DO I NEED A MUNICIPAL SEARCH OR A BUILDING DEPARTMENT SEARCH WHEN PURCHASING A HOME?
When purchasing a home, it is always necessary to have a title search performed of the town land records to verify ownership, and to insure that any existing mortgages, liens or taxes are paid, so that you receive clear title. One of the tasks of the buyer’s attorney in a residential home purchase transaction is to obtain and review the title search for the property being purchased, and if necessary work with the seller’s attorney to resolve any lien or title issues. However, a title search is limited to a search of the land records and does not involve checking for building permits, certificates of occupancy or other building issues that are not part of the land records.
In residential real estate transactions, buyers are increasingly checking the municipal department records regarding a property they are purchasing. The relevant municipal departments may include the building department, health department, fire marshal and planning and zoning. These records may reveal significant information regarding a property, such as open permits (where a building permit was taken out but no final inspection performed); unpermitted work (improvements made without obtaining required municipal permits); health violations such as a failed septic or well; or zoning issues such as notices of violation. Many buyers are now performing municipal searches as part of their general due diligence investigation of a potential purchase. Frequently, however, the contracts routinely in use do not include specific provisions that deal with municipal search issues, such as the time period during which such a search must be conducted, or how to handle issues such as missing or open permits.
What should a buyer do? It is always best to be prepared for the worst. Therefore, add the contingency provision to your offer and then have the discussion with your attorney as to whether you want to exercise it. Just because the contingency is in the contract does not mean you have to use it. Without such a contingency provision, you can still have a municipal search performed, but the contractual remedies relating to any permitting issues will be unclear. Above all, before signing the contract consult a knowledgeable real estate attorney to help guide you through this process.