verify and Look for open permits DURING THE INSPECTION PERIOD.
Or, and this is what many agents are doing now, include some language in the Contract that addresses 1) Closing open permits and maybe even 2) Pulling a permit for work which should have been permitted but was not. These are a few example of the verbiage I’ve seen but none of it, looks anyway, to have been drafted by a lawyer:
Section 12 of the Contract is modified as follows to provide for the Buyers inspection of open and/or expired building permits at the Property. Section 12C of the Contract is deleted and replaced as follows: At least 10 days prior to the Closing Date the Buyer may notify the Seller of any open permits and/or expired permits or non permitted work. In the event of any open and/or unexpired Permits the Seller shall, at the Sellers sole expense, Close or finalize these permits prior to the Closing Date. In the event of any work performed at the Property which would require a building permit then the Seller may, at their option, have such work properly permitted, at their sole expense, prior to the Closing Date. Should the Seller choose not to permit any work which would otherwise require a permit then the Buyer may have the option of cancelling the Contract between both parties and all Escrowed Funds shall be immediately returned to the Buyer.
And, another one:
Notwithstanding any provision herein to the contrary, the parties agree that Seller will, prior to closing, at Seller’s expense, close all open or expired permits and will remedy any violation of governmental, building, environmental, and safety codes, restrictions or requirements, including improvements made without permits. Seller shall deliver to Buyer evidence of compliance by providing final and specific governmental approvals no later than 5 days before closing. In the event Seller is unable to bring the property into compliance prior to closing, the closing will be extended for up to 10 days in order to obtain all governmental approvals, failing which the parties may thereafter elect to extend the closing date, or terminate this Contract. In the event this Contract is terminated, the Deposit paid shall be returned to Buyer, thereupon Buyer and Seller shall be released of all further obligations under this Contract.
Time is of the essence with regard to any of the provisions of this Addendum. Except as expressly set forth herein all of the terms of said Contract are incorporated herein by reference. The express terms of this Addendum shall govern and control in the event of any conflicts with the terms of said Contract. The Buyer and Seller agree that the language of this Addendum and the Contract shall be construed according to their fair meaning and not strictly for or against either party. This Addendum constitutes the entire agreement of the parties hereto with respect to the matters addressed herein, and supersedes all prior or contemporaneous contracts, promises, representations, warranties, and statements, whether written or oral with respect to such matters; and this Agreement may not be changed except by a written agreement signed by all the parties hereto.
And, another one:
The Seller shall close any open/expired building permits associated with the Property and shall pay all costs/fines/liens associated therewith. The Seller shall close any open municipal code enforcement cases associated with the Property and shall pay all costs/fines/liens accrued as a result of any code enforcement actions at the Property.
The previous one does not address work which should have been permitted.
