The Florida Realtors/Florida Bar “AS IS” Residential Contract for Sale and Purchase (“Contract”) is the most common contract used for residential real estate transactions in Florida. The default inspection provision of the Contract, Section 12, is not very favorable to buyers when it comes to permits.
Section 12(a) of the Contract provides that after the inspection period, the buyer “accepts the physical condition of the Property and any violation of governmental, building, environmental, and safety codes, restrictions, or requirements.” In other words, Section 12(a) says that after the inspection period ends, the buyer cannot cancel the Contract due to permit issues.
The problem that parties run into is that many sellers do not know if there are open permits or work that was done without permits. In addition, many buyers do not find out about permits during the inspection period. Often, the parties only become aware of permit issues once the closing agent receives the municipal lien search. By the time the municipal lien search is received, the inspection period may have already ended.
By default, the seller is not responsible for closing out permits in the Contract. Instead, it is the buyer’s responsibility. Section 12(c) of the Contract provides that the seller is required to assist the buyer in closing out permits, but not to spend money in doing so.
To protect themselves from potential permit issues, I recommend buyers do the following:
(1) Include language in the additional terms section of the Contract requiring sellers to resolve permit issues. This shifts the responsibility for permits from the buyer to the seller.
(2) Research whether there are potential permit issues during the inspection period. The buyer should ask the seller whether there are any permit issues and call the City building/code enforcement department where the property is located and ask about permit issues and code enforcement violations.