patrick.net

Hey c'mon now, buying is a great idea - if the house is good and the numbers pencil out!

1) YOU might care, faulty wiring can cause fires, faulty plumbing leaks, faulty roof flashing let's water in (more leaks), etc. Non-permitted is more likely to be badly built, less aesthetically pleasing and less safe for your family.
2) Your local building inspector. Want to do any work in the future, the right way? They'll not allow it until the previous non-permitted is fixed. They'll find out when they come to inspect your new work, or if a code violation is reported, etc.. Could be trivial, could be major, depends on whether the work was done 'to code' but just not using the building inspectors (Just pay for inspection) or if the work was poor (rip it all out and start over).
3) Lender - I am not sure about the details here but I think they will decrease the sq ft count and not count the room(s) if not legal. This means they might appraise for less than you were expecting, or possibly not write the loan. Maybe someone else is more knowledgeable on this.

I am sure there is more. I am going to assume you are in CA because it is rampant here. I guess it is the pressure to max out rents etc. People will buy a house and convert the garage (without permits) to get income to cover the mortgage they couldn't pay otherwise. I am reminded of that RE agent in San Jose who told me in broken English, "You cut house in half and rent to student!" I for one find this stuff pretty sad, it ruins otherwise good houses.

If your neighbor reports you, or a city does a random inspection you will be royally screwed. It's a gamble.

If you are buying a house like that make sure that that is listed on a loan as something you have to spend money to get within regulation. That should reduce the price you pay for the house.

Relatively minor non-permitted changes such as a kitchen or bath remodel probably dont matter if the construction is good, no one really can know. An addition or a second or third additional unit on a property are much more problematic. These are rampant in CA. The local governments even have amnesty programs to get people to come clean. If the unit is up to code (unlikely) it is relatively painless except your property taxes will go up. This is why even an amnesty (of fines and fees) and code compliant construction people choose to stay illegal. It is my understanding that if a unit or addition is illegal an appraiser cannot give any value to this improvement.

Non-permitted structural changes = huge headaches if/when an inspector decides to make a huge deal about it. Could be anything from requiring permits and partial tear-down for the inspection to tearing it down completely.

Homeowner's insurance can (and will) retroactively change or cancel a policy - or refuse to pay out when there's a claim.

Lenders might not be interested in lending on a non-inspected structure. True dat about the appraiser not being able to allow the addition in the calculation of the value.

...and, if there's a mudslide and the house slides off the foundation and creates a problem for a neighbor, you could be royally screwed.

if the stupid idiots wanted to "stimulate" construction they could stop uptaxing people on improving their property.

stupid. 2M construction workers unemployed still

http://research.stlouisfed.org/fred2/series/USCONS

Some californian ladies got furious when city inspector found out that their house has been modified w/o permit. They go like, "realtor never told me that", "The former owner did it, I won't be responsible for what I didn't", "everybody did that, so what's the problem?", and finally they go like, "freakin government won't let us do what we want in our own house! F-kers!!!" The truth is, it was her and her hubby that modified it w/o permit to cut some slack, the city somehow found it, and ordered them to take it back at their cost.

I'd say go ahead and do or buy it at your responsibility. Don't start it when you don't like that responsibility part.

Usually you can remodel a bathroom or perhaps turn a garage or basement into a living space without too much trouble, but changing the structure by adding an addition is more problematic. Technically the city could force you to demolish the addition, this rarely happens, because few cities want to spend the money in legal fees in court, cause if they tell you have to tear your house down, you can bet your going to try and fight them in court. What usually happens is they forgive you (or fine you) and you get the permits retroactively. Your always taking a risk buying a house or a house with a non-permit addition.

They find out by pissed off neighbors who are pissed off for whatever reason: the property is not kept up, the extra tenants are parking in front of their house every night, etc. Or, the local building inspector/mail man notices 3 electric meters on the single family house driving by. Or, the water meter reading guy who sees something wrong. Or, through the tenant themselves when they get mad at the landlord, or attempts to use it as defense for not paying rent.

Anyway. Here's something to consider:

All building codes are for the preservation of the "Health, Safety and Welfare" of the general public.

Period. Codes do NOT address fines, taxes, etc. (That's up to the local jurisdiction to superimpose when something does not comply.) So focusing on their intent:

They are meant to keep people from getting hurt in a fire, collapse, etc. So should you care if the plans/work was not reviewed/approved to ensure they met minimum HSF standards?... up to you. But neighbors, fire departments, etc. should also care.

Any work that is non-permitted and found out is subject to the most recent codes, NOT the codes applicable at the time of the illegal construction. Just as an example, say the 10 yr. old non-permitted bathroom has no GFI's and no venting. Say the code was changed 3 years ago that all bathrooms must have these. Guess what? Only work that was permitted is grandfathered into codes that existed at the time of construction. If you bought the house with the illegal changes, and it is found out, you must now tear out walls, add these things to keep it. You have to pay for the he fine and changes someone else caused, the Township won't care if it means the current owner isn't responsible and has to go after someone else for the liability. Violations are issued to the property and the current owner on town record must resolve them.

TechGromit says

Usually you can remodel a bathroom or perhaps turn a garage or basement into a living space without too much trouble, but changing the structure by adding an addition is more problematic.

I assume this means without much trouble with getting caught initially. But restrictions on basement dwellings/sleeping spaces are meant to prevent someone from not having adequate egress in case of a fire, safety from exhaust fumes from mechanical spaces, etc. They also tend to have fewer electrical outlets which can be overloaded. Bathroom codes primarily address proper venting, clearances, minimum sizing and electrical safety.

@Liz,

Great points regarding the safety aspect and workmanship. If there is no permit for an addition then we have no way of knowing who did the work either.

A friend almost lost family members due to some idiot who patched an electrical circuit (that fed a couple of bedrooms) with appliance electrical cord. The patch job happened when an ad hoc doorway was added. All of this was buried in the walls for a couple of decades. Think smoldering wall, that luckily, they found before the house burned down.

marko says

If there is no permit for an addition then we have no way of knowing who did the work either

This is correct. And non-permitted work has a much higher chance that a non-licenced/non-insured person did the work, which could be of some concern. Contractor proof of insurance is (almost) always required before a permit is issued.

Depending on what work is done, homeowners can complete work on their own and get proper permits/inspections without insurance, but that is a different matter than this.

EBGuy says

A friend almost lost family members due to some idiot who patched an electrical circuit (that fed a couple of bedrooms) with appliance electrical cord.

Knew a dude who decided to do a gut renovation of a single family house in a high end area. Refused to consider a permit, who the hell knows why. But since he didn't, you'd think he'd at least be careful. The contractor started demolition and throwing the debris all over, including into the neighbor's yard. they asked politely that it stop 2 times, they were not so gently told to pound salt. So the next call they made was to the building department. Stop work order was issued on the spot, dude was fined $1,000, work was held up for over 8 weeks. There was also a nieghbor-coming-out-of-house-to see-what-is-happening screaming match in the front between the contractor, owner and inspector. Classic. I do wish someone could have put it on YouTube.

EBGuy says

A friend almost lost family members due to some idiot who patched an electrical circuit (that fed a couple of bedrooms) with appliance electrical cord.

Seen it before when I used be an electrician. The most common violation is way too many things on the same circuit, followed by an over-sized breaker to prevent it from tripping.

I did some nifty thing too when I was first learning. I crossed the wires on a mixer, when I plugged it in I never seen such a big electrical explosion. Turned out the plug / outlet was 3 phase, and I switched the phase wires, I never even heard of 3-phase before then.

Due to laziness I blew up an outlet. There used to be a guy I worked with that would take a piece of wire and insert it into the outlet with pliers to trip the breaker. It was an easy way to identify the circuit and turn it off. Anyway I tried this one day and the breaker was defective. When I jammed the wire into the outlet the short caused blue flames to shoot out of the outlet, I jumped back and the short continued for a few seconds and the oil in the plastic outlet heated up and exploded. The ladies floor vinyl floor had little burn marks on it. Fortunately my boss was working near the electrical panel and flipped the main breaker off. The outlet also caught on fire, but I was in the process of moving the outlet up higher on the wall so I had a hole in the wall I could reach in and pull the burning insulation out with. The husband come over with a fire extinguisher, but the damn thing was so old it didn't work. My bosses insurance had to pay to get the floor fixed, but the lady had the outdated old main panel replaced after that so we go that job.

Last good one I remember was we arrived at this ladies house to install something and she pulled down the attic stairs and went into the attic to "help" us, stepped on the ceiling and fell through it. She ripped out half of a rooms ceiling. I was working on a fan in the other room and I thought my boss fell through the ceiling and my boss was outside comes in and he thought I fell through it.

If someone does non permitted work, and it is reported to the city after completion, what can the city do to the homeowner?

windhex says

If someone does non permitted work, and it is reported to the city after completion, what can the city do to the homeowner?

What city for christ sakes? The city can do whatever the laws on the books say they can do. Look it up it's public record.

if you rent an illegal garage conversion or inlaw, then you have no certificate of occupancy for it. If you have a "lease" for the tenant, the lease is then not valid or enforceable. A "tenant" can decide not to pay rent, because, after all, they have no enforceable lease. Have fun getting them out. If you have to evict them, then you are going to the sheriff (the county) and basically admitting you had an illegal unit. Then you will get shut down and never rent it again or pay to bring it up to code and get it legal. Also, if you evict the tenant they can potentially request relocation fees of over $5000 and could even go after you for all the months/years of rent that they paid as it was not "legal" rent. I'd be careful here.

anniecoyote says

Also, if you evict the tenant they can potentially request relocation fees of over $5000 and could even go after you for all the months/years of rent that they paid as it was not "legal" rent. I'd be careful here

In other words, the potential downsides are far worse then any perceived advantage of skirting the law.