Basically they said anything after the main meter is the home owners responsibility and that I would need to file permits as per the permitting requirements. 

The land records show only 823 sq feet, but they dug out the basement years back- without permits.

The recent Tax Cuts and Jobs Act has a transition rule permitting 1031 exchanges of qualified personal property.

That includes zoning, building, permits, sales tax, licensing, and more.  

If I know from the start that I can't get the addition all the way through permitting and inspection, I'll just specify tearing it down to begin with and save $5-10k in fees to redo the drawings and go through Urban Design approvals again to come to the same conclusion.   

@Robert Ombres The city is fine with ADUs if they are permitted to be used as a short term rental. 

Check zoning and permits, and yes it is commercial.

Make sure to check with the city to see if you need any permits etc. 

But this time the city declared it un-permitted and the tenant is seeking relocation benefit.  

A demand feature permits the lender to require early repayment of the loan.If the demand feature is checked "yes," the lender can require that you immediately pay the entire loan balance (principal and interest) at any time.