In November, New York City agent Mike Fabbri was fed up with an expensive, deal-stalling problem.
Over the past 18 months, six of his pending transactions had been held up thanks to open permits for past renovation work filed with the Department of Buildings.
Home renovations typically require permits — and once the work is done, those permits must be formally closed out. But when that step gets missed, the open permit can resurface late in the sales process, often in a title report, and bring a deal to a standstill as neither side wants to absorb the liability. Closing the permit could mean hiring architects, electricians and inspectors and filing fresh paperwork with the DOB, which can cost thousands of dollars.
Fabbri had run into this issue this many times that he’d decided to add an agent who specializes in closing these permits to his team.
“One deal I did this summer, we had to agree to put a certain amount in escrow for them to close,” Fabbri said. “The permit is still not closed out, so money is just sitting there.”
Fabbri wasn’t sure why this had become more common in the last year, but he had a few theories, namely that Covid-era slowdowns and construction halts had disrupted the process. Some sellers may have filed permits for work that ultimately didn’t get done due to a law passed in the spring of 2020 banning non-essential construction.
But that explanation didn’t account for every situation he’d encountered. Some of the permits dated back to previous owners, not the sellers he was representing.
Issues with open permits have “definitely picked up, but they’ve always been out there,” said Shaun Pappas, a real estate attorney with Starr Associates. “As a sellers’ lawyer, I usually push back on it, and [the hurdle] goes away. But buyers have been more adamant about it recently.”
There are no easy solutions to dealing with open permits, Pappas said, especially because they often require convincing plumbers, electricians or other professionals to sign off on work they didn’t complete themselves. But “it’s rare that this becomes an issue that we can’t work around.”
He added that for buyers and sellers, it usually means one side has to absorb a risk, one that lenders and title companies also have to adjust to.
“One of my clients bought a house and didn’t realize the electrical work permit wasn’t closed and had to open up a wall to fix an electrical socket,” said Compass’ Tali Berzak, who added that the process cost the buyer about $25,000
Berzak said that one reason the problem might be coming up more often is because lenders are more scrupulous in their evaluations of prospective borrowers.
Adam Maiser, who Fabbri added to his team, pointed to the DOB’s transition to its new records platform, DOB Now, a process that began in 2016 and has since mostly concluded.
Permit records have been publicly available online since the early 2000s, first through the DOB’s legacy 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 open permits during an earlier sale, only for them to surface years later when the property was back on the market.
There doesn’t appear to be a short answer for why some agents might be running into open permits more often, and it’s likely a combination of Covid-era disruptions, tougher lender scrutiny and long-buried paperwork.
Have you seen this hold up deals? Send thoughts to sheridan.wall@therealdeal.com.
Not so fast…
The Alexander brothers’ sex trafficking trial is kicking off on Jan. 26.
Disgraced brokers Tal and Oren Alexander, and their brother Alon Alexander, will be back in the courtroom on Monday — weather permitting — to face 12 federal charges resulting from what prosecutors have alleged 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 destinations.
All three brothers have repeatedly denied the allegations and have pleaded not guilty to the charges.
Judge Valerie Caproni of the Southern District of New York signed off on a jury for the trial on Friday. Real estate earned a few namechecks in the selection process, where she questioned jurors on their familiarity with a slew of names, addresses and companies that could be mentioned during the course of the proceedings.
For daily updates on the trial, subscribe to The Real Deal’s Court Report newsletter and keep an eye out for news from reporters Katherine Kallergis and Sheridan Wall and editor Ellen Cranley on TRD’s website and social media.
NYC Deal of the Week
The most expensive deal to hit city records this week was a condo at 20 East 76th Street, one of 14 units above the Surrey Hotel developed by British billionaires David and Simon Reuben. The apartment, Unit 12AC, sold for $28 million to a buyer whose identity is shielded by an LLC.
Douglas Elliman’s Michelle Griffith and Lauren Muss led sales at the development, which launched in the fall of 2024.
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