The property that I am purchasing contains a violation in New York City. What are my options?

This issue seems to come up, it seems, in every transaction. Typically, a seller made an improvement to the home without obtaining a new certificate of occupancy or proper permit. The most common examples are illegal decks, pools, extensions, finished basements, and converting garages into living space. A building inspector issues a violation when the building department is prompted to appear at the property for a routine inspection or receives an anonymous tip (usually from a disgruntled neighbor) that there are illegal structures on the property.

The violation usually requires remediation and payment of a fine. The payment of a fine does not necessarily mean that the violation has been cured. To remediate the violation, the homeowner usually has to restore the improvement to its prior condition or to obtain the proper permits to allow the improvement to exist. In either case, depending on the type of improvement, a building inspector may be required to re-inspect the property. In some cases, an affidavit called a certificate of correction may be submitted as evidence of remediation. A certificate of correction is an affidavit indicating that the work was done to remove the violation to comply with building codes. In some cases, in addition to the permit, a new certificate of occupancy may be required. A certificate of occupancy is a document issued by the building department of the municipality that the building may be occupied for its intended use.

Assume you have entered into a contract of sale for the purchase of a certain property and the title search discloses a violation. As a purchaser, you usually have three options when a violation appears on record:

  1. The seller is notified and remediates the violation. Under this scenario, there really is no issue because the seller shall deliver the property with all improvements containing the proper permits or with a proper certificate of occupancy.
  2. Accept the premises in “as is” condition subject to the violation. You must be careful in this situation because you have just purchased a property which requires you to comply with the building codes. When you attempt to sell the property, you may then have to remediate the violation (unless, of course, you can convince the purchaser to accept the premises “as is”). Even if the seller renegotiates the purchase price to entice you to close title, ultimately, you must remember that there is a chance that the improvement may not be legalized. Be careful and due your homework.
  3. Terminate the contract. A contract of sale usually contains specific language which requires that violations must be remedied by the seller for those violations which exist prior to contract signing. Further, a contract of sale can be cancelled if a building contains an improvement, which a seller has refused or fails to legalize. Careful consideration must be given to requiring that the seller remediate all violations that exist prior to closing. If contractual grounds exist for you to terminate the contract, this is an option that may be available to you.

What if I want to buy the property despite the knowledge of the existence of an illegal structure without a violation being issued?

This question is difficult to answer because it depends on the type of improvement. Just because a violation has not been issued does not necessarily mean that a violation will never be issued.

A purchaser may make a business decision and purchase the property “as is”. These purchasers take the chance that a violation will not be issued or purchase the property knowing that a violation will require remediation, but in the meanwhile, enjoy the improvement.

For example, one of the reasons you like a house is because the backyard is set up the way you like it with a nice pool and deck. Unbeknownst to you at the time of signing the contract, the seller did not secure the proper permits. At a certain point you discover the pool and the deck have not been legalized. You are now two months into the process (contract is signed, mortgage application has been approved, etc), and you think to yourself, I really do not care if it the pool and deck are legalized. If you purchase the property subject to the improvement being accepted in “as is” condition, then it becomes your problem once you purchase the property. This may be a risk you would be willing to take. However, you should keep in mind that there may be a chance that the improvement, in this case, the pool and the deck, may never comply with building codes.

Of course, if you are demolishing the building and improvements there is no real issue here because the removal of the improvement usually will satisfy the building department requirements to remove the violation.

However, some improvements simply cannot comply with building codes, i.e., an extension to a building. What then? You may be required to remove the entire improvement and restore the building to its prior condition. A huge expense for you and most certainly not what you had bargained for. This is a chance you should not be willing to take.

There is one other point worth noting, just because you accept the property in “as is” condition, does not necessarily mean that your lending institution will accept the property with the illegal improvement. So, prior to accepting the property subject to the violation, check with your lending institution.

In conclusion, when you purchase a property, careful thought should be placed into whether or not you should purchase a home with a violation existing against the property. The options available to you are to request that the seller remove the violation, accept the property “as is” subject to the violation (with or without a reduction in the purchase price), and to terminate the deal. The worst case scenario is that the condition cannot be remediated and you must remove the improvement.

The information contained in this blog is limited in scope, is for informational and educational purposes only, and applies, generally, to the five boroughs of New York City (Staten Island, Brooklyn, Queens, Manhattan, and Bronx).

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