Risk Associated with Purchasing Brownstone Renovated Illegally
We are considering purchasing a Brooklyn brownstone that has been renovated (kitchens moved, bathrooms installed, etc) but no permits for this work have been filed. The worksmanship appears to be fine. It seems, from perusing this forum, that this is extremely common in Brooklyn. But it also seems that we would be taking on a lot of unknown risk in doing so. As I know this is a common problem, has anyone figured out the best way to identify with any more certainty how much risk you are taking on? Is it true that most old brownstones in Brooklyn have this problem (in other words, if you want to buy a nice brownstone you are going to be dealing with this problem regardless)? We have spoken with an expeditor who seems to think it would just be a matter of filing with the DOB and that everything should be up to code (he quoted us 20K to get the paperwork done), but that doesn’t seem reliable. Has anyone asked sellers to have NYC DOB inspectors (beyond the stand ard home inspection) come in to evaluate the electrical, plumbing, HVAC, work in an illegal renovation to determine compliance with code? Is that done? Any guidance or advise most welcome. Thank you.
Ahielscher
in General Discussion 8 years and 9 months ago
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23 replies
ame_raleed | 8 years and 9 months ago
What DIBS said! The CO is really the key thing. And it needs to match for the configuration of each floor. If it was formerly a 3 family, with separate units on each of 3 floors, and now it is two studios on one floor and a duplex above, you need a new CO. This will require an expeditor and maybe some modifications that the DOB requests. Consider having an escrow fund set up from the purchase price to cover the related costs and expenses (if you want to close now.)
daveinbedstuy | 8 years and 9 months ago
I think the problem is that we have an inexperienced (maybe even a first time) home buyer. He doesn’t know what he should expect and we are now complicating the discussion for him. I assume there might be difficult banks out there and he probably should use a mortgage broker like Adam Dahill who can address these things for him and will hook him up with a lender where this isn’t an issue. In fact, he never asked about what a lender might do but more about what might be potential DOB issues. As unpermitted renovations go, a moved kitchen and an installed bathroom are pretty standard, commonplace issues. What we should have also mentioned to him is to check to see if the property has an existing C of O and to make sure the layout agrees with that for both the bank and any future permitted work.
elizabethwhiston | 8 years and 9 months ago
Right. I understood the distinction. The bank, in the situation I was involved in, became aware of a recent renovation. They wanted proof that the work was permitted. It had not been. Same situation. It almost scotched the sale. The seller had to go through all sorts of costly gyrations to satisfy the bank. Ugly. Granted, this was one of the tougher banks.
elizabethwhiston | 8 years and 9 months ago
Right. I understood the distinction. The bank, in the situation I was involved in, became aware of a recent renovation. They wanted proof that the work was permitted. It had not been. Same situation. It almost scotched the sale. The seller had to go through all sorts of costly gyrations to satisfy the bank. Ugly. Granted, this was one of the tougher banks.
daveinbedstuy | 8 years and 9 months ago
Yes but you had mentioned permits that might not be closed, which they definitely would not lend on. The OP said there were no permits.
elizabethwhiston | 8 years and 9 months ago
Points taken, gentlemen (I assume you are gentlemen and gentlemanly). I’ve seen this happen with my own beady, glasses covered eyes. Maybe one anecdote isn’t enough to make this a concern, but banks are much more strict about their lending perameters than they’ve been in the past.
elizabethwhiston | 8 years and 9 months ago
Points taken, gentlemen (I assume you are gentlemen and gentlemanly). I’ve seen this happen with my own beady, glasses covered eyes. Maybe one anecdote isn’t enough to make this a concern, but banks are much more strict about their lending perameters than they’ve been in the past.
EJR | 8 years and 9 months ago
What DBS said
daveinbedstuy | 8 years and 9 months ago
What EJR said
daveinbedstuy | 8 years and 9 months ago
If there are no open permits, bank will have no issues with any of the work even if some of it does not specifically meet code. If there are some egregious situations then yes, the bank may have a problem.
EJR | 8 years and 9 months ago
@Nick – While the appraiser certainly asks questions and takes notes on renovations, this usually just adds to the overall appraisal review. I have really never heard of the appraiser or bank going the step further and asking about or delving into permitting issues. If the place is mid-renovation, perhaps. But the OP’s situation just seems to be the standard Brooklyn situation where a house with no active renovation has had unpermitted work performed in the past. The bank will not care about this.
elizabethwhiston | 8 years and 9 months ago
And SlopeFarm is right, if the work wasn’t done properly or to code, you could have some major problems down the road — including safety issues.
elizabethwhiston | 8 years and 9 months ago
And SlopeFarm is right, if the work wasn’t done properly or to code, you could have some major problems down the road — including safety issues.
elizabethwhiston | 8 years and 9 months ago
If the listing description talks about the renovations, a bank appraiser will probably be aware. She/he will certainly give the bank a heads up about the changes. The bank will want to see closed permits. This is a real problem for the seller. Anyone hoping to finance the purchase, will have a hard time getting a mortgage. Unless they get an all-cash deal, the seller will have to pay the cost of ‘permitting after the fact’. This is obviously time-consuming and expensive. Sometimes a bank will finance if an agreement has been struck about permitting after the fact; if it can be shown that the process has been initiated, they might consider a loan.
elizabethwhiston | 8 years and 9 months ago
If the listing description talks about the renovations, a bank appraiser will probably be aware. She/he will certainly give the bank a heads up about the changes. The bank will want to see closed permits. This is a real problem for the seller. Anyone hoping to finance the purchase, will have a hard time getting a mortgage. Unless they get an all-cash deal, the seller will have to pay the cost of ‘permitting after the fact’. This is obviously time-consuming and expensive. Sometimes a bank will finance if an agreement has been struck about permitting after the fact; if it can be shown that the process has been initiated, they might consider a loan.
resident2 | 8 years and 9 months ago
The cost to “legalize” non filed work is a huge money pit. Do not even consider such a ridiculous idea. Any “expediter” that says it can be done is completely misleading you, In theory maybe, in practice: NO.
As you have said there are many, many 100+ year old buildings in NYC that have had work done to them without filing for every permit to do it….. this is for many historic reasons. But you can be sure that any house that has filed plans and permits for every piece of work that required a permit also has very high Real Estate taxes, which is one of the many reasons that most work does not get filed….. you maintain your house or add “improvements” the City says thank you with a tax increase that never goes away… year after year… you pay for it.
So get a good home inspector to inspect the work that was done, chances are it was done by licensed trades people and it is all OK, but do not think of legalizing it or inviting in DOB inspectors etc.
slopefarm | 8 years and 9 months ago
I think there are two distinct issues.
1. Can you trust the work to be safe and not compromise the house in some way.? Inspector can help somewhat with that but can’t see behind the walls. I would be worried about amateur work on the gas lines, and stupid corner-cutting things like cutting joists to accommodate plumbing. If the renovation is by the current seller, as questions about what they did, who they used, etc. But you may never get an answer, though, as dave points out, lots of homes have interior unlicensed renos. Just look for clues with the inspector as best you can.
2. Will you get caught.? I think the answer here is that DOB inspectors have enough to do without randomly trying to inspect homes without an actual complaint. Neighbors do not typically rat out people’s houses unless there is work going on. The issue may arise if you decide to do some renovations, but probably not before then.
Lurker | 8 years and 9 months ago
davinbedstuy is right–like vampires, don’t invite dob inspectors into your home.
I’s impossible to know what is behind your walls now, and without specific knowledge of your home situation it’s also impossible to say here what the effect would be of making it “official.” But you’d be opening up a tremendous can of worms potentially.
For instance, if they moved kitchens they almost certainly moved gas lines. If they did that, it’s likely you’d need to expose your entire gas line from the street to the meters and to each location to get it officially inspected (and you’d need to undergo a pressure test too). For plumbing you’d have to do the same technically although they might be ok just looking at locations—a plumber could tell you that. With electric you may be fine, but you have no idea whats in the walls.
If the home is a multifamily you have all kinds of fire and energy code type things that would have had to have been updated if you did a major renovation, like fireproofing between apartments, not mention putting in a sprinkler system. There’s a jillion little quirks of the code that could become a major hassle if you try to make things “legal” if you don’t know what work was actually done. I’d let sleeping dogs lie.
EJR | 8 years and 9 months ago
If you are purchasing someone’s home (as opposed to a property that has just been gut renovated and you know everything was filed), there will be non-permitted work that has occurred in almost every instance. Whether or not the work was permitted is really a non-issue. The issue is whether or not the work was done well and to code regardless of whether it was permitted. Plenty of people want quality work performed in their house without the hassle of permitting the work. Honestly, I wouldn’t think twice about it, if the home met my expectations otherwise.