The two issues are:
1) Is it properly vented for the type of combustion.? (And this also includes energy issues, screening issues for the top of the chimney, water protection issues for the top of the chimney, required dampers, and chimney lining.? Also the top of the chimney needs to be a certain height related to the height of the roof.? The building codes are quite strict on this.
2) Structural issues.? Non-reinforced brick is not allowed anymore for new construction.? Also, tall? chimneys require strapping and/or bracing.? Most of California is considered "earthquake country".? Even if you blanked off the fireplace to not use it, this does not take care of the structural issues.
Personally, I would call or visit the local building department, and find out what they will require for issuing a certificate of occupancy.? Without that, you technically can't move in anyway.
Source: http://www.zillow.com/advice-thread/Buying-a-house-with-an-unpermitted-fireplaace/464576/
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