Obtaining proper home improvement permits is the only way to go

When I first entered the real estate business in 1993 it was common to find improvements in homes that were completed without a required permit. At the time, it just wasn’t a big deal to move ahead with your basement development without one. Almost everyone did it.

In recent years, the failure to obtain proper permits has become a much bigger deal, and in fact, a point of contention that has caused many residential sale transactions to collapse at the last minute. In instances where the transaction can be salvaged (the seller agrees to obtain and close the required permits and the buyer agrees to complete the purchase), it often involves lots of “jumping through hoops” for homeowners and real estate agents. Occasionally, these hoops are hard, if not impossible to clear in a short period of time.

Let’s not debate whether the government has a place in regulating what we do with our private property. As a real estate agent, I’m likely at least as geeked up about your property rights as you are. Insisting that the government has no place to tell you what to do and refusing to play by the rules may be an example of “cutting off your nose to spite your face” when it comes to the resale value of your home.

Building codes are intended to ensure safe construction standards are met to protect occupants from structural failures, potential fire hazards and electrical shock. When a Saskatoon home owner, or a contractor acting on behalf of a home owner obtains a permit for home improvements they commit to completing the work in accordance with current building codes. Ultimately, they allow access to a qualified inspector who inspects the work and verifies that the improvements meet the code. Where deficiencies exist, the inspector will require adequate repairs before the permit can be closed.

When a potential home buyer discovers that improvements were completed in your home without the required permits, they lose the assurances that the work was done correctly and safely. Even if the buyer is comfortable moving forward on that basis, a lender may refuse to provide financing, or an insurer may refuse to insure the home. On the other hand, if the proper permits were obtained everyone who has an interest in the purchase can have some reasonable measure of confidence that the improvements are durable, valuable, and most importantly, safe. Simply put, your home improvements add more value to your property when they are completed with a permit.

More and more, home buyers who discover missing permits after entering into a conditional purchase agreement are insisting that the proper permits be obtained and closed by the seller before the purchase is completed. In most cases, this is completely possible but it is almost always far more difficult and costly to do after the fact. It’s not something that you want to be doing when you’re trying to coordinate a move.

In a short series of future posts we’ll talk about which home improvements require a permit and how home buyers might discover that your home improvements were completed without one.

Mean time, here’s some building permit information from the City of Saskatoon and some electrical/gas permit information from SaskPower.

I’m always happy to answer your Saskatoon real estate questions.  All of my contact info is here. Please feel free to call or email.

Norm Fisher
Royal LePage Saskatoon Real Estate

Comments

  1. Hey! I was trying to find an appropriate heading to ask a question – Have you been following the bylaw change for above garage suites? I can’t decide how I feel about them (great for helping the rental shortage and as additional retirement income for some, but I think a lot of landlords will see it as a way to add another tiny unkept suite to their properties too). I couldn’t think of a better guy to ask though – you’ve always got great perspective on stuff like this! How do you think having a garage suite would affect the value of a property in a buyers eye? I’m not sure I’d want someone living right outside my door either – creeps near my kids scare me, among other things. But I also think it’d be a great way to provide somewhere for my kids to be while in university that’s not quite IN my house either. I’d be interested in your thoughts Norm! Have a great day :)

    • Thanks Ringo,

      Honestly, I’m not completely up to speed on the conversation. I’m sure that if this kind of secondary unit is approved they will require a permit to develop and will have a strong set of standards to ensure a safe living environment for the tenant. I’m generally in favour of anything that would increase the availability of good rental homes right now. The rental situation is very hard right now. Crappy apartments are a thousand bucks a month and it’s really hard for young people to get a good start with rents so high.

      From a value perspective, anything that provides for some steady income has the potential to fetch a little more than a similar home without that potential but the difference is marginal. I could see a seller being able to get an extra 7-10% for something with revenue.

  2. Holy cow Larry! Who is stirring the pot? Lol.

    These are all good points, my friend. There’s also the improvements that were completed with a permit under older building codes that wouldn’t pass the mustard today.

    This post was intended to provide some very basic and simple advice to home owners who might be considering an improvement that requires a permit – get one. Beating the permit charge and the resulting tax increase may not provide a good return given the hoops that buyers could put you through later. That is all. :) I’m simply sharing an experience that seems to be more commonplace all of the time. I’ve encountered it a handful of times in the past few years. In each case, the seller agreed to get the permit. They’d all tell you that they wish they had done things in the proper order.

    I don’t know if lenders have official policies on this yet but in some cases, they are requesting property condition disclosures and considering it part of their due diligence in understanding what they’re lending on.

    I’m not saying any of this is right. I’m just saying it might be a heck of a lot easier to grab a permit when you install that new bathroom, or develop the basement.

  3. Norm,

    You stirred a pot –

    I don’t think it is that simple! While in principal I agree with your premise, I think you are drawing a line here that extends beyond most seller’s good intent.

    Example:

    What if the non permitted work was completed by an owner prior to the current seller who has lived in the house for twenty years?

    The work remains without a permit but is the current owner responsible? How far back can you push this envelope?

    Consider what would happen if lenders determine that if any unpermitted work exists they will insist that any work beyond the original building permit needs to have a permit prior to acceptance and subsquent funding. Everybody now has a massive problem.

    Were banks to insist it may mean that it will take months to close a sale and potentially thousands of dollars in costs to the seller who must remedy work which that seller never performed, was unaware of and one which never created a problem. Additionally, will a bank hold a favourable rate for the buyer during this potentially lengthy period of official repair? How much will that cost?

    Next level – assuming they are good sellers and follow this change in lending requirements, what value does that add to the property when all is done? Our problem as RE consellors is whether that seller is now in the position having accepted an offer below market? We relied on their good faith and provided an accorded value. Should they accept an offer with a “permit please requirement” and subsequently fullfil that obligation over a period of months, have we not undervalued their home if they needed to make repair?

    The there is the problem of an accellerating market? For the buyer what if the market is dropping – did they pay too much?

    Forget about the banks for a moment. If you are representing the seller and are all about protecting their back side how far must we go beyond the Property Declaration which I believe a consensus would determine provides little true value. Are you now going to insist that sellers have a ‘save harmless’ clause where in you state that there are absolutely no warranties implied, expressed or given by the seller with respect to any aspect of the home?

    I think if it got down to the crunch and you didn’t include that disclaimer you would leave that seller wide open to a law suit years down the road. By the same token, were you representing the buyer I would be seeing red flags all over the place if that clause appeared on the paper leaving the buyer at the doorstep of caveat emptor which for me, includes a discussion with the buyer to ensure a clear understanding of latent and patent defects and their application to both parties under common law.

    I think it’s a fine line of understanding that the ‘degree of permitless perfection’ is something we live with. Really, if you change a wall plug and hook up the black wire where the white should be it isn’t going to burn the house down. Is it perfect – no. Did it require a permit – I’m quite certain it did. Now admittedly, electical gadgets may be out of phase and I’m sure there is an engineer amongst your readers who will clarify that assumption, but it’s not the end of the world.

    I wanted to make note of this because something quite similar is developing here which is creating some issues.

    Of note: grow-ops which have been certified, inspected and received the stamp of approval from the regulatory authorities are now in deep trouble. Relatively new to the RE scene is that a greater number of banks and I believe CMHC will not fund or insure the purchase of a grow-op regardless of whether all permits, tests and renovations have been concluded properly and are in compliance with municipal and building code standards. It seems that the word ‘stigmatize’ has crawled into the lexicon of lenders and government insurers who are now worried that the stigma will perpetually lower the value of the propety.

    I find this quite interesting when as example you check an provincial assessment of the property which has hypothetical gross value of $900,000, $875,000 is allocated to the land and the remainder to the structure. I think you see where this is going. To my mind the $25,000 dollar structure may be stigmatized but not the land and yet, they claim the total has insufficient value upon which to hang financing.

    Taking this to the ludicrous, imagine a large farm worth millions – old Fred had a little off season side operation tucked away on the swampy portion of the back 40 in a old barn that helped pay for his and Martha’s snowbird holidays in the Winnibego. Were it found out, you couldn’t borrow money to buy it because the entire 1000 acre farm would be considered stigmatized.

    Back to your point. What is bothersome is that were this type of mantra applied to homes without permits for that new bathroom, kitchen sink, or extra light in the ceiling, will that home become stigmatized as well? I don’t know where that fine line is – do you?