NYC Permits and Violations: How Smart Investors Turn Compliance Issues Into Profit

[Michael Genari]

When most real estate investors look at a property in New York City, one of the first things they check is whether it has open permits or construction violations. Many see these as red flags, assuming they will slow down the deal, increase costs, or cause endless headaches. But experienced investors know that these issues can actually create opportunities—if they know how to navigate the system.

Instead of walking away from a deal with compliance problems, savvy buyers use NYC permits and construction violations as negotiation tools to secure better pricing, structure deals creatively, and even turn problem properties into high-value assets.

Why NYC Permits and Violations Scare Away Buyers—And Why That’s an Advantage

For many buyers, seeing open NYC permits or unresolved construction violations on a property’s records can be enough to kill the deal. Lenders hesitate to finance buildings with outstanding compliance issues, and many investors assume they will be too costly or complicated to fix.

That’s exactly where the opportunity lies. A seller who needs to unload a property with violations is usually in a weak position, and buyers who understand NYC’s compliance system can leverage these problems to their advantage.

A property with an open permit, a Stop Work Order, a Vacate Order, or a Work Without a Permit violation often means fewer competing buyers, stronger negotiating power, and the possibility of structuring escrow agreements to address the issue after closing. Many sellers prefer to lower the price rather than deal with violations themselves. That's when an opportunity awaits. 

Understanding how to work through NYC permits and construction violations isn’t just about staying compliant. It’s a strategy for turning distressed properties into profitable investments.

Real-Life Example: Turning a Problem Property Into Profit

An investor recently came across a small mixed-use building in Brooklyn that had been sitting on the market for months. It was priced below market value, and upon further research, the investor discovered why:  the property had multiple open permits and an active Stop Work Order due to past construction that was never completed. The seller, frustrated with the process, was eager to sell quickly.

Instead of seeing this as a deal breaker, the investor saw an opportunity. By working with an expediter and an architect, they determined that resolving the open permits and lifting the Stop Work Order would take approximately four months. Knowing this, they negotiated a $175,000 discount off the asking price.

After closing, the investor immediately started the compliance process. Within months, all permits were closed, the Stop Work Order was lifted, and the building was legally rentable again. By the end of the year, the property’s appraised value had increased by over $400,000, far exceeding the cost of resolving the compliance issues.

This is just one example of how understanding NYC permit and violation processes can turn an overlooked property into a highly profitable investment.

How Open Permits Affect NYC Real Estate Deals

An open permit in NYC means that work was started on a property, but the Department of Buildings (DOB) never officially signed off on its completion. Even if the work was done years ago, an open permit still appears in city records until the proper paperwork is filed and approved.

Open permits can create major obstacles in a transaction. Banks may not finance a property with open permits since they indicate unfinished or un-inspected work. Many sellers don’t even realize they have open permits until a buyer’s attorney finds them during due diligence.

Resolving an open permit may or may not be a straightforward process. The first step is checking the property’s DOB records through the DOB NOW and BIS systems. From there, working with an expediter and architect can help determine whether the permit can be closed easily or if additional inspections or filings are needed. Many sellers agree to resolve open permits in escrow, while others prefer to sell at a discount to avoid dealing with the issue.

NYC Construction Violations: A Barrier or a Bargaining Tool?

Unlike open permits, construction violations in NYC indicate that the Department of Buildings (DOB) or another city agency (there are several)  has flagged the property for non-compliance. These violations don’t disappear on their own. They must be resolved through corrections, filings, inspections and sometimes fines.

Some of the most common construction violations include Work Without a Permit, Stop Work Orders, Vacate Orders, and Failure to Maintain violations. Each of these can impact the property’s ability to be sold, occupied, or refinanced.

For investors, violations often create a chance to negotiate. Sellers facing violations may be more willing to reduce the purchase price or agree to an escrow arrangement where funds are set aside to resolve the issues after closing. In many cases, clearing violations adds significant value to the property, making it more attractive to future buyers or lenders.

Resolving NYC construction violations requires working with an expediter, architect, and contractor to correct the issue, submit proof to the DOB, and obtain a final dismissal. While this takes time and expertise, it’s a fixable problem that can translate into a profitable investment. In other words, there is nothing that can't be done.  Everything is fixable. 

Real-Life Example: Buying a Property with Open Violations

A small multifamily property in Queens had several Work Without a Permit violations and several ECB fines totaling $35,000. The violations had been accumulating penalties for over two years. Most buyers passed on the property, fearing the compliance issues, but one investor saw potential.

By negotiating a lower purchase price, the investor factored in the cost of removing the violations. They worked with an expediter to submit the necessary paperwork, scheduled DOB inspections, and hired licensed contractors to perform corrective work. After eight months, the violations were cleared, and the building was fully compliant.

By the time the investor refinanced the property, the value had increased by over $250,000, proving that these compliance headaches can be leveraged for significant returns.

How to Turn NYC Permit and Violation Issues into Profitable Deals:

For investors willing to take on the challenge, NYC permits and construction violations offer some of the best real estate opportunities. The key is understanding how to navigate compliance issues and using them to create negotiating power.

Before buying a property with open permits or violations, checking DOB records is essential to identify any outstanding compliance issues. Working with an expediter and architect early in the process can help determine the cost and timeline for resolution. If the violations are manageable, negotiating a lower purchase price can make the deal worthwhile.

Many investors use escrow agreements to structure deals where the seller sets aside funds at closing to cover the cost of clearing violations. Others prefer to buy the property at a discount and handle the compliance process themselves. Either way, the sooner violations are removed and permits are closed, the sooner the property’s value increases.

Final Thoughts: .  NYC permits and construction violations scare away most buyers, but for investors who know how to navigate compliance, they present a hidden opportunity to buy low, fix efficiently, and increase value. Whether it’s clearing an open permit, removing a Stop Work Order, or resolving Work Without a Permit violations, the right strategy can turn these obstacles into major profits.

Have you ever purchased a property with open/expired Department of Buildings permits or construction violations? What was your experience? Let’s discuss in the comments.