NJ Real Estate: Improvements Before Sale Can be a Risk to Buyers and Sellers

Risks to Consider When Buying or Selling Property in NJ

Buying and selling property can be a cumbersome process filled with many potential pitfalls. While most buyers and sellers understand some of the risks (e.g., whether the buyers can qualify for a mortgage), many other pitfalls are not dealt with or even thought about until the transaction is ready to close.

As a New Jersey real estate lawyer, one issue (pitfall) I see that is often overlooked until right before the closing date is whether the seller did any work to the property, and if so, whether the proper permits were obtained.

While it is true that many attorneys allow the buyer to cancel the contract if the seller is unable to obtain a certificate of occupancy or if all proper building permits have not been obtained (if a certificate of occupancy is not required), this is often left to the end of the transaction, when both time and money have been spent. This is due in part because (i) many certificate of occupancies have a thirty (30) day expiration date, so a seller will wait until right before closing to avoid having to pay for the same inspection twice, and (ii) in today’s market where getting a mortgage is not as easy as it used to be, making sure that the seller obtained all of the proper permits for the property can seem like a small issue.

Don’t Take Permitting Issues Lightly, They Can Throw Off the Entire Sale

While this rational is not incorrect, it is sometimes the smallest issues that cause the most problems; so you need to flush them out as soon as possible. For example, in today’s economy people are often looking to save money by doing home improvement themselves. After all there are plenty of television shows as well as books on home improvement. This is problematic because often times a home owner is more concerned about the quality of work, than it is whether or not he/she needs a permit for the work being performed. Consequently, when the inspection for the certificate of occupancy takes place, the municipality often cites these as violations whereby not only will a permit be required, but a fine can be rendered. This can result in hundreds or thousands of dollars. It can also take time to obtain the permits, which can result in the buyer having to incur a rate-lock extension, which costs money. Often times, there is an issue as to who will pay for the extension the seller or the buyer. The seller will say it is the buyer’s responsibility as closing dates in the state of New Jersey are not firm unless the contract states the closing date is “time of the essence” or a letter stating the same is sent after the date written in the contract has passed. A buyer will say it is the seller’s responsibility as it caused this delay.

Notwithstanding the foregoing, there is also an issue as to whether or not a seller can afford to obtain the proper permits or pay the fines. This is especially true in a short-sale where many times a seller is incurring a financial hardship. Many buyers, who are also putting the majority of their savings into the transaction, may not have the time to pay such monies on such short notice.


As mentioned above, even though many contracts allow for the buyer to cancel the contract if a certificate of occupancy is not obtained or all building permits are not obtained (if a certificate of occupancy is not required), it does not account for the time and monies spent by both sides up until this point of the transaction. A way to mitigate the seller’s work issue, aside from the protection language in the contract, is to flush it out in the very beginning. Sellers need to try and remember if they did or had any work done to the property. For example, was the bathroom redone, was the basement finished, was a patio added, etc. If so, the Seller then needs to find out if all of the proper permits were obtained for such work. If it is unsure the seller may want to check with the town. While this may seem like it is “opening up a can of worms”, if there are problems as a result of the work performed, they will most likely come to light during the certificate of occupancy inspection anyway, so it is better to deal with them early on, so the parties can decide how they will be remedied or terminate the transaction before any more time and money are spent.

*The information in this blog posting is for general information purposes only. Nothing in this blog or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information in this blog is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

Leave a Reply

  • (will not be published)

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

[gravityform id=”1″ name=”Contact Us”]