With rising real estate values, and recent changes in how California taxes certain residential properties, many older homes are hitting the market. Unsurprisingly, many of these homes include unpermitted repairs and/or renovations. Buyers of such properties, seemingly unaware of the permit issue, are increasingly getting cited for permit violations either during a routine city inspection or when the buyers themselves attempt to renovate the property. These disgruntled buyers then turn around and sue everyone involved in their purchase of the property. So whose responsibility is it to disclose the fact a residential property listed for sale contains unpermitted improvements?

In every residential real estate transaction, a seller is required to fill out a Seller Property Questionnaire ("SPQ") and a Transfer Disclosure Statement ("TDS"). The SPQ and TDS are designed to provide buyer with information regarding the property, including whether any unpermitted work was performed. Oftentimes, however, the seller neglects to disclose unpermitted work either because it occurred years prior and is not remembered, or because it occurred when the property was owned by another person. The blame for lack of discovery of the permit issue is then hoisted onto the buyer's real estate agent for failing to investigate the property's permit status before escrow closed.

Every buyer's agent will tell you that they do not have a statutory duty to investigate public records and confirm permit status for residential properties. They are right. Civil Code section 2079.3 states that an agent is not required to investigate public records concerning title or use of property. This statutory rule is confirmed in several standard California Association of Realtor ("CAR") forms including the Agent Visual Inspection Disclosure ("AVID") form and the Residential Purchase Agreement ("RPA") form.