How to handle open permits is often a common question associated with real estate transactions.
When a property owner wants to perform certain work to their property they typically have to secure a permit from the governing municipality. The governing municipality then performs an inspection of the work once the work is completed. If the work passes inspection the permit is then closed.
But there are times when a permit is not closed. For instance, even if the work permit was secured the owner may have failed to either start or complete the work. Perhaps the work was completed but someone neglected to secure an extension to close the permit. Or perhaps an inspection of the completed work revealed deficiencies and the owner failed to remedy those deficiencies. And then there is the situation where perhaps the permit simply expired and the owner failed to follow up to either have the permit closed or re-issued.
Failing to properly close a permit could end up costing the owner lots of money. That is because such a situation may result in the issuance of a building code violation which can result in the imposition of a monetary fine.
As a result, many lenders and purchasers will require that a permit search be conducted before the completion of the transaction. The permit search is being done to determine if there are any permitting related issues that need to be addressed before the completion of the transaction.
This is important because open permits are not covered by title insurance. Open permits are considered matters of zoning and therefore are excluded from title insurance coverage. If you are a buyer of real estate it is imperative that you order a permit search to learn of any potential issues lurking. Indeed, if you are a real estate agent representing a buyer you may even wish to include some language in the sales contract confirming the seller’s obligation to close any open and expired permits. If you are a seller, then you may wish to perform your own permit search prior to any sale.
ABOUT THE AUTHOR. Hugo V. Alvarez is a shareholder at the law firm of Becker & Poliakoff. He is the 2017 Dade County Bar Association’s Legal Luminary Award winner. He was also named to the Best Lawyers in America in Real Estate related litigation.