What Is Unwarranted Space?

Photo by Arthur Lambillotte on Unsplash

When perusing real estate listings, you may come across language referring to some part of the property being “unwarranted.” Unlike feedback and opinions, unwarranted in this context doesn’t mean unsolicited or unwelcome. Unwarranted space in real estate can be a good thing for buyers, with potential benefits — and pitfalls. Sellers, too, may find both upsides and downsides to having unwarranted space in their property.

What Is Unwarranted Space?

Unwarranted space refers to areas within a property that lack the necessary permits or approvals from the local building department, and therefore don't have the official stamp of approval. That said, just because a space is unwarranted doesn’t necessarily mean that it doesn’t adhere to established building codes and regulations; it just means that it hasn’t been through planning or inspection.

Potential Benefits of Unwarranted Space

1. More Bang for Buck

   • Unwarranted space often translates to additional square footage that hasn't been factored into the property's official records. This can result in a lower effective price per square foot, making the property more affordable compared to similar homes with fully warranted spaces. For example, a home whose tax records say has 2,000 square feet and is listed at $1,000,000 pencils out to $500/sq.ft. But if that same property had an additional 500 sq.ft. of unwarranted space, that means you are effectively buying 2,500 sq.ft. for the same price, bringing the price per square foot down to $400.

2. Unique Features

   • Unwarranted additions often involve converting otherwise unused spaces into practical rooms. These may be include spaces reclaimed from garages, bonus rooms, converted attics for supplemental bedrooms, and so on. Each of these complement the original layout of the house, and may have unusual and charming features like dormer windows.

3. Flexibility

   • Buyers may find unwarranted spaces to be flexible and versatile, allowing for customization based on their specific needs and preferences. In recent years, fo example, many buyers are interested in having home offices, gyms, and meditation areas, which may not have been as feasible in the original floor plan of a traditional home.

Potential Downsides of Unwarranted Space

1. Legal Consequences

   • The foremost concern with unwarranted space is the potential legal consequences. Homeowners could face fines or, in extreme cases, be required to undo the unauthorized modifications, especially if they involve things that require inspection, such as structural matters, electrical, and plumbing. This can be a significant deterrent for buyers, as it introduces uncertainty and legal risks.

2. Appraisal Challenges

   • Unwarranted spaces may not be considered in the official appraisal of a property, potentially affecting its market value. This can lead to challenges during the mortgage approval process, as lenders may be hesitant to finance properties with unapproved alterations.

3. Resale Complications

   • When selling a property with unwarranted space, homeowners may encounter difficulties in finding interested buyers due to the perceived risks and complications associated with unauthorized modifications. This could result in a longer time on the market.

Of course, any unwarranted space could be made warranted, but with the risk that, as noted above, the city could either levy fines and/or require that some or all of the unpermitted work be undone before new permits are issued.