Home buyer makes accustation of unpermitted improvements

Example: A property has a nice finished basement. An offer is accepted using Offer To Purchase and Contract Form 2-T.

During the due diligence period, the buyers indicate they believe the basement is in violation of governmental compliance because the tax records show the home with less square footage.

The sellers say they made improvements over the years by hiring licensed professionals. The local permitting department has confirmed that there are no permits on record, but they cautioned that they kept none of the records prior to 2014.

The buyers have sent a mutual termination with a request to return the due diligence fee and earnest money deposit.

What’s the answer? Who is right?

The burden of proof is on the buyers to demonstrate that the property has governmental violations. In this case, it may be impossible to demonstrate that the permits were never obtained, as the records are limited to less than a decade by the retention policy of the permitting office.

The buyers may have difficulty meeting their burden of proof to terminate for legal cause.

Ultimately, it will be a decision that only a judge or jury can decide.