You are interested in purchasing a renovated property, this gorgeous house in a great established neighbourhood has been completely renovated top to bottom, it just looks great, and is everything you have ever wanted.
Do I have anything to worry about?
Yes, one of many items you have to check are the construction permits.
CHECK IF THE PERMITS WERE OBTAINED.
Why is this important?
Most major renovations will require some kind of permit, examples of work requiring permits are new additions, load bearing walls, installing new plumbing, adding entrance to a basement, installing solar system, changing fire place from gas to wood, and many more (please contact your municipality for details). Obtaining a permit will not guarantee quality of work, but should ensure the renovation is done to code, zoning bylaw and safety standards. It also indicates the owners did not want to cut corners to save a few dollars by not obtaining permits.
CHECK IF THE PERMITS WERE CLOSED.
Closing a permit is as important as getting a permit, it means the town inspector signed off on the project.
What are the consequences of not closing the permit?
The Ontario courts recently decided that open building permits pose a significant risk, and if the seller is unable to close the permits, the buyer may be entitled to back out of the purchase.
Open permits could prevent the seller from delivering a clean title, and if the lender discovers open permits it could prevent the purchaser from getting financing.
The problems don’t end there. What will happen if the sale went through and now you are a proud owner of the property with open permits, in some cases if all the work is done to code, it will pass the final inspection without much consequences. But what if the inspector can’t see what’s done behind the walls, the height of the addition exceeds the max allowed, or the pool is too close to the property line. The onus will be on you to correct the issues, and it could be very costly. You may have an option to sue the seller, but the town inspector is not interested in who took the permits, they only care about closing it, and the current owner is responsible for that.
I found the property I love, but discovered it has open permits, what are my options?
Listed below are a few options you may take.
- Assume the outstanding permits with all risks associated.
- Require the seller to rectify the permits before or after closing.
- Walk away.
- Put a holdback or reduction conditions in the agreement.
In summary, before buying any property make sure you or your representative have checked for open and closed permits.
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