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Single family home, issue with shed blocking means of egress

The moment I enclose the porch they said it will be considered habitable and would need full insulation and a proper foundation.

R202
[RB] HABITABLE SPACE. A space in a building for living, sleeping, eating or cooking. Bathrooms, toilet rooms,
closets, halls, storage or utility spaces and similar areas are not considered habitable spaces.
 
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