I had a customer who finished his basement when he moved into his house in NYC in 1981. The Building Dept came knocking on his door in 2002 and told him they had a report of work(unpermitted) going on in his house. At this point he wasn't and let them in to look around.
They found the basement finished with a bedroom(no egress window) a full bath and a beauty parlor room.
It cost him $8600. to rectify the issues, get permits and inspections.
I've gone there at least 3 times to track down bad wiring where shorts in the boxes melted the wire insulation and 2 outlets and 1 TV plug.
The fact the house hasn't burned down due to bad wiring is amazing.
That's why you get permits, to have the work inspected to make sure you don't find yourself on the front lawn, in your jammies, in the middle of the night watching the house burn to the ground.
Also if you go to sell eventually, it becomes a quick and easy way for the buyer to negotiate down, because the city won't have that square footage accounted for as finished space. You make it easy for a buyer to say "not only can't you list this as finished space, but now you have to disclose it that you know it wasn't permitted." Strong negotiating point just to give away like that. I bought a house a few years ago and got a ton of money knocked off the sell price, because an addition didn't have a permit. And the guy buying my old house tried pulling that on me, but prior to listing I went and got after the fact permits done on the work the prior owner did. I got full price for the house I sold, and tens of thousands off the house I bought.
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