Unpermitted Panels Discovered Mid-Escrow on a Claremont Home

The array looks fine. It is producing, the panels are straight, nothing is obviously wrong with it.

Then somebody checks the city's records and there is no permit for it, or there is a permit that was never finaled.

That is not an aesthetic problem or a paperwork nicety. It is a discovery that touches the disclosure package, the loan file, the insurance policy and the buyer's future ability to sell the same house, all at once.

How it comes to light

Usually one of three ways.

Somebody pulls the permit history at the city, which is an ordinary piece of due diligence and takes very little effort.

An appraiser or an inspector notices that improvements on the property do not match the record and says so.

The utility interconnection file does not line up. Interconnection and permitting are separate processes with separate paperwork, and a gap between them is informative. The utility side of that record is described in the permission to operate guide.

Any buyer can run the first check. Very few do, which is why this frequently surfaces late, through the appraisal, at the worst possible moment.

Open permit is not the same as no permit

Draw this distinction carefully, because the fixes are different.

NO PERMIT means the work was never authorized. The record contains nothing.

AN OPEN OR UNFINALED PERMIT means the work was authorized and the file was never closed out. Somebody pulled the permit, the work happened, and the final inspection either never occurred or never got recorded.

The second is far more common and generally far easier to resolve, because the paperwork trail exists and there is a defined process for finishing it. The first requires establishing, after the fact, that work nobody inspected complies with what applies to it.

Find out which one you are dealing with before anybody starts negotiating about it.

Why it matters beyond the record

The permit is a proxy for inspection, and inspection is a proxy for whether the electrical work and the roof attachments were done to an acceptable standard.

Solar touches the electrical system and puts penetrations through the roof. Both are areas where the consequences of poor work are slow and expensive rather than immediate and obvious. A system with no inspection record is a system where nobody independent has ever looked.

Insurers can take an interest in unpermitted work, and what any particular policy says about it is a question for the carrier and for the policy language rather than for a general article. The relationship between an array and a homeowners policy is covered in the insurance guide, and it is worth asking the carrier directly.

Lenders can take an interest too, particularly where an appraisal has flagged that improvements are not reflected in the record. That is a lender-specific question, raised early, in writing.

Who fixes it

The default position is that the seller resolves what the seller built, or what the seller inherited and is now selling.

Reality is more negotiated than that, because resolving it takes time and escrows have dates. The realistic options are:

THE SELLER RESOLVES IT BEFORE CLOSING. Cleanest, and it requires an escrow long enough to accommodate a municipal process that runs at its own speed.

THE SELLER FUNDS IT AND THE BUYER RESOLVES IT AFTER. Faster to close and riskier for the buyer, because the buyer now owns an unknown scope of work. If corrective work turns out to be needed, the buyer is holding it.

A PRICE ADJUSTMENT. Appropriate only where both sides genuinely understand what resolution involves, which frequently they do not.

THE BUYER WALKS. A legitimate outcome if the contingency is still in place.

The negotiating posture available to a buyer here is the same one described in the buyer tactics guide: the party with information and time has the position.

The third-party wrinkle

Where the system is owned by somebody other than the homeowner, the seller may not be free to authorize corrective work on it at all.

Equipment belonging to a provider is the provider's equipment. Modifying it, re-permitting it, or having a third party work on it may run into contract terms. That has to be checked against the actual agreement, and the split that drives all of this is set out in the ownership guide.

So the sequence is: establish who owns the equipment, THEN work out who can lawfully cause it to be fixed. Doing those in the other order wastes a week.

For sellers

Pull the permit history on your own house before you list it.

It costs almost nothing and it removes the single most damaging version of this problem, which is the seller who genuinely did not know, discovers it alongside a buyer, and now has to convince that buyer they did not know.

A seller who finds an unfinaled permit in advance closes it out quietly. A seller who finds it in escrow is arguing about credibility as well as about money, and credibility problems kill deals that the underlying facts would have survived.

Whatever you find, it goes in the disclosure. A seller who has looked at the record knows what the record says, and knowledge is what disclosure duties attach to, as covered in the disclosure guide.

Permit requirements and processes are set by the city and they change; confirm the current position with the building department directly rather than relying on what was true for a previous project. Start at the solar homes hub for the rest of the file.

Anthony Grynchal has been licensed in California since November 2009.