How sellers can disclose ‘no building permits’
Q: We just listed our home for sale and are worried about disclosure liability. In the past year, our home has been completely remodeled without building permits. Some of your articles have stressed the importance of disclosing unpermitted work. We plan to follow your advice but are worried that this may not eliminate our liability. What can we do to sell our home without problems turning up later?
A: You are wise to approach this issue with caution and concern. In today’s business world, liability lurks around many corners. We can be sued for doing something wrong or doing nothing wrong, and in either case, attorneys are waiting to be hired.
Liability can never be fully eliminated, but it can be prudently reduced, and real estate disclosure is a sure way to exercise such caution.
When selling a home, every defect you disclose is removed from the list of potential liabilities.
But beware: With nonpermitted additions and alterations, the ways that you frame your disclosures can make a critical difference. Many sellers make a fatal mistake at this point in their transaction. Instead of simply declaring that the work was done without permits, they state or infer that the work was all done “according to code.” Disclosures of that kind are often made with utmost sincerity, but with little or no actual knowledge of building codes.
Sellers who are not professional contractors, building inspectors or architects have no idea whether improvements were done according to code. Codebooks are voluminous, exhaustively complicated, and not easily understood by persons outside of the construction professions.
When you disclose that work was done without permits, you should state that “no guaranty is made regarding compliance with building codes.” You should also recommend that buyers hire a qualified home inspector to evaluate the condition of the improvements, as well as the rest of the property. With that kind of disclosure, you should be reasonably safe from complaints after the close of escrow.
Q: Our home is on city water, but it has an old well. Before we bought it, the seller said, “You don’t really want to hook up the old well.” When we asked why, he said, “You’ll find out.” At the time, this didn’t seem important, so we dismissed it and closed the deal. Three months later, we received notice from the Environmental Protection Agency that an old gasoline tank leaked into the well and we are required to do an environmental cleanup. What should we do?
A: When a seller said, “You'll find out,” rather than telling you the whole story, that was a red flag. Your response should have been, “What do you mean, I'll find out? I want to know now what is wrong with the well.” Unfortunately, no one was there to advise you accordingly.
The seller was apparently aware of the problem and chose to withhold the details. Failure to disclose environmental contamination is a violation of law in most states. You should consult an attorney to learn what recourse is available to you under law.
• Distributed by Action Coast Publishing. Questions to Barry Stone can be emailed to barry@housedetective.com.