The supply of new homes remains at all-time lows here in Victoria and people spending more time in their homes due to the pandemic. Many have turned now to renovations on their existing homes rather than search for a new one.
Renovations with or without permits? (Photo by La Miko from Pexels)
Whenever you renovate, you will likely require some permits, especially when dealing with plumbing, electrical or adding space. It goes without saying that the proper procedure is to pull the required permits, but some homeowners, due to the onerous nature of the permit process, opt not to do this. I am often either looking at a home with a prospective purchaser or listing a home that has had work done without proper permits. This blog post focuses on how this decision impacts the real estate process.
Renovations without permits
If you are a seller and have a home that has work done without permits, then you have something called a “Material Latent Defect.” This is a defect in a home that cannot be discovered in a visual inspection and you are required, by law, to disclose this to potential purchasers before they enter into any contract of purchase and sale. The level and detail of this disclosure will directly affect the comfort level a prospective purchaser will have.
For example, if you didn’t pull permits but used qualified trades for the work, say so. Make sure to have receipts and invoices available to offer proof. Take photos of the work throughout the process. Explain all work in detail. You have done what you can, outside of going back and getting the work permitted. If you are a handyman homeowner, it is still important to disclose this work in detail.
Buyers and home renovations
On the flip side, there are some risks to you as a buyer when looking at a home with unpermitted work. But a lot of homes in Greater Victoria have work that was done without permits. A common one is secondary suites. Many of the older suites were created when they were not permitted under the zoning and, as a result, work had to be done without a permit. This is one of the most common discussions we have as agents.
Assuming the Seller followed our advice above and disclosed this work in detail, there are still a couple of things to consider:
- Insurance – Discuss with your insurance provider what the implications are for renting out a secondary suite that is not permitted by zoning and/or any work was done without permits. Are you protected if there are issues? If it is other work, what are the implications to your coverage if they turn out to be faulty? For example, faults with the wiring or plumbing.
- Secondary Suites – Most municipalities are not looking to shut down illegal suites in the midst of a housing crisis, but they do operate on a complaint-based model. You may be forced to either legalize the suite under the municipality’s bylaws (i.e. bring the suite up to code) or remove the suite altogether if you receive complaints about the suite. Needless to say, if you bought the home needing the income from the suite, this could be devastating.
- Inspection – We highly recommended inspections in these situations, as well.
Renovations aren’t always the best
Ultimately, as a buyer, you need to be satisfied and comfortable with the work done on a home without permits. Plus, be grateful for the homeowners who do pull all the required permits! That being said, remember that not all permitted work is top-notch either. This is why inspections are so important.
I can already hear you: how do I do a home inspection when there are so many unconditional offers already? While this may not be the case with every unconditional offer, prudent buyers are still doing home inspections prior to writing an offer. Often a seller will allow a professional pre-offer home inspection, giving you more confidence waiving the inspection condition on the offer.