Open Permits and Unregistered Work on an Ontario Home Purchase

An open building permit or an unpermitted renovation can appear late in a purchase, often through a lawyer's search or a home inspection. It can affect the price, the closing date and your plans for the home.

This article explains the general risks, what a seller must disclose, and the options people often use to deal with it. Municipal processes differ, so the details for your home need to be confirmed locally.

What open permits and unpermitted work mean

An open permit means building work was approved by the municipality but the file was never closed, often because a final inspection did not happen. Unpermitted work is work that was done without the permit that was needed.

Both can leave questions about whether the work meets the building code. A buyer may inherit the problem, including the cost of inspections, corrections or, in some cases, removal.

What a seller must disclose

Ontario follows buyer beware. A seller generally need not disclose patent defects, which a buyer can find through reasonable inspection and inquiry. A seller must disclose latent defects that make the property unfit for habitation, dangerous or potentially dangerous. These duties come from case law, not TRESA.

A seller who conceals a patent defect can lose the protection of buyer beware. Failing to disclose a latent defect may be treated as misrepresenting the property, and wilful blindness can also create liability.

A seller property information statement is not a required form, and it is based on the seller's own knowledge and experience. If the seller has prepared one, the seller's agent must tell every interested buyer it exists and give a copy to any buyer who asks. Ask for it and read what it says about renovations.

Options when you learn of the issue

What is possible depends on your agreement and how much time is left. Whether a particular municipality will close a permit, and what it will require, varies and should be confirmed with the local building department.

• Ask the seller to deal with the permit before closing.
• Negotiate a price change or a holdback in your lawyer's trust account for the cost of resolving it.
• Seek an inspection by a qualified professional to understand what was done.
• Use a condition in the offer, if one is available, to withdraw or renegotiate.

If a deal falls apart or work is unpaid

If a seller refuses to close, a buyer who sues uses a certificate of pending litigation to protect the claim, because starting a lawsuit about an interest in land is not notice to outsiders until the court issues the certificate and it is registered on title. A court may discharge the certificate in several cases, for example where the party claims money instead of the land. Separately, a court that can order specific performance may award damages in addition to specific performance or instead of it.

Unpaid contractors are another risk. A contractor's construction lien generally expires unless it is preserved within 60 days, counted from the earliest of the events listed in s. 31(2) of the Construction Act, such as the contract being completed, abandoned or terminated. A preserved lien also expires unless it is perfected within 90 days. It is worth checking title for registered liens before you close.

What to do next

• Tell your lawyer right away about any open permit, unpermitted work or suspicious renovation.
• Ask for permit and inspection records from the municipality.
• Request any seller information statement and ask direct questions about past work.
• Get a professional inspection of the renovated areas.
• Agree in writing on who will fix the issue and who pays before you close.
• If you are the seller, consider resolving open permits before listing.

Frequently asked questions