Real Estate Deals and Open Building Permits

Recently, we have had several real estate transactions with open municipal building permits on the property. Building permits remain open before the construction or renovation has passed final inspection by the municipal building inspector or if there are deficiencies that need to be completed. Open building permits present a challenge for sellers and buyers in real estate transactions and a real risk to the transaction. If work done on an open permit does not pass inspection or if the building permit is revoked, the construction or renovation is liable to a stop work order or a removal order. Correcting building permit issues can be very costly, depending on the extent of the work involved. If a buyer closes a purchase with open building permits, they may assume exposure in respect of the building permit for final inspection, deficiencies, work orders, stop work orders, code violations, removal orders, and so on. Title insurance may not assist in this case. Title insurance coverage for building permit problems is restricted and may be subject to exclusions from coverage.  It is important to know how to properly requisition in respect to open building permits and the available options to resolve issues before closing. There are a few ways to deal with open building permits before closing a transaction, including postponing the closing or closing with holdbacks, undertakings and warranties. These methods need to be carefully considered and carefully prepared to adequately deal with this important issue and to protect the parties involved. If you wish to speak to us about your real estate transaction or building permit issues, please reach out to Simon Valleau.

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