Real Estate Market Notes: Open Building Permits Can Give Buyer the Right to Terminate

In real estate purchases, a buyer should ensure they have performed sufficient due diligence so there are no unfortunate surprises once the sale has been completed. In a hot real estate market, due diligence is too often an after-thought.


Not performing the sufficient due diligence, exposes the buyer to risk. In law, it’s tough to quantify risk. Any quantification by anyone is based on qualitative positions of the lawyer and very little quantitative data. The best way to limit any risk in a real estate transaction is to perform sufficient due diligence on the target property.


For example, one item that is not considered too often in the course of closing a sale are open work building permits. The prudent buyer would be aware of these building permits and requisition the seller to remove them before the closing date. The buyer must be attentive of the deadlines and ensure the requisition is done on a timely basis.


If the seller fails to remove it, then the building permit can be considered as a cloud on the title. This opens the ability of the buyer to terminate on the basis of the seller’s inability to give a clear title. Building permits may expose the new buyer to great risks and can involve them in a whole host of problems that they probably could never have imagined.


A buyer should do the applicable searches with the local municipality and address them with the seller before the closing date. It’s always tough to negotiate anything after the closing date.


Disclaimer – This is not legal advice but general information, therefore, you should not rely on it. Please contact us for specialized advice.

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