|Palo Alto Online Real Estate
Uploaded: Thursday, April 19, 2012, 4:35 PM
Worth the risk?
Homeowners who skip building permits gamble with home safety, value
|The idea is tempting. Converting your 400-square-foot garage into a spare room could provide much-needed living space for your household. But the process takes a building permit, and obtaining one can be lengthy and pricey. You decide to forgo it. It's not worth the time or the money.
Or is it?
Different city governments require building permits for different types of construction. Yet building and planning departments sometimes encounter homeowners who are either ignorant of or resistant to their need for a permit.
New construction adds value to a property and thus can increase property taxes, a consequence that motivates many homeowners to skip the permit process, according to Jeff Stricker, a Realtor in the Alain Pinel Los Altos office.
However, "that's unwise because it comes back to impact them when it comes (time) to sell," he said. "If some room is added without (first receiving) a permit, it can affect appraisals. ... The appraiser may not take that space into consideration if it's not a valid permitted space."
If a particular area is not factored into a home appraisal, the home will lose some of its sale value, he explained.
Additionally, any further renovations done on the home cannot be completed without first obtaining a permit for the illegal renovations, according to Francis Rolland, Coldwell Banker real estate agent from Los Altos.
The next homeowner also may be unable to get homeowners' insurance if part of the home was built without a permit, said fellow agent Fred Hiebert.
For city governments, the most serious concern is safety. Woodside Deputy Town Manager Paul Nagengast said that contractors who complete construction without permits often fail to build structures to code, endangering the occupants of a home.
"It's hard to say what does or what doesn't require a permit," he said. "There isn't a solid (threshold) because the types of renovations can be so different. ... (A homeowner's) best bet is to come in and talk to the building department before (construction)."
Projects are generally required to meet both building and zoning codes. Building codes address physical construction needs and are created and enforced to ensure safety. Zoning codes may dictate building size and location, accessory structures, construction limitations, insurance amounts, and the like.
"Typically, people come in and ask beforehand if their proposed project requires a permit," Nagengast said, then the inspectors can look and see what is required.
The problem of a missing permit is treated differently depending on the circumstances and type of permit.
"In Woodside, our approach is co-compliance: You meet codes, you get your permit," he said. "It's not intended for us to be penal or go after somebody (who doesn't have a permit)."
Neighboring city Palo Alto has a similar permit process that works with homeowners to ensure building safety, according to Chief Building Official Larry Perlin. Yet like Woodside, Palo Alto penalizes skipped permits with a doubled (Palo Alto) or tripled (Woodside) processing fee -- that is, when the homeowner finally seeks a permit.
Other financial penalties may incur in more serious cases when the illegally renovated property receives an official "compliance order" or requires involvement from the city attorney. A compliance order sets out a schedule or timeline for obtaining necessary permits, with a structure that "tries to be as cooperative and fair and reasonable as possible," Perlin said.
"Every situation is unique," he said. "It kind of depends on what was built, and does it impose any sort of immediate threat to life or public health and safety or welfare?"
Yet providing a permit post-construction can entail a destructive process. In some situations, it may be necessary to tear down walls and other new construction in order to ensure that the construction is safe and compliant with building and zoning codes.
Additionally, buyers who discover undisclosed illegal construction upon purchase can claim deception in sales and ask the seller for financial compensation.
There is no law that requires sellers to make public their illegal renovations, but full disclosure will limit the potential liabilities of selling an unlawfully renovated home, Stricker said.
"In the short term, (building without a permit) may save $10,000 in property taxes, but in the long term, it could cost them $100,000," Stricker said.
One of his recent clients sold a 1,200-square-foot home as a 1,600-square-foot home, with the extra square footage coming from an illegally converted garage space. Despite full disclosure of the illegal renovations, the buyer still chose to purchase the home.
The buyer's primary motivation for purchase was the Bay Area's "sellers' market" -- the high demand for houses spiked by incidents like the looming Facebook IPO and other Silicon Valley-area tech booms.
"When the market is hot (like it is) now, it's just a matter of disclosure of the lack of a permit," said Stricker, who primarily sells homes in Los Altos, Palo Alto and Menlo Park. "It's not slowing down buyers from buying a home."
Conversely, in a so-called "buyers' market," homebuyers have the flexibility to be choosy in their selections. They might force a seller to provide a permit, or ask for a decreased home price as a way of factoring in the unlawful renovations.
In the end, the weighty complications of the belated permit process are "just not worth the risk," Perlin said.
"(Homeowners are) not availing themselves of the real benefits of obtaining a building permit, ... which are designed to ensure public health, safety and welfare," he said.
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