How Building Permits (or Lack Thereof) Can Come Back to Haunt You

Law Office of

Michael J. Fleck, P.C.

-Illinois Legal Topics-

by Michael J. Fleck, Esq.

WARNING: THIS IS NOT LEGAL ADVICE. CONSULT YOUR ATTORNEY FOR INFORMATION CONCERNING YOUR PERSONAL SITUATION. This is a series of discussions on legal issues in Illinois. Topics covered include Real Estate, Estate Planning and Administration (wills, trusts, probate and guardianship), Business Law, Employment and Civil Litigation.

by Michael J. Fleck, Esq.
Law Office of Michael J. Fleck, P.C.

Huntley, Illinois

www.flecklawoffice.com

Member:  Illinois Real Estate Lawyers Association (IRELA)

It's very common for homeowners to make improvements to their residence without first obtaining the proper permits.  "It's a little project",  "Who's going to know?", and "I didn't realize that a permit was required" are among the comments we hear from clients.

Building permits are definitely not on the list of popular topics for homeowners hoping to make additions or improvements to the interior or exterior of their residence, and often, one will make the decision to avoid getting one.  Permits cost money.  Permits require the construction to be done a certain way or performed by a qualified, licensed professional.  Permits will affect property taxes in the future, since the value of the improvement will be included in future assessed values.  And, Permits may not allow certain improvements to be made at all due to code or property restrictions such as setback lines or easements.

Because of these problems, a homeowner may go ahead and do the work without a permit.  But here's the problem(s) that can arise as a result.

First, the governing body may become aware of the unpermitted improvement and take enforcement action against the homeowner.  This may include stoppage of work and removal of existing work, fines, penalties, reassessment and imposition of property taxes, and increased permitting costs (some municipalities charge double or triple for the issuance of a permit after work has commenced).

Second, the work may be unsafe.  Whether one would agree or not, the permit process is designed in part to make sure that improvements are completed to applicable code.  This is especially important with electrical, gas or plumbing work.  Failing to follow code could be a safety issue for the occupants and guests, or in some cases, the neighbors.  All of this may expose the homeowner to liability and in some cases, insurance coverage issues.

Third, and this is where this particular post is focused, when it comes time to sell, unpermitted improvements can create problems for the homeowner.  A homeowner may enjoy unpermitted improvements for many years, having saved money on the cost of the permit, the price of the construction, and the exclusion of the improvement from assessed values.  But when it comes time to sell and convey the property to a willing buyer, who can see an improvement such as a basement renovation or a patio or deck, if the buyer is aware that he or she is taking on risk associated with the improvement for ordinance or building code violations, safety issues, or increased tax bills, then the buyer may back out, or seek recovery post closing for misrepresentation.

Current standard real estate contracts often contain a representation from the seller that expressly state that the seller is not aware of any improvements to the real estate where initial and final improvements have not been obtained.  This representation survives the closing.  If a seller is found to have known (or should have known) that a permit was required for a project and did not obtain the necessary permits, a buyer may be able to bring an action for breach of contract, fraud and misrepresentation.  Sellers usually want to sell and move on, and not be burdened with the potential of or actual litigation post closing.

Also, the improvement may raise issues during the home inspection period.  If an inspector sees a basement renovation, and notices that the outlets are not spaced properly, or that GFCI outlets are not used where they should be, the inspector may report that these issues need to be corrected, and it may send up a red flag that the work was not done according to code and therefore, likely not properly permitted.  

Wary buyers may not be willing to take on the risk of projects that were not done right.  They may also be concerned that the property is taxed a certain way (for example, with an unimproved basement) and when it is realized that the improved basement will be added to the taxes in the future, the tax bill may increase significantly.  This can be another source of potential litigation between buyer and seller.

It is uncomfortable to say the least to have to delay a closing or negotiate a resolution to permit issues because it was discovered at the eleventh hour that a permit issue is present in a residential real estate transaction.  All of the savings that the seller was planning on by not obtaining a permit can be lost trying to scramble and rectify the situation to the satisfaction of the buyer.

The better option for a homeowner is to obtain the proper permits.  The homeowner is assured that the work is allowed as proposed, that it will pass applicable code, that it will be properly and timely revealed to the taxing authorities, and that the seller can confidently state to a future buyer that all work was properly done and disclosed, and that the bargained sale price is properly reflective of all improvements to the property.

If you have questions on these and other matters, do not hesitate to contact a qualified real estate attorney.

-Michael J. Fleck is an attorney in Huntley, Illinois with the Law Office of Michael J. Fleck, P.C.

WARNING: THIS IS NOT TO BE CONSTRUED AS LEGAL ADVICE. 

CONSULT YOUR ATTORNEY FOR INFORMATION 

CONCERNING YOUR PERSONAL SITUATION.

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