The freedom to do whatever you want with your home is an attractive benefit of homeownership. For some, that freedom means converting a garage into a bedroom, adding a deck, enclosing a sun porch or making other improvements without getting a building permit.
But if you buy a home with unpermitted renovations, it can create a financial nightmare for you, the new homeowner.
How to uncover unpermitted construction
Unpermitted renovations aren't easy to uncover, says Kim Bregman, broker/owner of Optima Properties, a realty brokerage in Boca Raton, Fla. One way to find them is to look for anything in the home that appears to be inconsistent with the original floor plan.
Another way is to ask the sellers and their agent whether any changes have been made.
The local building department can provide details, too. Public records, on paper, microfilm or online, show what permits were obtained and whether those permits were completed, or "closed," with a final inspection by a city inspector, Bregman explains.
"If you see new bathrooms, a fence that has been added or anything like that, you should see if a permit was pulled for it. If you cannot find a permit, that's your first red flag," Bregman says.
Don't count on an appraiser, title agent, closing attorney or home inspector to identify unpermitted construction.
"An inspector might say something like 'it appears that this (room) might have been an addition' or 'this was done, and I cannot locate a permit' or 'further research needs to be conducted to determine if this was permitted work.' The inspector isn't going to say yes or no, but they are going to flag it," Bregman says.
Risks of unpermitted construction
Construction that's shoddy or not up to code obviously can create safety hazards.
But that's not the only risk, says John LaRocca, president of LaRocca Inspection, a home inspection company in Burbank, Calif.
"If you purchase property with unpermitted construction, you assume any and all liability related to it," LaRocca says. "If the building department gets wind of the situation, you'll be responsible to take whatever steps are necessary to get it permitted or put it back the way it was. If it's an addition that can't be permitted, they have to ask you to remove it, take it down, destroy it."
Some building departments will allow you to discuss unpermitted construction with them informally and anonymously to find out what would be required to remedy it. That can be helpful, LaRocca suggests.
If the renovation must be removed, you'll have to pay for demolition and you'll lose the use and value of that portion of the property, LaRocca adds. You might end up with a home that no longer suits your needs.
Saying "the prior owner did it" is no defense, and if you refuse to comply, the local authorities can impose fines or take you to court, says Linda Pieczynski, a municipal code enforcement prosecutor in Oak Brook, Ill.
A fine might sound like an easy out, but, Pieczynski says, most codes and local ordinances say that every day of non-compliance is a new violation. A $500-a-day fine can add up fast. You might even have to hire an attorney, too.
Local authorities typically find out about unpermitted construction when more work is done and a city inspector sees prior renovations for which no permit is on file.
Or, often enough, "a neighbor rats them out," Pieczynski says.
A contractor can tell you how much it might cost to make unpermitted work code-compliant, and you can apply for a permit after the fact, Pieczynski says. There's no way to know for sure whether the permit will be approved, however.
How to remedy unpermitted construction
One way to avoid these problems is to stipulate that the seller must remedy all unpermitted construction as a condition of the sale, Bregman says. Some sellers will agree. Others won't, especially if other buyers are willing to purchase the property as-is.
Whether you should walk away if the seller refuses to remedy the situation depends on the nature of the problem, your resources and risk tolerance.
"If the seller won't fix it," Bregman says, "you have no idea how much unpermitted work there really is."
Marcie Geffner is an award-winning freelance reporter, writer, editor and blogger whose work has been published by MSNBC, CNBC, Yahoo! Finance, Fox Business, Bankrate.com, AOL Real Estate, ThirdAge.com, Fidelity.com, Inman News and dozens of major U.S. newspapers. She holds a bachelor's degree in English from UCLA and MBA from Pepperdine University. You can follow Marcie on Twitter: @marciegeff.