OK to deceive buyer about lack of permits?

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Dear Real Estate Adviser,
My ex-husband and I are selling our old house, but there’s a problem. Unknown to me at the time, my ex, who is a commercial contractor, chose to not pull permits for a comprehensive remodeling we had done. This was in exception to the relandscaping, which he was caught doing. He also apparently used a former electrician who wasn’t licensed at the time. Personally, I’d like to come clean with the buyer before the sale. But the Realtor and my ex are trying to sell the place as if there were no violations, though she knows the truth. What should I do?
— Ms. Honest

Dear Ms. Honest,
The right thing to do, at least according to law, is to disclose the issue to city and county permitting officials and to the buyers. Of course, the former action could cost you thousands of dollars in new permit costs and penalty fees, not to mention possible remedial expenses, while the latter could result in the same, plus a lower sales price — or even a failed sale.

Plus, prospective owners might get hinky when they realize they’ll have to face the same delicate issue when it’s time to sell. You might even leave yourself open to litigation if, for example, a fire from faulty wiring occurs, and the new owner’s insurer balks at paying the claim. Moreover, you are legally obligated to divulge any such work in your disclosure — though many don’t, frankly. In California, for example, renovations can cause property-tax hikes of thousands of dollars a year, so many homeowners get construction work done to code without the permits. Curiously, this is so widespread that some sales contracts in California state buyers can’t call attention to the unpermitted additions to government authorities.

I might add that the chances of repercussions for sellers of homes with unpermitted work seem to grow if the home’s gross living area, or GLA, has been increased, thus causing a disparity between the county assessor’s records and reality. That will usually raise a red flag for the buyer’s inspectors or agent.

Ethics aside, the main concern in unpermitted work is always safety. In your case, it seems as if the work, though technically illegal, was professionally done to code standards by obviously experienced tradespeople. So, that’s likely not a consideration here.

It may benefit you to coyly talk with a local code official without identifying your house or your status as its seller. That discussion will give you an idea of what’s at stake and how much expense and effort it will take to correct such a situation. Oftentimes, a city will inspect unpermitted but safely constructed work on an “as-built” basis and approve it after fees are paid. It’s relatively rare that code authorities will actually make someone deconstruct remodeling work, but it does happen.

Sometimes, you’ll see homes, such as yours, marketed as “permits unknown” or “w/o permits,” or more generically “improved.” Your agent seems to feel the odds of getting caught or being accused of being complicit in a coverup are small. Either way you go, you’re begging for trouble if you try to claim the proper permits were issued for the work.

Good luck in your decision and sale.

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