As Al said, it's not really a Code issue - usually the AHJ makes the determination under a general Building code, sometimes augmented by language in the local Code.

In my area the threshold for "complete upgrade" (re-work all exisitng to current Code specs) is 51% of area of the structure in SF, greater than 51% of the building system (ie plumbing, electrical) or work/improvements equal or greater than 51% value of the property. This burden lies with the person who owns the property or is having the work done - not the contractor.

If the AHJ is requiring additional work, I would have him explain it (and show it if possible) to the HO - this way it's "the man" coming down on him, and shouldn't be construed as you trying to cobble up extra work.

(Yes, I know, the AHJ probably gave you a nice printed form with comments, but if you're the one who presented it to the homeowner, it's kill the messenger time. Having the AHJ present it directly should eliminate the perceived "self interest" the HO might imagine)

Explain to the AHJ that the HO doesn't believe that you're not trying to generate extra $$, and see if he can take the extra 15 minutes to do a "walk through" and explain why he (DBA the City/Village/whatever) is requiring the extra work. Hopefully hearing it from the Horse himself will ease the anticipation of more $ outlay.

If he still refuses, technically Scott is right, and you have no "obligation" past your contracted / permit listed work (service upgrade). I don't think I could walk away from a job like that without a release from the HO acknowledging an unsafe condition, and documenting his refusal to correct this previously existing unsafe condition, despite being advised of the potential hazards to life and property. (not that I've ever had to ask such a thing before) [Linked Image]

I'd get such a signed acknowledgement to cover my butt, and advise the HO I was providing a copy to the AHJ. The I'd see if the AHJ will at least sign off on my work as a "temporary" green tag, to allow me to get the heck out of there.

Maybe suggesting that his Home Insurance carrier would be contacted? Hardball, but it might help.

Good luck.