Navigating Unpermitted Work in Bay Area Real Estate

The Bay Area real estate market is chock-full of properties that have unpermitted work. It can be confusing and stress-inducing to try and figure out what you’re responsible for if you inherit a situation when purchasing such a property.

If you do purchase, responsible is exactly what you become by default. If a situation like a violation were to pop up, you as the owner are on the hook for fixing, repairing, replacing, or eliminating that violation.

Given the risks, WHY would a previous owner do unpermitted work? Here’s some common reasons:

COST

Permitted work costs more than DIY or hiring a local handyperson to get it done without permits. Cities and counties collect fees for permits, and sometimes even revalue property taxes at the end of the project. Obtaining permits runs the risk of an increase in annual taxes, as well.

DIFFICULTY

I’m sure they’re trying their best like the rest of us, but the folks in city and county agencies who are in charge of building and planning permits (and the bureaucratic processes themselves) can make permitting really hard. The process is tedious, costly, and time consuming, and inspectors may require things from the applicant that seem meddlesome at best and a bit of a racket at worst. They’ll look at public safety as well as building codes and compliances, but they also sometimes change their minds about what they require mid-project. I once knew someone who, while remodeling their restaurant, was dinged hundreds of dollars by their city code enforcers because they’d installed an oval handwashing sink instead of a square one! These laws are implemented with fairness and citizens’ safety in mind, but the practical ramifications can be frustratingly tedious.

IGNORANCE

Many people are not aware of the need for permits. I mean, for sure you don’t need a permit just to change a water heater, right? Are you sure…? You’d be surprised (you do).

DISTRUST IN GOVERNMENT

Some folks are rebels — they don’t want the city, county, or state all up in their business.

So, we’ve gotten the why — now let’s look at the RISKS of purchasing a property that comes with unpermitted work.

DISCLAIMER: Before I go any further, I as a realtor do not work for a city or county in the permits department. I am not a permit expert. Any information I provide needs to be verified with the relevant permit officials in your area.

One question new buyers often ask is, “Does this mean the work done is subpar?” The answer to this question is different every time, and should never be addressed beyond a casual observation by a realtor. This question is for inspectors and contractors. A permit adds a layer of oversight to any job, but it does not mean that the work done without a permit is subpar — it might be, or it might be excellent work performed by a licensed contractor. I’ve seen everything from a terribly unskilled DIY project that was a hot mess to a gorgeous, professionally designed and executed construction project.

But here’s what can happen:

FINES and/or DEMOLITION

An inspector who uncovers unpermitted work can impose fines and/or require that the work be undone. This is not the case 100% of the time; in fact, there are instances in which variances and/or amnesty are granted, as well.

INSURANCE ISSUES

Claims can be denied when repair is needed on unpermitted work. This will also affect your C.L.U.E. Report. What’s a C.L.U.E. Report, you ask? It’s like your credit score, but it tracks how much companies can charge you for insurance based on past claims filed.

HOW does a non-permitted situation get REPORTED?

Anonymous neighbor: Any person can report a violation to their local building and planning agency.

Inspector: When an inspector comes to inspect one area, if they see a violation, they’ll likely call it out — especially if it affects public safety.

THEN WHAT?

In most cities, the planning/building department is required to reach out to the homeowner if a violation has been reported.

If you choose to refuse to cooperate with them, that’s cool; they’ll refuse to issue you permits on anything you need until the problem’s cleared up. You’ll likely also deal with escalating fines, liens, etc. and it will likely affect your home insurance eligibility.

So, you made an offer on that property:

You might be thinking, “Huh, I believe that primary suite used to be a garage. Did they do that legally?”

It makes sense to call the city and ask them if it’s legal, yes? If you do, and you give them the address of the home you’ve just went under contract for, you’ve just set them up for a code violation. Which puts you in breach of contract — so don’t do that.

Instead, you could call up and say, “I’m thinking about buying a home, but I have some questions about the rules for converting a garage into a living space. Can you tell me the rules and regulations around that?” DO NOT give them the home address. Full stop.

You could DIY search here. And also ask the planning and permit department for a permit history report on a specific property. As a realtor, I cannot do that. But as a buyer, you can.

Over the years, I’ve talked with representatives from building and planning departments in many cities and counties, and what I know to be true is they can be helpful, they mean well (for you and for public safety at large), and they’re not hell-bent on uncovering every single violation just for the sake of it.

They’re not knocking door to door and peeking in basements and attics on their free time. They deal with violations because they either notice glaring ones in plain sight or because the violations are reported to the agency.

So, for example, if you pull a permit to build an ADU in your backyard, and it turns out that your attic half-bath was put in your main house without a permit, the likelihood of an inspector finding it is quite small. They are there to see if your backyard is permissible for an ADU, not to inspect your half-bath.

However, if you’re in the buying process and you’re feeling uncomfortable with any unpermitted work, don’t feel like you need to move forward with the purchase. There’s always another house — one that fits your needs and doesn’t compromise your sense of safety and propriety.

I hope you’ve found this little primer helpful, and please feel free to use me as a resource for all of your real estate needs!