Trish Bongard Godfrey

Problems with Open Building Permits

22 May 2014
Trish Bongard Godfrey

Recently, I've been involved in three property deals in which there were open City of Toronto Building Permits. Older and current open permits can exist when the owners, or previous owners, fail to ensure that the City has completed their final inspection on permitted work such as structural changes, plumbing, or electrical. Toronto Inspectors do not automatically issue paperwork at each inspection, which are done at defined stages of each construction or renovation process. An open permit may result because:

  • It's a misunderstanding or oversight by the contractor or owner. They may have simply forgotten.
  • It is intentional – sometimes people think that a final inspection will result in a higher property valuation & taxes.
  • It is intentional because the work was incomplete or done differently from the approved plans.
  • The city has failed to properly document their inspections.

Most concerning to me is that some lawyers, on closing a deal, seem to be relying on Title Insurance to cover problems like this, as well as for other unknown title defects that would affect clear ownership. They may not be doing their own due diligence with the City to see if any permits or work orders are outstanding when they conduct their Title Search as part of the closing of a transaction. In my experience, most people are too busy to read their Title Insurance Policy because they receive it from their lawyer on moving or closing day, which is a very stressful time. As a result, they may not realize what it covers. Check your own policy.

A quick call to the City Building Inspectors for final inspection may be all that is required to settle the permits. But if there is work to be done, information corrected/updated on older permits, or a work order issued, the buyer and seller may both be in a bind, because, really, who wants to be fixing an old problem just when you want to sell or buy a house? Recent permits can be searched here. For suspected older permits, call 311 and your lawyer for advice. If you are a prospective property buyer, you can check at City Hall if such permits exist. If you are an owner, you are entitled to more detailed information. Always get solid legal advice.

So what happened? In one case, the sellers agreed to make a claim on their Title Insurance Policy and negotiated to have the work done so it passes inspection before the sale closes. In the second case, the owner called the city on a Sunday and the inspector showed up the next morning and cleared the permits by Monday afternoon. In the third case, the sellers undertook to get the inspections completed quickly on minor work, and we made an offer with a "hold back" clause – meaning that if they didn't complete the work and permits, we'd hold back 10% of the final agreed price until such time as everything was complete.