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Open permits ... who is liable?

May 10, 2011
By MARIO D'ARTAGNAN, Real Estate in Perspective

One of my readers discovered that the home she purchased in 2008 had an open permit for improvements made in 2006. Consequently, the city of Cape Coral is requiring that the improvements be brought up to current code and is holding her responsible. This begs the question, "Who is or was responsible?"

Generally speaking, the former owners of the property would have had the ultimate responsibility to disclose that there was an open permit. Also, the agent who listed the property would have had an obligation to disclose the open permit.

This issue could be considered a fact that would materially affect the value of the property. It falls under the umbrella of agency law wherein if the agent knew or should have known this fact, he or she should have disclosed it. One way to eliminate these issues is by having the sellers complete a real property disclosure statement. Although this form is not mandated by law, it is good practice to use it when taking listings. It covers many comprehensive questions regarding the property, including by not limited to: appliances, structure, defects, zoning, and, in this case, any improvements that were either completed with or without permits during the course of ownership.

By completing this form, the listing agent can determine if there are issues that need to be addressed immediately. Moreover, when the seller signs off on this disclosure, it provides some documentary evidence in the event a transaction ends up in court.

With respect to the instant case, the sellers contracted for the improvements, but for some reason either a final inspection was not completed, or the contractor failed to have the city close out the permit. In either case, the seller should have insisted on being provided with the final documentation.

When the title search was completed, the open permits were not discovered. One reason is that permits are not considered liens or encumbrances, and therefore could easily be overlooked. The city of Cape Coral's website, www.cape-coral.net, allows you to search permits within city limits. The title company would most likely not be responsible for outstanding permits because this is typically an issue that would be an exception to the policy coverage.

As a buyer, there is presumably a level of due diligence that must be performed. Determining if open permits exist would fall under the minimum standard of due diligence. However, if the buyer relied on the statements of his agent, then the agent could be held liable. Remember that real estate licensees are held to a higher standard and therefore should have known about the open permits, unless of course the seller executed a property disclosure statement.

The foregoing is not intended to be legal advice. If you find yourself in a similar situation, please contact a real estate attorney.

Mario D'Artagnan is a broker associate at Paradise Realty, specializing in domestic and European clientele. Mario is a former investigator for the Florida Real Estate Commission. He is also a former real estate instructor. Mr. D'Artagnan is a published author and has been a keynote speaker on the subject of agency law. Mario is also a veteran of the U.S. Air Force. For questions or comments contact Mr. D'Artagnan at: mariodartagnan@yahoo.com or call 239-565-4445 or visit www.mariodartagnan.com.

4-23-11 Breeze

 
 

 

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