Open Permits and Unpermitted Work in a Sale

Why this matters

Permit history used to be something nobody looked at until a house sold. Now title companies, lenders, buyer's agents and inspectors pull it as a matter of routine in many markets, and an old job of yours that was permitted but never inspected shows up on a printout in the middle of somebody else's escrow, with your license number on it and a closing date two weeks out. The call that follows is rarely friendly. Knowing what the printout means, what the seller is likely to ask of you and what you actually owe is the difference between a short, paid fix and a dispute you lose because you answered the first call wrong.

This card is the landscape: what the search finds, the kinds of permit trouble, the retroactive path, and your own exposure. The step-by-step of closing one out is its own article. See related: Closing Out an Old Open Permit for a Seller.

This is not legal advice. Permit law is local first, state second, and the federal government has almost no part in it.

Who pulls the permit history, and when

The layer that governs this is local. Building permits are issued and tracked by a city or county building department under a building code the state adopted, often with local amendments. There is no national permit database and no federal rule requiring a permit search before a sale.

What varies is who looks. In some states a title company or closing attorney routinely orders a municipal lien and permit search as part of the title work. Florida is the clearest example, where an open or expired permit commonly surfaces in that search and is treated as something to resolve before closing. In many other states nobody searches unless the buyer's agent or inspector does, and an open permit may sit unnoticed through several sales. Your local market's habit decides how often you will get this call; ask a title officer you know which searches they order.

The search usually happens in the first third of the escrow period, alongside the inspection, which is why the call arrives with a deadline already set by a contract you never saw. See related: How a Home Sale Timeline Works for the Trades.

What a permit printout looks like and how to read it

Most departments show the same few fields. Here is a typical excerpt as a buyer's agent might forward it.

PERMIT HISTORY - 2207 ELM ST - PARCEL 08-114-22
--------------------------------------------------------
PERMIT     TYPE        ISSUED      STATUS     FINAL
B19-0421   REROOF      05/02/2019  FINALED    05/30/2019
M20-1187   WATER HTR   08/14/2020  EXPIRED    --
           CONTRACTOR: RIVERSIDE PLUMBING LIC #P-55210
           LAST INSP: NONE REQUESTED
E21-0090   SVC CHANGE  01/19/2021  ISSUED     --
           OWNER-BUILDER
--------------------------------------------------------

Three things to read off it before you call anyone back:

• The status word. "Finaled" (or closed, or complete) means the work passed final inspection. "Issued" means the permit is live and work was never finally inspected. "Expired" means the permit lapsed without a final, usually after a set period with no inspection activity. Terms vary by department; the department's own legend is the authority.
• The holder. A contractor-held permit names a license. An owner-builder permit means the homeowner pulled it and took responsibility for the work, which matters a great deal to who has to close it.
• The inspection trail. "No inspection requested" on a water heater permit usually means the work was done and nobody called for the final. An inspection that was requested and failed is a different and worse story.

The four kinds of permit trouble in a sale

An open permit on finished work. The most common and usually the easiest. The work was done, probably done right, and the final was never scheduled. Water heater and HVAC changeouts are the classic case, because the job is complete the day it is installed and the inspection feels like paperwork.

An expired permit. Same work, but the permit lapsed. Many departments let the holder renew or reactivate it, often for a fee, and then schedule the final. Some require a new permit. A few states have written statutory routes for resolving old open and expired permits; Florida added such provisions in 2019, including letting the building official close out permits that have sat open for years. Check your own state.

Unpermitted work. No permit was ever pulled. A finished basement, a moved panel, a converted garage. This does not show on a printout at all, which is why it surfaces instead through an inspector's observation, a mismatch between the tax record's square footage and the house, or the seller's own disclosure form. See related: Your Findings and the Seller Disclosure Obligation.

A failed final. The inspector came, found deficiencies, and nobody returned. This is the one that can carry real cost, because the correction notice says exactly what is wrong and it is on the public record.

The retroactive path for unpermitted work

Most departments offer a way to permit work after the fact, called an as-built, after-the-fact or legalization permit. The shape is usually the same: apply, often at a higher fee than an original permit; expose enough of the work for the inspector to judge it, which can mean opening walls or ceilings; correct whatever does not meet code; pass inspection.

Two questions decide whether the retroactive path is practical before a closing. Which code applies. Some departments judge legalized work against the code in force when it was built, others against the current code; current-code compliance on a 15-year-old panel move can mean a much larger scope. How much has to be opened. A drywalled basement may need cuts at every junction box and plumbing connection. Both answers come only from the department, by phone or at the counter, before anyone commits to a date.

When the closing date cannot accommodate that, the parties often negotiate around it instead: a price adjustment, a credit, an escrow holdback, or the buyer accepting the condition. That negotiation is between them and their agents. See related: Repair Versus Credit at Closing.

Your exposure when the open permit is yours

This is the part to understand before you return the call.

Your license board. In many states, a contractor who pulls a permit is responsible for obtaining the final inspection, and leaving permits unfinaled can be a disciplinary matter under the state licensing law, separate from anything in your contract with the homeowner. How strictly a board treats it varies widely; check your state contractor licensing rules and the board's published disciplinary grounds.

The permit itself. Many departments will not issue you a new permit while you hold too many open or expired ones, and some flag a contractor with a pattern. One forgotten final costs little; thirty of them can stop new work.

Your contract. If your contract with the original customer included obtaining permits and inspections, an open permit is arguably work you did not finish. That is a contract question, and the answer depends on your terms and your state's law.

Liability for the work. A permit closing out does not create liability for the work and does not erase it. What governs a claim about the work itself is your contract, any warranty you gave, and your state's statutes of limitation and repose for construction defects, which commonly run somewhere between about 4 and 15 years from completion depending on the state and the claim type. A final inspection can help you show the work met code when installed, which is a practical reason to want it.

The current owner is not your customer. The seller who calls may not be the person who hired you. You owe them courtesy and, depending on your state and contract, possibly the inspection you never completed. You do not owe them a free re-do of work that has aged, and you do not need their agent's permission to tell them what the department requires.

The point to stop and call your own attorney is any of: a failed final with a correction list, a demand letter, a request that you sign something about the work's condition, or a seller asking you to state that work you did not do was permitted. Walk in with your original contract, the permit record, your invoice and any photos from the job.

A worked call

A listing agent forwarded the printout above and asked the shop named on M20-1187 to "close the permit by the 22nd." It was the 8th. The shop's own records showed a water heater replacement for a previous owner in August 2020, paid in full, with no inspection logged.

What the shop established first. The department's online portal showed the permit as expired with no inspection ever requested. A call to the permit counter confirmed that the department would reactivate an expired mechanical permit for the original holder for a reactivation fee, and that the final would be judged against the code in force when the permit was issued. The earliest inspection slot was the 15th.

What the shop told the agent. That the shop held the permit and would request the final; that the reactivation fee and a site visit before inspection would be billed to whoever ordered the work, in writing, before anything was scheduled; and that the shop could not promise a pass on equipment it had not seen in over five years, because the current owner could have changed the venting or the relief line since.

The pre-inspection visit, on the 12th. The water heater was the one installed. The temperature and pressure relief discharge line had been cut short by someone, probably during a later remodel, and now ended about a foot above a finished floor rather than where the code and the manufacturer's instructions require. That was corrected and billed as separate work, because it was not the shop's original condition.

The inspection, on the 15th. Passed. The shop requested the department's closure record and sent it to the listing agent and to the title officer the same day, seven days before the deadline.

What would have changed it. Had the department required a new permit rather than reactivation, the shop would have needed a new application and the earliest inspection might have fallen after the 22nd; the honest answer then is to say so on the first call so the agents can negotiate. Had the permit been owner-builder, as E21-0090 on the same printout is, the shop would have had no standing to close it at all, and the correct reply is to tell the agent the permit belongs to the owner.

How to keep this from being your call next year

Run a report of your own open and expired permits from each department you work in, quarterly, and close them out while the customer still lives there and still likes you. Most department portals can list permits by license number. A shop that finals every permit within its own cycle never gets the escrow call, and the one that does not will get several.

References

• Your state's contractor licensing law and the licensing board's published disciplinary grounds, for whether leaving permits unfinaled is a violation
• Your local building department's permit status definitions, reactivation and after-the-fact permit procedures
• Florida Statutes Chapter 553 (Florida Building Codes Act), including the 2019 provisions for closing expired permits, as one state's example
• See related: Closing Out an Old Open Permit for a Seller
• See related: Your Findings and the Seller Disclosure Obligation