Is an unauthorized house suitable as collateral for a loan?

Before using the building, a permit for use must be applied for in the cases provided for in the Building Code.

The use permit is in principle a confirmation of the local government that the construction of the building complied with the construction permit and the use permit determines the purpose of use of the building.

However, not all buildings and all construction activities require a permit. The rule that a permit for use must also be applied for when applying for a building permit no longer applies. A permit for use must be applied for only if it is expressly required by the Building Code and all these cases are described in Annex 2 to the Building Code.

For example, in the case of a residential building with an area of more than 60 m2 or a building required for its servicing, a permit for use is required if the building is erected or the existing building is extended by more than 33%.

In other cases – when renovating, expanding up to 33%, changing the purpose of use – a notice of use is required for such a building. If a part of the building has been replaced by an equivalent one, it is not necessary to apply for a notice of use or a permit for use.

The local government or, in cases prescribed by law, the technical supervision board may, in justified cases, decide whether a permit for use is still required for the use of a building not specified in Annex 2 to the Building Code.
In order to obtain a permit for use, the owner must submit an application for a permit for use to the local government in the prescribed form. In doing so, it is necessary to monitor what activities are planned in connection with the building, whether the erection, extension or reconstruction of the building or the change of use.

The application for a permit for use must be accompanied by the documents required by the Building Code. The construction project and documents reflecting the construction must be attached (construction documents, including construction drawings, construction diary, report on covered works, minutes of working meetings, etc.). Maintenance instructions, the energy label and the audit of the building should only be included if required by law. In addition, a state fee must be paid. There is no need to pay a state fee for the usage notice.

An unauthorized house can be sold, but banks may not accept it as a loan guarantee.

A permit for use is granted if the construction of the completed building complied with the building permit and the building can be used in accordance with the requirements and purpose of use.

According to the Building Act, a permit for use cannot be granted if the building has been completed without a building permit. How can this situation be resolved? If the construction project on which the construction is based complies with the requirements provided by legislation, the building has been constructed in accordance with the construction project and complies with all the requirements and does not unduly infringe the rights of persons, a legal basis must be provided.

The sale of a building without a permit for use is not restricted by law, but the granting of a loan as collateral for such an object may become an obstacle. Banks have made their practice more conservative in this respect and have recently begun to require a license.

The lack of a permit may be due to various circumstances. For example, there may be a situation where a building has been built without a building permit. It could also be that the request has simply not been made or that the matter has been stuck behind one document. However, it is also possible that a permit for use has been refused due to construction defects or non-compliance with the construction project. It is therefore advisable to always find out before purchasing why a permit is still missing, as this may indicate a significant defect in the building.

If a permit for use is required for a building, the law prescribes a fine of up to 300 fine units for the use of a building without a permit for use and up to 32,000 euros for a legal person. In the worst case, if the building is dangerous and has very significant defects or the building has been built without a building permit, the local government may issue a precept to demolish the building.

Source: Ehitusruudus

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