For financial reasons most parties do not perform an Open Permit search (which would include expired permits) until after the inspection period has expired. This is a common mistake that generally leads to the buyers inability to object to an open permit issue at a later date. The new FARBAR-2 Residential Contract for Purchase and Sale (“FARBAR-2 Contract”) now requires the party paying for the owners title insurance policy and charges to pay for a municipal lien search. Generally an Open Permit search is performed in tandem (i.e., part of the same report) with a municipal lien search which is generally handled by an insured third party vendor (i.e., a municipal lien search company). Note that an Open Permit search is generally an optional service performed by the municipal lien search company and may be an additional fee.
Paragraph 12(d) of the FARBAR-2 Contract provides that the “[b]uyer may have an inspection and examination of records and documents made to determine whether there exists any open or expired building permits or unpermitted improvements to the Property. Buyer shall, within the Inspection Period, deliver written notice to Seller of the existence of any open or expired building permits or unpermitted improvements to the Property.” In other words, a Buyer may lose the opportunity to object to an open permit issue if it is not discovered (and notice provided to Seller) during the Inspection Period. Obviously the same would hold true for an unpermitted improvement but that is not a service that a municipal lien search company would perform and would typically be disclosed by the Seller or discovered by a licensed building inspector or contractor during inspection. In order for a Buyer to preserve any objection to an open permit issue he/she/they should: (a) order (and object thereto if necessary) a municipal lien search which includes an Open Permit search prior to the Inspection Period expiring; or (b) extend the timeframe to object so that an open permit search is not tied to the Inspection Period.
As always, should you have any questions in regards to the foregoing, please consult with your local real estate attorney.
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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