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A Due Diligence Tip for Chicago Land Purchasers—Beware of the Driveway Permit

April 12, 2016

Purchasers of land in the City of Chicago should include a new item on their due diligence checklists—outstanding driveway permit fees. Most everyone knows that a landowner must pay a fee for driveways and curb cuts. What many do not know is that the City will hold a landowner responsible for past, unpaid driveway permit fees. These unpaid fees can go back more than a decade. The outstanding fees, together with interest and penalties, can result in a very unpleasant, and costly, surprise as a new landowner applies for its driveway permits. To avoid such surprises, buyers should confirm with the Chicago Department of Transportation that all fees are up to date or, in a less likely option, include a provision in the purchase contract that allows the purchaser to recover any such costs post-closing.

The following is a description of actual transaction that recently occurred. Purchaser entered into a contract for a parcel of land in the City that had three driveway permits. Those permits were held since at least 2004 by tenants of the property. Seller was unaware of the tenants’ permits or the outstanding fees. Purchaser closes on the land in late 2015 with the intent of redeveloping it. The tenants vacate the property as of closing. Purchaser seeks permits for driveways in locations other than where the existing driveways are located. The Chicago Department of Transportation will not issue driveway permits to the purchaser until purchaser pays the more than $15,000 in fees, interest and penalties dating back to 2004. While these circumstances are somewhat unusual given the tenant involvement and the length of time that fees had not been paid, they are a good illustration of why a permit investigation is warranted. Not only is the purchaser incurring unexpected costs, the development of the property is delayed. 

Purchasers are also wise to expand their due diligence beyond driveway permit fees. Unpaid fees for building inspections and public right of way encroachments can also accumulate and ultimately fall to the new purchaser. Purchasers should investigate these types of outstanding fees during due diligence or seek a remedy against sellers as part of the purchase contract.

For further information about City of Chicago permitting, zoning and land use matters, please contact Andrew Scott at (312) 627-8325 or apscott@dykema.com.

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