In the past eighteen months, six of its ongoing transactions have been suspended due to outstanding permits for past renovation works submitted to the Ministry of Buildings.
Home renovations typically require permits – and once the work is completed, these permits must be formally terminated. But if that step is missed, the outstanding permit can resurface late in the sales process, often in a title report, and bring a deal to a halt because neither party wants to assume the liability. Closing the permit could mean hiring architects, electricians and inspectors and filing new paperwork with the DOB, which could cost thousands of dollars.
Fabbri had encountered this problem so often that he decided to add an agent to his team who specialized in closing these permits.
“One deal I made this summer was we had to agree to put a certain amount of money on deposit so they could close,” Fabbri said. “The permit has still not been closed, so the money just remains there.”
Fabbri wasn’t sure why this had become more common over the past year, but he had a few theories, namely that Covid-era delays and construction freezes had disrupted the process. Some vendors may have applied for permits for work that ultimately wasn’t done due to a law passed in spring 2020 that bans non-essential construction.
But that explanation couldn’t explain all the situations he encountered. Some permits dated to previous owners, not the sellers he represented.
Problems with open permits have “certainly increased, but they’ve always been there,” said Shaun Pappas, a real estate attorney at Starr Associates. “As a seller’s attorney, I usually go back and [the hurdle] goes away. But buyers have become more adamant about it lately.”
There are no easy solutions for dealing with open permits, Pappas said, especially because they often require persuading plumbers, electricians or other professionals to sign off on work they haven’t completed themselves. But “it’s rare that this becomes a problem that we can’t ignore.”
He added that for buyers and sellers, this usually means one party must absorb a risk, a risk that lenders and title companies must also adjust to.
“One of my clients was selling a house and didn’t realize that the electrical work permit was not closed and that he had to open a wall to repair an electrical outlet,” said Tali Berzak of Compass, who added that the process cost the seller about $25,000.
Berzak said one reason the problem is becoming more common is that lenders are more rigorous in their evaluations of potential borrowers.
Adam Maiser, who added Fabbri to his team, pointed to DOB’s transition to its new recording platform, DOB Now, a process that began in 2016 and has since been largely completed.
Permit information has been available to the public online since the early 2000s, first through DOB’s old system and later through DOB Now. But the transition wasn’t immediate: permits were migrated in batches, leaving gaps where some records didn’t immediately appear in the new system. As a result, title companies may have checked one database but not the other, missing outstanding permits during a previous sale, only to surface years later when the property was back on the market.
There doesn’t seem to be a short answer to why some agents are running into open permits more often, and it’s likely a combination of Covid-era disruptions, tighter scrutiny of lenders and long-hidden paperwork.
Have you seen these heist deals? Send your thoughts to sheridan.wall@therealdeal.com.
Not so fast…
The Alexander brothers’ sex trafficking trial is set to begin on January 26.
Disgraced real estate agents Tal and Oren Alexander, and their brother Alon Alexander, will be back in court Monday — weather permitting — to face 12 federal charges stemming from what prosecutors allege was a decade-long scheme to drug and sexually assault women in New York City, the Hamptons, Miami, Tel Aviv and on a Bahamian cruise ship, among other places.
All three brothers have repeatedly denied the charges and have pleaded not guilty.
Judge Valerie Caproni of the Southern District of New York signed off on the jury for the trial on Friday. Real Estate earned a number of name checks during the selection process, questioning judges about their familiarity with a range of names, addresses and companies that could be mentioned in the course of the proceedings.
For daily updates on the trial period, please subscribe The Real Deal Court Report newsletter and keep up with news from reporters Katherine Kallergis and Sheridan Wall and editor Ellen Cranley on TRDs website and social media.
NYC deal of the week
The most expensive deal to hit city records this week was an apartment at 20 East 76th Street, one of fourteen apartments above the Surrey Hotel developed by British billionaires David and Simon Reuben. The apartment, Unit 12AC, was sold for $28 million to a buyer whose identity is shielded by an LLC.
Douglas Elliman’s Michelle Griffith and Lauren Muss led sales on the development, which is set to launch in fall 2024.
Read more
A new indictment, final appearances: the trial of the Alexander brothers approaches
Socialite Shafi Roepers nightly deal for UES co-op after 10 years, 50% discount
Inside the Alexander brothers’ defense machine
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