Buying house with unpermitted garage conversion Antioch, CA

22 Replies

Yay! My second post. (Am I a real estate investor yet?) :)

I have been getting a various opinions regarding a stellar property in Antioch CA. 

Has a nice floor plan but the garage was converted to a larger kitchen. In addition to that a permit was never pulled for the development. I haven't had any inspections done but only learned that it was unpermitted after my offer was accepted.

My realtor seems to think that it is no big issue. "More than 95%" of homes have unpermitted development. My concern is the liability.

Does a renter not have to pay rent if the a space is unpermitted? Can the city of Antioch force me to do an expensive demolition? Should I just walk away from the property?

Any help is appreciated. You guys are awesome.

Seems that you would be concerned that it's not permitted as well, not just liability for a renter.

It also don't see the tie in with a "renter" and "unpermitted space", the renter will rent your property - they don't get involved whether it is permitted or unpermitted - at least I've not seen this to any contrary.

What happens when the local gov permit office gets involved somehow and makes you remove everything that was not permitted.  Even if they do an inspection it may not be that they sign off and allow it be kept. Who knows what was done to the closed up walls, electrical, plumbing, etc. Just a thought....

The realtor isn't buying the property and ultimately will not be responsible for the property, you will.

I own a couple of properties with unpermitted improvements, and it doesn't bother me. (Although maybe it should?) I'd be interested in hearing other people's opinions. 

Here are the things I consider:

1) What is the age of the properties and the neighborhood? Do they date back to a time before proper records were kept? In my case, my properties are over a 100 years old, and it is common for many houses to have had undocumented improvements throughout the years. It can be difficult for the permitting department to care that much, if it's unclear what was or wasn't grandfathered in. For example, I have a bathroom in my basement. I have no idea when it was built. Even though the fixtures are newer, it's possible they were installed to replace older fixures. It's not included on the square footage, so I won't be able to count it when I sell it, but the city likely won't make me take it out. This would be a totally different case if it's a modern house. Most modern developement have much stricter acceptance standards, with both the city and home owners expecting everything to be on the up and up.

2) What is the quality of the build. If it's unsafe, poor workmanship, or not up to code, then it could be problematic. This can come into play if the city finds out and want's resolution, and they could require it taken down. If it's done correctly though, it might just be matter of paying the permit costs (and penalty fees), and getting it permitted. You might have to take down some drywall to expose some plumbing and electrically depending on the inspector and region. For example, I have a bungalow with a master suite added in the attic which was not permitted. This is a common addition in the neighborhood. The build quality is very high though, and everything was done up to code. They even put on new siding with OSB sheer walls installed to make the 2nd story earthquake compliant (this is in CA). I bought it in this condition, and likely wouldn't have a problem selling it like this. I would likely be able to get it permitted, if I wanted to go through the hassle.

3) 'Does a renter not have to pay rent if the a space is unpermitted?'  I generally wouldn't be worried about that; however, since this is the kitchen, it could potentially make a difference. Most cities have some minimum standards for the rental properties, of which a kitchen could conceivable be one such standard in your city. If the entire kitchen is in the unpermitted space, then the property technically doesn't have a kitchen. An unscrupulous tenant could potentially try to take advantage of that.

One more thing; it can definitely affact the appraisal though. Lenders might have an issue when the appraisal comes back saying there isn't a kitchen, but hey, the garage is super nice!

Wow @Derek Daun thanks for such an replete response. My biggest concern as you have noted is the potential for a tenant to take advantage of that. The workmanship on the kitchen is very good. Eventually I may raise the floor to enhance the cohesiveness of the property but it looks really good.

Im just very concerned about the liability.

@Daria B. The relation to the renter and unpermitted space is the idea that a renter may go to the city and not have to pay rent. One of the liability concerns.

This could be to your advantage, depending on if there were other offers.

Take a trip to design review of your city's permitting process. Explain the situation, and ask what would be required to bring it up to code. The clerk won't be able to give you any guarantees, but could probably have a fairly general idea.

With that in hand, ask for a discount in price.

Originally posted by @Derek Daun :

I own a couple of properties with unpermitted improvements, and it doesn't bother me. (Although maybe it should?) I'd be interested in hearing other people's opinions. 

Here are the things I consider:

1) What is the age of the properties and the neighborhood? Do they date back to a time before proper records were kept? In my case, my properties are over a 100 years old, and it is common for many houses to have had undocumented improvements throughout the years. It can be difficult for the permitting department to care that much, if it's unclear what was or wasn't grandfathered in. For example, I have a bathroom in my basement. I have no idea when it was built. Even though the fixtures are newer, it's possible they were installed to replace older fixures. It's not included on the square footage, so I won't be able to count it when I sell it, but the city likely won't make me take it out. This would be a totally different case if it's a modern house. Most modern developement have much stricter acceptance standards, with both the city and home owners expecting everything to be on the up and up.

2) What is the quality of the build. If it's unsafe, poor workmanship, or not up to code, then it could be problematic. This can come into play if the city finds out and want's resolution, and they could require it taken down. If it's done correctly though, it might just be matter of paying the permit costs (and penalty fees), and getting it permitted. You might have to take down some drywall to expose some plumbing and electrically depending on the inspector and region. For example, I have a bungalow with a master suite added in the attic which was not permitted. This is a common addition in the neighborhood. The build quality is very high though, and everything was done up to code. They even put on new siding with OSB sheer walls installed to make the 2nd story earthquake compliant (this is in CA). I bought it in this condition, and likely wouldn't have a problem selling it like this. I would likely be able to get it permitted, if I wanted to go through the hassle.

3) 'Does a renter not have to pay rent if the a space is unpermitted?'  I generally wouldn't be worried about that; however, since this is the kitchen, it could potentially make a difference. Most cities have some minimum standards for the rental properties, of which a kitchen could conceivable be one such standard in your city. If the entire kitchen is in the unpermitted space, then the property technically doesn't have a kitchen. An unscrupulous tenant could potentially try to take advantage of that.

 Point well taken about the age of the house. I tend to think in terms of the here and now and that records are available.

Originally posted by @Jarrad Henry :

@Daria B. The relation to the renter and unpermitted space is the idea that a renter may go to the city and not have to pay rent. One of the liability concerns.

 So meaning if the tenant knew it was unpermitted they would use that against you to have the permit office determine what is paid on the property as rent. Humm,I still don't think the permit office will get into dictating the rent - but - they will look at the codes and regulations related to work on the house and if it was permitted. The point of the age of the home and availability of records now comes to mind as mentioned here earlier. If it's all new then they would obviously look to have some recorded paperwork on it.

@Daria B. The concern has nothing to do with a tenant contacting the permitting office. 

The concern is that the tenant takes you to court claiming you didn't provide them with appropriate housing, i.e. a house with a kitchen. Is that possible? I have no idea. Would they get away with it since there is in fact a kitchen? I have no idea. 

Originally posted by @Derek Daun :

@Daria B. The concern has nothing to do with a tenant contacting the permitting office. 

The concern is that the tenant takes you to court claiming you didn't provide them with appropriate housing, i.e. a house with a kitchen. Is that possible? I have no idea. Would they get away with it since there is in fact a kitchen? I have no idea. 

 Ah ok...

Okay. I misspoke about the relation to the tenant and the unpermitted space.

Originally posted by @Derek Daun :

@Daria B. The concern has nothing to do with a tenant contacting the permitting office. 

The concern is that the tenant takes you to court claiming you didn't provide them with appropriate housing, i.e. a house with a kitchen. Is that possible? I have no idea. Would they get away with it since there is in fact a kitchen? I have no idea. 

Exactly, the tenants will always have you over a barrel.  Non permitted for your own use you just may have to demo when you sell.  Non permitted for tenants then you will be at their mercy and a fire will wipe out any financial gains you have and more.

@Bob Bowling That's scary. Sound like you would pass on the property? Have you ever faced a similiar situation. What did you decide?

Originally posted by @Jarrad Henry :

@Bob Bowling That's scary. Sound like you would pass on the property? Have you ever faced a similiar situation. What did you decide?

I don't buy that type of property. Usually an area that allows garage conversions is not a high rent growth/appreciation area. If those type of NBHD's are in your REI plan you should educate yourself to the problems. You are also at the mercy of the neighbor that gets pissed at you or your tenant and turns you in. Always better to be legal. You could ask that the seller get the conversion permitted de facto. It may be easier to be accomplished as a owner occupant. There have been instances in the East Bay where there are programs to bring illegal conversions up to code.

It was disclosed that the garage conversion was unpermitted after you submitted an offer?  Seems like you could re-negotiate the cost of having to bring it up to code, if you really wanted the property.  Otherwise, I'd consider walking, if your intent is to rent it out.

@Jarrad Henry :

Jarrad,

    Despite what other people are saying, you should be very cautious about purchasing a property with an un-permitted addition. Once you close on the property you have no recourse against the seller if you are required by the city to make any changes that bring it up to code. This can get very expensive, and ultimately on your dime. In addition, you should fire your Realtor for saying that 95% of properties have additions without a permit. From an outsiders' perspective, They seem more interested in their commission than they are in your potential liabilities following closing.  I am not telling you to walk away from the deal, but rather to proceed with caution and make sure you understand all that you are taking on. Once you own the property you own all the good and bad that come with it. These are just my opinions. Best of luck to you!

Stuart

Stuart Birdsong, Twin Pines Investment Group LLC | 9706726282

@Jarrad Henry

I've never seen an entire development that was unpermitted and had houses.

I have seen some other situations.  A developer submitted a plan and the municipality required a second means of egress which required a bridge over a stream and wetlands.  The developer didn't want to do that, recorded the plan without approvals and sold lots.  One house got built, but they the municipality clamped down and no more houses could be built until the bridge is built.  The developer is long gone, sold the lots to unsuspecting buyers, who are now punished.  The developer got off scot free and is actually deceased now.  Not his problem now.  The cost of the bridge is escalated with new regulations and probably will never be built.  The lots are essentially worthless and unbuildable because the municipality won't issue building permits.

Another example:  A builder decided to build another house behind his personal home.  He neglected to get a building permit and the structure was actually not permitted as the zoning limit was 1 house per lot.  He even tried some political pressure and offered to let the election bureau use it as a polling place for twice a year elections gratis.  Nothing worked.  The brick house still sits there never occupied for nearly 50 years, and probably never will be!

In one municipality we did an extensive remodel, added 4 new bedrooms, new windows, new siding, new heat, refinished hard wood floors, insulation etc.  The house was 2 doors from town hall.  I told the contractor go over there and see if you need a building permit.  He did and they told him that since we didn't change the foot print, no permit was required.

In another municipality, they required a building permit for new shingles and a new furnace.  So it varies a lot, and enforcement depends on how strict the town is and the personnel  they have available for doing all the work.

Originally posted by @Derek Daun :

@Daria B. The concern has nothing to do with a tenant contacting the permitting office. 

The concern is that the tenant takes you to court claiming you didn't provide them with appropriate housing, i.e. a house with a kitchen. Is that possible? I have no idea. Would they get away with it since there is in fact a kitchen? I have no idea. 

Units or additions or conversions without permits will automatically be considered substandard housing......until proven otherwise,  If reported to the permitting dept. or code compliance the burden is on the owner/landlord to permit after the fact and/or modify in order to get it permitted.  Or in some cases the only viable solution will be demo or returning the unit to it's original building permit plans.  The process can be as simple as inspections, pull new permits and reinspect.  It can be as complicated as inspections, permit applications, appeals and then no approval and required demo.  Then more inspections. 

My daughter lives in a 7 unit Bay Area property.  Her studio was part of the main house conversion to 4 units in 1952.  The 1952 permit and drawings allowed for 4 units in the main building.  They snuck in the extra studio during construction.  It's been illegal this whole time.  3 years ago one of the tenants in a different unit called code compliance with issues and the illegal status was discovered. Permitting and Code Compliance have cited the landlords to remove it.  As well as remove one additional illegal unit in the carriage house.  Removing the units is a $2600/mo income loss.  The only thing that is saving this situation is the Rent Control Board which works with the city to keep sitting tenants in safe illegal units due to the housing shortage.  So the tenant is protected and the landlords luck out and get to continue to collect income on illegal units.  Once those tenants vacate the units cannot be re-rented and must be demoed.  

Don't make any assumptions about any work done without permits. I almost always demo illegal conversions, including garage conversions, "sun rooms" and porches, playhouses and any outbuilding outside of code.  My pool of buyers is bigger for properties without permitting issues.  I'd only permit after the fact if the property value was significantly higher for keeping the addition or conversion.

Originally posted by K. M.:
Originally posted by @Derek Daun:

@Daria B. The concern has nothing to do with a tenant contacting the permitting office. 

The concern is that the tenant takes you to court claiming you didn't provide them with appropriate housing, i.e. a house with a kitchen. Is that possible? I have no idea. Would they get away with it since there is in fact a kitchen? I have no idea. 

Units or additions or conversions without permits will automatically be considered substandard housing......until proven otherwise,  If reported to the permitting dept. or code compliance the burden is on the owner/landlord to permit after the fact and/or modify in order to get it permitted.  Or in some cases the only viable solution will be demo or returning the unit to it's original building permit plans.  The process can be as simple as inspections, pull new permits and reinspect.  It can be as complicated as inspections, permit applications, appeals and then no approval and required demo.  Then more inspections. 

My daughter lives in a 7 unit Bay Area property.  Her studio was part of the main house conversion to 4 units in 1952.  The 1952 permit and drawings allowed for 4 units in the main building.  They snuck in the extra studio during construction.  It's been illegal this whole time.  3 years ago one of the tenants in a different unit called code compliance with issues and the illegal status was discovered. Permitting and Code Compliance have cited the landlords to remove it.  As well as remove one additional illegal unit in the carriage house.  Removing the units is a $2600/mo income loss.  The only thing that is saving this situation is the Rent Control Board which works with the city to keep sitting tenants in safe illegal units due to the housing shortage.  So the tenant is protected and the landlords luck out and get to continue to collect income on illegal units.  Once those tenants vacate the units cannot be re-rented and must be demoed.  

Don't make any assumptions about any work done without permits. I almost always demo illegal conversions, including garage conversions, "sun rooms" and porches, playhouses and any outbuilding outside of code.  My pool of buyers is bigger for properties without permitting issues.  I'd only permit after the fact if the property value was significantly higher for keeping the addition or conversion.

 Now that you bring up that story, I found a property that I looked up the permits and found they did a "conversion" of the garage into living space. It was inspected and has a final date by the permit office. I find myself looking to see if there are any open permits on the properties I'm interested in so avoid any undue issues. This was the description.

Job Description:CONVERTING GARAGE TO CONDITIONED SPACE W/ ELECTRIC.

Originally posted by @David Krulac :

@Jarrad Henry

In one municipality we did an extensive remodel, added 4 new bedrooms, new windows, new siding, new heat, refinished hard wood floors, insulation etc.  The house was 2 doors from town hall.  I told the contractor go over there and see if you need a building permit.  He did and they told him that since we didn't change the foot print, no permit was required.

Where is this muni dream?  I want to live there.  We have permits and inspections for everything. 

@K. marie P.

Its gets even better that that, some places around here don't even have a codes/building inspector, and you won't believe this but some municipalities (very rare) don't have any taxes!

In another state, they have unincorporated areas in which the lowest form of government is the county, so not municipal taxes, because there is no municipality.

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