Shifting the Cost of Closing Open and Expired Permits

I typically advise my clients that are acting as buyers in a real estate transaction that they should add in Section 20 of the Far Bar “As Is” form contract that Seller shall be responsible for closing out any open or expired permits prior to Closing at its sole cost and expense.” The reason for this legal advice is to protect the buyer from becoming responsible for the potentially expensive cost of settling such matters after becoming the owner of the property. Section 21(c)of the Far Bar “As Is” form states that if a buyer’s inspection of the property identifies open or needed building permits, then the seller shall deliver all plans or documents relating to the improvement to the buyer and shall cooperate in good faith with buyer’s efforts to obtain estimates of repairs or other work necessary to resolve such permit issues. The cooperation includes seller’s execution of authorizations and consents for the estimates needed to close out the permit, but the provision specifically states “but in fulfilling such obligation, Seller shall not be required to expend, or become obligated to expend, any money.” By adding the language above to the contract the risk (and the potential cost) is shifted from the buyer to the seller.

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