Unpermitted Remodeling – What Realtors®Need to Know

Posted on by Phil Querin

What Must Sellers Disclose? Oregon’s Property Disclosure form asks sellers whether they have had any additions, conversions or remodeling to the home. If the answer is “yes” the form asks three follow-up questions; (1) Was a building permit required? (2) Was a building permit obtained?  (3) Was a final inspection obtained?

Seller and buyer agents should always be mindful of the fact that a seller’s answers to these questions can vary greatly depending upon how the question is interpreted:

  • Since the seller’s answers are provided upon the basis of his/her actual knowledge at the time of disclosure, Sellers who have lived in the home for a comparatively short period of time may have little or no knowledge about what additions, conversions or remodeling occurred prior to their ownership;
  • Even if they are aware of such work having occurred either prior or during their ownership, they may have no knowledge as to whether a permit was legally required for the work to be done;
  • If work was performed, the seller may regard it as merely “cosmetic” and therefore not qualifying as an “addition,” “conversion” or a “remodel;”
  • If the work was performed by a contractor, the owner may incorrectly assume that permits were pulled and the work inspected for compliance with the building codes.

For all of the above reasons, Realtors® should be alert to the distinct possibility that a seller’s answers to questions concerning remodeling may not always be totally reliable, even when made in good faith.

While Oregon law does not require that real estate brokers be “experts” on the issue of code compliance, it does not permit them to close their eyes to the obvious.  The same is true of buyers.  Here are some warning signs:

  • The home’s garage or attic has been converted to a sleeping area;
  • An older home is advertised as having been “updated” or words to that effect;
  • The style of the kitchen or bathroom obviously post-dates the home’s original construction;
  • There is a finished basement with electrical and plumbing installed.

In cases such as these, and many others, the following questions must be asked:

  • Who performed the work?
  • Was a permit required?
  • Was one obtained?
  • And did it go through a final inspection?

These questions should be asked regardless of the seller’s answers in the property disclosure form – in other words “trust but verify.”

There are several reasons for following this practice:

  • From the listing broker’s perspective, learning this information in advance can avoid a possible sale-fail late in the transaction when it is discovered;
  • For both brokers it reduces the risk of being accused of being complicit in a cover-up;
  • From the buyer broker’s perspective, checking with the building department early on can eliminate buyer claims after closing , since then the problem will have to be cured before the buyer can seeking permits for any further work and before placing the home on market to re-sell; and
  • Most importantly, verification and curing (where necessary) reduces the danger that illegally or poorly performed work might result in a catastrophic fire or other disaster causing injury or death to a buyer or buyer’s family.

When is a Permit Required?The answer to this question is not always clear and is oftentimes confusing.  And sellers’ answers in the property disclosure form can vary dramatically.2 It is true that generally owners themselves may perform work on their own home without hiring a licensed contractor.3 However, homeowners performing their own work are nevertheless subject to the same permit requirements as if they hired a qualified contractor.  That is, they all must apply for and obtain the necessary permits and have the work inspected for code compliance. Work performed by a seller does not eliminate complying with the building codes.

If the work involves interior plumbing, such as repair, replacement, or relocation of lines, chances are a permit is required. The same holds true for new plumbing fixtures, such as toilets, sinks, tubs, etc.  Even replacing an existing fixture, such as a tub or shower, can require a permit, if it involves concealed plumbing connections. A permit is generally not required to replace accessible plumbing fixtures or to make certain emergency repairs.  If a bathroom is added to a home, this may involve obtaining not only a plumbing permit, but a building permit, an electrical permit and mechanical permits (defined below).

Work involving exterior plumbing such as sewer lines, septic systems, cesspools and drywells can require a permit. In some instances, the contractor must also be licensed by the Oregon DEQ.

Repair, replacement or installation performed on heating, cooling or ventilation systems is known as “mechanical” work for which a permit may be required. This can include installing or changing any part of a home’s heating or cooling systems, wood stoves, fireplace inserts, gas piping or fuel oil tanks.

When electrical work is done on a home by the owner, he/she must also be the occupant – otherwise a state licensed contractor must perform the work. A permit is required to install, change or repair any hard-wired electrical system. This includes installing additional wiring, adding an electrical outlet or light fixture, or changing a fuse box to circuit breakers. Even installation of low voltage systems, such as phones or security systems, may require a permit.

Building permits are required almost any time a dwelling is enlarged or altered in any material way. Examples would include finishing an attic, garage, basement, moving or adding walls, some deck and porch construction, etc. When building permits are not required, but there are concerns about how the site is used, a zoning permit may be required. For example, enlarging a driveway or paving a parking area, may require the owner to obtain a zoning permit.

Permits, if required, must be purchased before the work is performed. Any work performed under a permit must be inspected for code compliance. The permit expires after 180 days if it has not been inspected.  If the city or county becomes aware that work has been performed without the necessary permit(s), the homeowner will be notified by mail to either purchase the necessary permit(s), or in the case of more complex work, to submit plans to the proper authorities. If the requested action is not obtained, the matter is turned over to code compliance authorities for follow-up. If necessary, the authorities have the power to take administrative action or issue fines against the owner of a home if the necessary permits were never issued. Since the enforcement action is against the record owner of the home, in those cases in which the home has been sold, this means the innocent buyer is now saddled with the consequences of their seller’s noncompliance.

Verification. There are many reasons why homes may not be code compliant, ranging from a failure to realize the need to obtain a permit, to acquiring a home that had alterations performed by the prior owner. The Portland Bureau of Development Services, which is charged with responsibility for ensuring that construction is properly permitted and code compliant, has a website that permits anyone to check into the permit history of a property by simply entering the address.  For further information, go to: https://www.portlandoregon.gov/bds/34154

Conclusion. After a home has been sold, the new owner may become financial responsible for the expense and responsibility in making a home code compliant. In some cases, the time and cost can be substantial. Now that seller property disclosure is required to be given, owners have very little “wiggle room” to avoid addressing the issue of whether any remodeling was ever performed, whether a permit was ever issued and whether the work was ever inspected and passed. The longer the owner owned the home, the greater the likelihood he/she knows its remodeling history.

ORS 696.822(2) provides:

A real estate licensee is not liable for an act, error or omission by a principal or an agent of a principal that is not related to the licensee unless the licensee participates in or authorizes the act, error or omission. This subsection does not limit the liability of a principal real estate broker for an act, error or omission by a real estate licensee under the principal broker’s supervision. (Emphasis added.)

This provision appears to insulate real estate licensees from their clients’ misstatements, whether intentionally or negligently made.  However, in this litigious society, brokers cannot rely in blind faith on their clients’ word.  Listing agents should make sure their sellers understand the risk in giving untruthful answers, and buyer agents should make sure their clients understand the need to verify with the local jurisdiction exactly what work has (or has not) been permitted, inspected and passed. It is this type of value that Realtors® can bring to the transaction, and in so doing, justify their commissions. ~ Phil

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ENDNOTES

1 Much of the following information was obtained from the Portland Bureau of Development Services. Their website is http://www.bds.ci.portland.or.us/. It can be a very useful resource for Realtors® and their clients.

2 Remember, the form only requires that the seller’s answers be based upon his/her “actual knowledge.” If the seller truly doesn’t know whether a permit was required, or truly believed one was not required, it will be very difficult for a buyer to prove that the seller knew they were not telling the truth at the time they completed and signed the disclosure form.

3 The “owner” is the person named on the title – not a family member or friend of the owner.

 

© 2020 Phillip C. Querin, QUERIN LAW, LLC. All rights reserved.

Posted in Miscellany, Property Disclosure, Real Estate Laws, Realtor Risk Management, Residential Housiing | Tagged ,
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