May I include unpermitted space in the advertised total square footage?
QUESTION: I recently attended the 2022-2023 Update Course required by the Real Estate Commission. In the course materials, it is noted that “[u]npermitted additions to a property should not be included in the overall square footage of the property.” Is this a change to the advertising rules? Will I face disciplinary action if my sellers insist that I include the unpermitted space in the total square footage figure on the MLS, just like it was advertised when they purchased the home?
ANSWER: The course materials you cite do not reflect any change in our guidance or the Real Estate Commission’s, regarding the proper disclosure of unpermitted space or how to advertise the total square footage. In fact, this information and guidance was first published by the Real Estate Commission in February 2015, and that article can be viewed here. You can find another Q&A discussing the potential issues caused by unpermitted space and how to properly advertise the total square footage here. While it is a best practice to separately calculate the area of unpermitted space and exclude it from the total square footage as advertised in the MLS, there are steps you can take to include the unpermitted space in the total square footage, while properly disclosing all material facts and avoiding disciplinary action by the Commission.
The key concern is whether a prospective buyer could be misled or misunderstand the correct size of the home and what areas of the property are unpermitted. If you choose to include the unpermitted space in the advertised total square footage, you must clearly disclose the location and size of the unpermitted space. Further, you must fully inform all prospective buyers in both the public and agent remarks of the MLS advertisement of the unpermitted rooms and clearly explain that the space was included in the total area advertised. It is important to note that unrepresented buyers will not have access to the notes provided to brokers. Similarly, any real estate agent who is not a member of your local MLS will not have access to the agent notes and would need the details included in the public disclosures to ensure their buyers have notice of this material fact prior to making an offer. Note, depending on how your local MLS reports square footage and whether there is space to add comments, you may be able to add a notation regarding the unpermitted square footage in the same field.
While it is unlikely that you would face disciplinary action if you include the unpermitted space in the total square footage and you provide full disclosure of the unpermitted space in both public and agent remarks, you may still have to answer a complaint filed by a buyer who later claims the advertisement was unclear or who is forced to bring the home up to code. Early on in your representation of the sellers, you should explain your duties to disclose all material facts, which includes identifying the location and size of unpermitted space, and advising them on the importance of clearly informing prospective buyers about the lack of proper permitting. Sellers can avoid this issue altogether if the home is repaired prior to listing and all necessary permits are issued and closed.
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