Open Building Permits and a NYC Sale: Who Closes Them Out, Holdbacks and Lenders

An open Department of Buildings (DOB) permit does not legally stop a New York City sale. No law prevents a deed from being signed or recorded because a renovation was never signed off. What holds up deals is the contract, the buyer’s lender, and buyers who don’t want to inherit the paperwork. The contract and the parties decide who closes out the permit and whether money is held back at closing.

This guide covers the five boroughs. In Westchester, each city, town and village runs its own permits; see open permits and COs at a Westchester closing. For DOB violations, OATH/ECB penalties (fines decided by the city’s hearings office) and charges from HPD (the city’s housing agency), see NYC property violations at closing.

What “open” means

DOB tracks two things. A job is the application for the work, filed by a registered architect or engineer, or for some work by a licensed contractor. A permit lets the contractor do the work. One job can have several permits, such as construction, plumbing and electrical.

A job is closed when every permit on it has been inspected and signed off. DOB makes the architect or engineer and the contractor responsible for getting sign-offs for finished work (DOB, Letter of Completion). But DOB calls the owner “ultimately responsible for the project,” and tells owners to confirm the contractor asked for and passed the final inspection (DOB owner checklist).

What closes out the whole job depends on the type of job, as DOB labels it:

Job type (BIS / DOB NOW)	Closes with
New Building	Certificate of Occupancy (CO)
Alt 1 / ALT-CO	New or amended CO; LOC if no CO change
Alt 2 or Alt 3 / Alteration	Letter of Completion (LOC)

Source: DOB, Job types in DOB NOW. A Letter of Completion is DOB’s letter for smaller renovations that don’t need a new or changed CO. It issues once every permit is signed off. For older jobs in BIS, DOB’s older record system, it is requested on a PW7 form through DOB’s eSubmit system. For jobs in DOB NOW, DOB’s newer system, it is requested through the job’s filing. DOB won’t process the request if there are unpaid fees, open ECB or DOB violations, or missing sign-offs (DOB, PW7 form).

“Open permit” can mean three different things:

Work done, never signed off. The most common problem. The contractor finished and left without the final inspection or paperwork.
Permit expired. A DOB NOW permit expires at the earliest of three dates: when the contractor’s insurance runs out, when the contractor’s license runs out, or one year after the permit was issued (DOB, Permit Renewal). A permit also expires if work doesn’t start within 12 months, or stops for 12 months. An expired permit does not close the job. The job must be renewed or reinstated before it can be signed off.
Job filed, work never done. A filing for a renovation that never happened still shows as open until it is withdrawn.

In DOB’s older system, BIS, a job’s status reads, for example, “Permit-Entire” (permit issued for the whole job) or “Signed-Off” (DOB, job status codes). Anything short of signed off, on a job filed years ago, is what the buyer’s attorney will flag.

Why old permits show up when you sell

Open jobs from five, ten or twenty years ago often surface only at a sale. Several reasons add up:

Two record systems. BIS holds permits and applications from before DOB NOW launched, plus filings made in eFiling or at a borough office. The DOB NOW Public Portal shows only DOB NOW filings (DOB, Find Building Data; DOB NOW FAQs). Checking one system misses jobs in the other.
Old jobs pushed into DOB NOW. Starting August 23, 2025, DOB marked old BIS electrical jobs never signed off as “Abandoned.” To get one signed off now, it must be reinstated in DOB NOW: Build, with full filing fees (DOB notice, July 31, 2025). Earlier, in 2019, DOB stopped accepting changes and renewals for small BIS filings used for minor plumbing and similar work, and required new DOB NOW filings instead (DOB notice, 2019).
Earlier owners and contractors. The open job often dates from before the current seller. The contractor or architect may be retired or unreachable.
Closer review. In January 2026, The Real Deal reported that open permits from past renovations were holding up NYC home sales, often surfacing late through the title report. People interviewed suggested pandemic-era construction stoppages, more careful lender review, and the switch from BIS to DOB NOW as likely causes (The Real Deal, January 24, 2026).

What the title report does and doesn’t do

A NYC title report includes a DOB search, but only for information. It is not insured. An open permit is not a lien (a money claim against the property) and not a title defect recorded against the property. The title company won’t clear it or leave it off the report; it just reports it. Whether it must be resolved before closing is up to the contract and the lender.

Two cautions. First, an open job can come with real money owed: DOB civil penalties, unpaid DOB fees, or an OATH summons for work done without a permit. Those are handled like violations. Second, the search shows only what is on file. Work done with no permit at all shows up only if DOB has already cited it.

Who has to close it out? Your contract decides

No law says who must close out a seller’s old permit at a sale. The contract does.

Many NYC deals use a standard contract form written by the New York State Bar Association and the New York City Bar (the 2000 Residential Contract of Sale) (form copy). It touches on this in two places:

Violations. The seller must comply with violations and orders “noted or issued as of the date hereof,” meaning as of the contract date, and hand over the property free of them. An open permit with no violation is not itself a violation, so this clause may not reach it.
Conditions for closing. The buyer doesn’t have to close unless the seller delivers a valid CO, another required certificate of compliance, or proof that none was required, covering the buildings and other improvements.

Riders, the extra pages added to the contract, often change this. Buyers’ attorneys commonly add a promise that there are no open permits or applications, and require the seller to close them out before closing. Sellers’ attorneys commonly cap what the seller must spend and add a right to cancel and return the deposit if the cap is exceeded. Caps can be very small and narrow: in a 2016 Queens case, the rider let the seller cancel if the cost of compliance exceeded $500, but only in a situation tied to a City demand for an updated survey (details at the end). The wording of your own contract and rider controls.

Co-op and condo sales differ. The unit contract and the building’s alteration agreement (signed by an owner before renovating) usually govern. The board or managing agent may require the seller to close out permits for apartment renovations before it approves the sale. It pays to check the building’s requirements early.

Holding money back at closing

When a job can’t be signed off before closing, the parties sometimes close anyway. Part of the seller’s proceeds is held back, in escrow, until DOB shows the job closed. This is called an escrow holdback.

Who holds it. Usually one of the attorneys, in an attorney escrow account. A title company is more likely to hold money tied to a title problem it is insuring over. An open permit isn’t one, so a title company may decline. See who does what at a New York closing.

How much. There is no rule. The amount is negotiated, usually from an expediter’s or architect’s estimate of the cost to reinstate, inspect and sign off the job. It often includes extra for surprises, such as opening a wall. Closing out an old job can mean new DOB filings, fees, and licensed trades certifying work they didn’t do. The Real Deal cited one seller who spent about $25,000 after having to open a wall over an electrical permit.

What the agreement should cover:

The amount and who holds it
The document that releases the money, such as a printout showing the job signed off, or the LOC or CO
A deadline
Who does the work and who pays for it
What happens if the deadline passes, such as release of the money to the buyer to finish the job

Without a deadline and a fallback, the money can sit. One agent told The Real Deal the money in his deal was “just sitting there” because the permit was still open.

What lenders want

Lender requirements are not law, and they vary by lender and loan program. Many lenders’ closing instructions ask for proof that the property’s legal use matches the loan. Some won’t fund with an open job or a missing CO, especially where the open work changed the number of units or the layout.

Fannie Mae, which buys many home loans, is one example. It requires appraisers to comment on additions built without a required permit and how they affect value (Fannie Mae, appraisal improvements). Its loans generally require a legal use, including an older use that was legal when it began and is allowed to continue (Fannie Mae, appraisal site rules). Its rules for holding back money for unfinished work cover new construction and renovation loans, not a seller’s old permits (Fannie Mae, completion escrows). Whether a lender will accept a seller’s holdback instead of a sign-off is best asked before contract signing, not the week of closing.

Checklist by role

Sellers: before listing, look up every job at the address in both BIS and DOB NOW. An expediter (someone who handles DOB filings) or architect can scope anything not signed off.
Buyers’ attorneys: compare both systems against the CO and the actual layout. Write a no-open-permits promise and a closeout duty into the rider.
Sellers’ attorneys: cap the closeout duty and include a right to cancel. Avoid promises about work you haven’t checked.
Agents: ask about renovations at listing, especially kitchens, baths, electrical work and combined apartments. For co-ops and condos, ask the managing agent about open alteration agreements.
Everyone: tell the lender early about any open job, and put holdback terms in writing.

Details for attorneys and title professionals

Contract paragraphs. In the 2000 standard contract, the seller’s duty to clear violations noted or issued as of the contract date is paragraph 10(a). The condition that the seller deliver a valid CO, or proof none was required, is paragraph 16(b).
The 2016 Queens case. The rider required the seller to deliver a CO for all existing structures if the City required one. If the City first demanded an updated survey, the buyer had to supply it, and the seller could cancel if the cost of compliance exceeded $500. The court noted there was no evidence the City had required a survey, and the seller never cancelled (decision).
Permit expiry rule. The 12-month rules come from DOB’s January 2024 notice on reinstatement fees (DOB notice).
What a Letter of Completion requires. DOB requires every permit to be inspected and in signed-off status before it issues a Letter of Completion.

Official sources

Korvane Title is preparing to launch in New York. It is not licensed as a title insurance agent and does not accept title orders. Content on this site is general information, not legal advice.