This article is part of a series of real estate tips from Brooklyn broker Gabriele Sewtz of Compass, a specialist in the Brooklyn family market.
In this overheated seller’s market, most buyers are willing to take on a few repairs. After all, why renegotiate a deal unless the inspection reveals a major repair need? Chances are the buyers just won the bidding war and don’t want to risk losing their dream home to another buyer.
Sellers, meanwhile, might expect smooth sailing once they’re in contract. But what if their property violates building code, and the lender won’t close on the transaction? Or the title company won’t issue title insurance?
“As a buyer, falling in love with a property is the easier part of the transaction,” says real estate agent Gabriele Sewtz. “Crossing the finish line, turning the apartment or townhouse into your new dream home is the more challenging part. When it comes to selling a property, I always make sure my sellers are aware of potential deal breakers so that we encounter fewer surprises during the transaction.”
In this article, Gabriele Sewtz and fellow Compass agent and expeditor Janelle James share what every buyer and seller should be aware of before buying or selling a property in New York.
Congratulations, you just received the keys to your new home! Time to start tearing down walls!
Not so fast. Put the sledgehammer down for a second. If you own a townhouse and are planning major renovations, before you do anything, check with your new best friend, the Department of Buildings. They will let you know what permits you need before you begin construction.
If a renovation is a key consideration in buying your new co-op or condo, take the time to check out your alteration agreement prior to going into contract. Before any work can begin you might need not only DOB approval but also approval from your building, which means contacting the management company or co-op board to find out about any building rules.
For more detailed answers to your questions about permits, click on the questions below.
Open violations can prevent a homeowner from selling or refinancing his property, and illegal constructions can result in fines, crucial time lost on the market and even a lower sale price. (Not to mention headaches.) Ninety-nine times out of a hundred, the buyer and the lender (if the transaction is financed) have the same perspective: Both want the violation cured by the seller prior to closing.
“My townhouse sellers especially value my expertise and the valuable insights I share with them prior to listing the property during the process,” says Gabriele Sewtz. “But when it comes to specific violations, I always defer to the experts. They can serve my buyers and sellers best.”
NYC Construction Codes require owners to build and maintain their properties in safe condition. Inspectors will issue Environmental Control Board (ECB) Notices of Violation or Department of Buildings (DOB) violations when a property or construction doesn’t comply with the construction code, NYC Zoning Resolution, and other applicable laws.
“It’s tricky to advise a client to close around a violation, but in this overheated seller’s market, such a situation is becoming more common,” says Robert Dubno, a real estate lawyer who has successfully guided New Yorkers through the process of buying and selling real estate for over 35 years.
“It’s about risk, consequences, and worst-case scenarios.”
Usually, it is the seller’s obligation to cure all “clouds” on the title, unless otherwise negotiated. Here is a tip from Janelle James:
“Properties carrying violations change hands constantly. Violating conditions must be corrected, but that doesn’t necessarily mean that the new homeowner will have to carry the burden of fines, some of which may amount to thousands of dollars. Whether you’re submitting an L2 form, a request for overrides, reductions, waivers of civil penalties for work without a permit, stop work order violations — be sure to check BFP (bona fide purchaser) under Waiver Request. You could potentially save money.”
For more detailed answers to your questions about violations, click on the questions below.
Still planning on doing any work to your new dream home after reading this article? Gabriele Sewtz has one more valuable piece of advice.
“Bake plenty of cookies to keep your neighbors happy throughout the process,” says Sewtz. “And add at least a few months to your estimated project duration due to unexpected delays. Once it’s all over, you will enjoy your home years to come.”
All information in this article is from sources deemed reliable. No representation is made as to the accuracy thereof, and such information is subject to errors, omission, or withdrawal without notice. Exact information can be obtained by retaining the services of a professional architect, expeditor, engineer or real estate lawyer.
Do I need DOB approval to paint my walls or plaster my ceilings?
Cosmetic work, typically, does not require DOB approval. You can paint to your heart’s delight or install the new kitchen cabinets you saw in the design center. Not fond of the pink bathroom wall tiles? Go ahead and replace them. ^
Can I repair my existing bathroom/kitchen without filing a DOB application?
Some of the work may be cosmetic, like tiling, changing the medicine cabinet, or swapping out appliances. Again, you are fine to make these changes. Certain jobs, however, may require a licensed specialist.
If you’re moving your stove, and need to extend your gas line six inches? Or you plan to replace or relocate the fixtures in your bathroom? You need to hire a licensed plumber who can file a Limited Alteration Application (LAA) permit. (You do not need to hire an architect or expeditor.)
And don’t plan on ripping out all the bathrooms of your home at the same time. The LAA repair permit is intended for repairs, such as rerouting existing piping, replacing faucets, and relocating existing fixtures as needed. ^
Do I need a permit to upgrade my electrical system?
Let’s say that during the inspection of the due diligence phase, your engineer points out the outdated Federal Pacific Circuit panels with Stab-Lok breakers. He recommends changing the panels because they could be a fire risk.
Good news! Licensed electricians can file online to obtain the necessary electrical permit, which they will get upon receipt of a properly completed application. Permits are usually issued within 5 business days, unless the scope of the work is so extensive that it triggers an electrical application requirement.
Changing a light bulb, thankfully, does not require a permit. (Yet.) ^
What if there’s asbestos?
By now, most homeowners know that it isn’t a good idea to rip out asbestos yourself, as the inhalation of asbestos fibers can cause lasting harm to your health. Safe asbestos abatement — which may involve removing, enclosing, or encapsulating the hazardous material — requires licensed asbestos handlers who know how to keep asbestos fibers from going airborne.
To navigate the necessary permits, you will have to become familiar with an alphabet soup of NYC initiatives. The Asbestos Technical Review Unit (A-TRU) was launched by the NYC Department of Environmental Protection in 2009 to increase public safety at abatement sites. A-TRU introduced an online filing system called the Asbestos Reporting and Tracking System, or ARTS. Through ARTS, you can file Abatement Activity Forms and receive approvals or objections electronically.
Can I add an extension, roof deck, or pool?
You should have an expeditor or architect on speed dial to answer this question. To find out if you can add a story or build out, you need to know how much floor space you’re permitted under the building’s floor area ratio (FAR). The answer will depend on your property’s open space requirement, its landmark status, and other factors.
A deck on top of or attached to an existing structure generally does not count towards FAR, since it is not enclosed. But that doesn’t mean you can simply add it without checking.
If you don’t count an expeditor or architect among your close friends, there’s a Homeowner Night every Tuesday night at each borough office. There you can meet with a designated examiner from the Buildings Department to answer your questions — no appointment necessary. ^
For what type of work do I need DOB approval?
Most construction in New York City requires approval and permits from the Department of Buildings, unless it falls into the category of cosmetic work. If you’re planning any work that falls within the following three alteration types, you will need DOB approval and a permit:
If you change the use, egress, or occupancy of your property — whether it’s by adding a deck that connects the parlor level down to the backyard, changing a window into a door, or converting a three family home into a single family home — it will result in needing a new or amended Certificate of Occupancy and a permit for a Type 1 alteration.
Type 2 includes significant alterations that don’t change the use, egress, or occupancy of the property. Examples include adding a new bathroom, relocating an existing kitchen, adding a roof deck, or making changes to a load-bearing wall. Type 2 alterations will result in a letter of completion and no change of occupancy.
Type 3 alterations are for minor projects, such as fences, curb cuts, and sheds. ^
How do I get my job approved?
Time to put your vision into action. To get your planned work approved you hire an applicant, which can be a professional engineer or registered architect. He will put together a set of plans based on your planned scope of work and, along with a licensed expeditor, file the appropriate application with the DOB.
Depending on the location of your property you have to file with your Borough Building Department. Building code states that the DOB has 30 days to review your job and issue either their approval or their objections. This means you may have to go back to the drawing board if the DOB responds with objections. Your expeditor is allowed up to five visits (without the applicant) to obtain approval in person from the DOB examiner, or you can file electronically if your architect and expeditor are set up for it. Visits are in 20 or 40 minute intervals and must be scheduled one at a time.
Obviously this is an involved process, which is why hiring a licensed expeditor is essential. ^
My application has been approved – now what?
Congratulations – you are a third of the way there!
Approval means only that the DOB plan examiner has approved your scope of work. Now you hire licensed contractors to obtain permits for their specified scope of work.
Your priority at this point should be hiring a general contractor — and not just because it feels like this small project of renovating a bathroom and moving the wall over by a few inches to fit that much-coveted washer/dryer is turning into your new full time job. Here’s the thing: permits need to be pulled in the “order of operations.”
Let’s say your project has types of work classified as OT (other types of construction like pouring a new basement floor or removing a wall), PL (plumbing) and MH (mechanical). You need to pull your OT permit before your PL permit and MH permit because the contractor first has to create the hole in the wall, before the new pipe goes through.
Don’t panic, though. Permits can be obtained fairly quickly, assuming you already did most of the heavy lifting in your application phase. ^
Do I need a sign-off?
Your new roof deck is finished, and you’ve said good-bye to your work crew. (You’re going to miss them — by this point, it was starting to feel like they were roommates or visiting family.) You and your friends are enjoying your first sunset and an apertif on your brand-new deck.
Not so fast. It’s not over until the work has been inspected by the DOB. Or, depending on the type of job, until the work has been self-certified by a licensed professional who will then obtain sign offs and a letter of completion from the DOB.
Open permits can haunt you years later when you’re trying to sell the property and discover you have to rectify a job done decades before. This usually means you will need to make major adjustments to bring the job up to the new, ever-evolving building code. ^
My brownstone is landmarked. What type of work typically requires landmark approval?
You fell in love with your brownstone at first sight, envisioning warm summer nights spent sitting on the stoop and taking in the vibe of the neighborhood. To do that, though, you’ll have to repair the stoop, which is starting to resemble the Parthenon.
A Certificate of No Effect (CNE) is needed when the proposed work requires a Department of Buildings permit, but does not affect the protected architectural features of a building. Examples include interior renovations that require Department of Buildings permits, installation of plumbing and heating equipment, or installation of an exhaust fan vent.
A Permit for Minor Work (PMW) is needed for work that affects significant protected architectural features, but does not require a Department of Buildings permit. Examples include window or door replacement, masonry cleaning or repair, and restoration of architectural details – like restoring that crumbling stoop or repointing your façade.
A Certificate of Appropriateness (“C of A”) is needed if the proposed work requires a Department of Buildings permit and affects the significant protected architectural features of the landmark property. Examples include additions, demolitions, new construction, removal of stoops, cornices, and other significant architectural features.
Landmarks is legally required to respond within 20 days, provided that proper documents have been submitted and received. Certain scopes of work can qualify for FasTrack approval to receive a response in 10 days. Examples of work that may qualify for FasTrack approval include replacement of brick and stone masonry in small sections of the façade, repairs to lintels and rear cornices, or repointing limited sections of mortar on the rear façade.
The application should note that the replacement material will match the existing in terms of texture, composition, dimension, tooling, coursing and color. ^
What type of violations are generally “deal breakers” in a sales transaction?
Violations come in three categories, depending on how much of a hazard the violation poses to the public: Class 1 (immediately hazardous violation), Class 2 (major violation), and Class 3 (lesser violation).
Working without a permit is one of the most common violations in residential sales and can result in a (partial) stop work order. After closing, the current homeowner or buyer may be required to rectify past work performed without a permit at their own expense.
Old decks are known to be a notoriously sticky point in contract negotiations between buyers and sellers, because most of the deck structures are made out of wood and often are too close to the property line, violating the “three-feet rule.” And wait… what about that new interior wall? While the owner of an apartment may have obtained board or building approval, a missing DOB sign-off could still make it a deal breaker.
Excited about the mother-in-law suite in the rec room of your new house? Illegal occupancy occurs when there are more units in a building than are allowed in its Certificate of Occupancy, so you better make sure the number of apartments (read: number of kitchens) matches up. If not, time to dismantle that extra kitchen or electrical meter. ^
How can I rectify violations or legalize existing work done without a permit?
It can get expensive to rectify violations or legalize work done without a permit. There are three key steps to the process:
Step 1 – Correct the violating condition; submit certificate of correction
Step 2 – Admit violation or show proof of issuance in error
Step 3 – Pay the accompanying fine
Whether you are planning to sell or purchase a property with known violations, now might be a good time to consult with an expeditor, who can help minimize your risk. ^
Will I get financing if the apartment or townhouse I plan to purchase has a violation?
Lenders vary in their approach to the title report’s violations section. It is always a good idea to let your loan officer know of any obvious items as early as possible, so neither of you has an unpleasant surprise.
If a building has a serious hazardous condition violation (e.g.: boiler, electrical, broken glass), most lenders will not permit a closing until that violation is cured and the city has signed off on it. Lender underwriters will not take the chance and associated risk of letting a loan close if there is any way in which someone may be injured as a result of a violation in the title report.
If you are buying a “serious” fixer-upper that is actually dangerous to live in or work on, you may need a construction loan which is designed to disburse funds for renovation, repairs, construction insurance, and other costs.
If the violation involves a large project — like fixing a crumbling deck that needs complete replacement — some lenders may allow the buyer to close prior to repair and removal of the violation, subject to the lender holding an escrow that might be as high as 1.5 times a contractor’s written estimate to cure the violation. (The estimate will include construction costs plus permit-to-inspector-sign-off fees.)
The lender will return the escrow funds to the borrower, but will usually require an appraiser to confirm that the work has been completed. They will also require a copy of the cured violation documents, such as a Certificate of Completion, satisfaction of any violation penalties, etc., from the governmental agency that issued the violation.
Virtually all lenders will allow a so-called “burned-out light bulb” violation to close, typically requiring the borrowers to sign a letter that states that they will indemnify and hold harmless the lender from any liability whatsoever from the violation, and that they will cure the issue within 30 to 90 days. The buyer’s lender will not usually follow up on something as small as a light bulb replacement, as the lender always requires that the buyer obtain liability insurance on the property, and the lender has the indemnity letter to protect them from any claim of negligence on the lender’s part.
For some violations, the governmental agency will require a specific dollar amount to cure them. For example, a sidewalk violation may show up as a lien because the city has repaired the cracked concrete and is looking for reimbursement for the cost of the repair. In most cases where all that is needed to cure the violation is a payment, the title company will take enough of the seller’s proceeds at closing to pay off the violation or lien, and the lenders will allow the transaction to close. ^