As government expands its reach, building permits have been one focus for that expansion. With the professed goal of protecting its citizenry, local governments have expanded the requirements to obtain building permits for an increasing list of improvements, alterations or repairs. Something as simple as removing and replacing a new toilet to allow new tile in a bathroom can require a permit. When the kitchen or bath renovations are more extensive, permits and inspections can include electric, plumbing and even firewall.
Most homeowners do not understand the intricacies of permitting requirements and rely on contractors to obtain required building permits. Some contractors avoid the permit process to save money or time and that is unknown to the owner. Other times it can be the owner who makes unpermitted improvements or repairs for which a permit should have been obtained. When the government later finds work was done without a required permit, it will usually allow a permit to be obtained after the fact but often charges a penalty for the late application. Perhaps worse, the later required permit requires the earlier work to meet the building code in effect at the time the permit was obtained. That could mean installed improvements have to be removed and replaced with code compliant items and might even require invasive inspections to see if previous work was properly done. The contractor may be long gone, and the homeowner saddled with expense of correcting the missing permit.
If a homeowner is aware of the need for a building permit, the homeowner should make sure a permit is obtained. But even when a contractor obtains a permit another problem may be faced. That problem is failure to close the open permit after obtaining final inspection from the government. Some contractors never complete that final step after they have finished the work and been paid by the homeowner.
Before computerization and ability to readily search records, it could be almost impossible to discover a building permit was obtained but not closed. With the information age, searches are much easier, information is available and open permits became a growing problem. Good attorneys representing buyers make sure to search for open permits and when one is discovered demand the seller get that final inspection and close out the permit. In some cases, the open permit is for work that was never done.
How could a seller fix the open permit? The only real way to fix the problem was to get the permitting authority to do an inspection and close the permit or to do an inspection and confirm that no work was done. Permitting authorities generally required that the work meet code as of time of the inspection, which created real problems. The other problem was only a licensed contractor could close out the permit and allow title transfer immediately thereafter. Most contractors did not want to assume liability for work of a previous contractor, and many were unwilling to assist in closing an open permit.
This placed homeowners in a real bind as the open permit could kill a sale and leave them with months of effort to correct. Cost might even be prohibitive if the permit was decades-old and the code had changed so much that virtually all of the improvements would have to be rebuilt.
Not much can be done to ease the pain for a homeowner with property that did not obtain required permits. But Florida’s legislature wanted to help homeowners who got permits that were never closed. Much of the work done under those permits was done properly, but the contractor never got around to getting the final inspection. Since open permits became a bigger problem for real estate transactions as access to information improved, the legislature also wanted to help real estate transactions succeed rather than get tied up in the knots of open permits. The legislature’s effort to help in this area is H. B. 447, passed by the 2019 legislature.
The bill adds new subsections 15 and 16 to Section 553.79 of Florida Statutes. The new sections provide that the original or a subsequent property owner can close a building permit by either hiring the original contractor or a replacement contractor, as long as the contractor holds the necessary license to perform the work. The contractor can call for any needed inspections, thereby closing the permit, and do any work needed to meet terms of the permit and obtain final inspection. If a replacement contractor is used, the contractor is only liable for the work performed by the replacement contractor. The replacement contractor will not have liability for defective performance by the original contractor. That should make it much easier for a homeowner to find a willing replacement contractor.
The property owner can also complete as owner – builder and close out the permit without a contractor. Owner-builder permits usually require the owner occupy the property for at least one year after completion. The new law carves out an exception when the owner is only closing an open permit. The owner does not have to continue occupancy if the owner closes out permit as an owner-builder.
If all the new law did was help close open permits by completing work and getting a final inspection, it would be a big help to homeowners and the real estate profession. The new law does more. It authorizes building departments to close some permits that have been issued and outstanding for at least six years. Those permits can be closed without a final inspection, as long as the building department confirms no apparent safety hazards exist. Collier County has indicated willingness to fully cooperate in closing out old expired permits. But, these close outs have to establish no safety hazard. The complication will be establishing no such hazards. Paving permits may be easy to close. Electric, plumbing or structural permits may not be as simple.
The legislature provided more help to buyers. The new law provides that a building department may not penalize an arm’s length bona fide purchaser of property for value solely because a building permit was applied for by a previous owner and not closed. The local enforcement agency retains all rights and remedies against the property owner and contractor listed on the permit. The statute also provides that the local building department may not deny issuance of a permit to a contractor solely because the contractor is listed on other building permits that were not closed. If the contractor is guilty of fraud or willful building code violation, the local government can deny a building permit, but simply because there are open or expired permits in the contractor’s name will not suffice. That was a benefit obtained by the contractors but is of indirect benefit to the real estate profession, as it will help maintain availability of contractors to close out permits.
The legislature was made aware that Orange County has a practice of sending notice to all contractors and homeowners when their permits were about to expire. That notice reminds homeowners and contractors to close out permits if work is done or extend the permit if more time is needed. The number of Orange County building permits that expired without being closed dropped by almost 90% after the County started sending the notices. The statute does not mandate such notices be given by local governments, but encourages them by stating a local building department is authorized to send written notice of expiration to the owner of the property and the contractor on the permit at least 30 days before the permit expires.
The new law provides a lot of help in closing open and expired permits but does not eliminate the need for due diligence when purchasing property. Most contracts make open and expired permits an inspection item, which means buyers generally have 15 days to research and tell the seller about an open or expired permit and demand correction. The legislature has helped offer a cure to open permits, but vigilance is still required by buyers to avoid inheriting the problem.
William G. Morris is the principal of William G. Morris, P.A. William G. Morris and his firm have represented clients in Collier County for over 30 years. His practice includes litigation and divorce, business law, estate planning, associations and real estate. The information in this column is general in nature and not intended as legal advice.