Joe Richer, the Registrar of the Real Estate Council of Ontario, recently posted an article on this topic that is often overlooked or misunderstood in our marketplace.
There are many investors in the market today looking for houses with basement apartments or other accessory income suites. Houses with an extra bathroom, kitchen and one or more bedrooms in the basement are in high demand but, are they legal? There are a number of things that need to be considered in order to make that determination and the consequences of not doing that can be significant as described in a moment.
I’ve seen listings that say, “house includes a legal apartment.” What does that mean? There are many levels of legality that may include zoning and planning compliance, compliance with the building code, electrical safety and fire codes. I recently had a transaction where it was determined that a fire code inspection had been done and therefore the seller felt it was “legal” as a secondary unit however, further investigation revealed that no building permit had been obtained in renovating the basement into a secondary suite. It was in fact not legal and costly retrofits are now required.
Consequences of an illegal apartment
A municipality can order you to retrofit the unit to bring it into compliance with the building code or worse still, can require it to be torn out completely. A retrofit could be expensive and may include wiring, sprinkler systems, re-sizing windows, changing drywall, relocation of a laundry room or furnace and the list goes on. You may also face substantial fines and the municipality even has the power to shut off utilities if you don’t act immediately after non-compliance is discovered. It may be as little as 10 days!
- An electrical inspection may need to be completed that reveals deficiencies in meeting the required codes for a secondary unit
- The Fire department may be brought in to conduct a separate inspection to ensure a unit complies with the fire code. If not, costly retrofits can be required, a tenant can be forced to vacate and the unit shut down on the spot.
- If an accident were to occur, your insurance may not cover you for an “illegal” use of the house. You also open yourself to a lawsuit by the tenant(s) and any affected parties.
If You Are A Seller
If your house has an income suite, it most certainly can add value to your home and sale price. Before advertising this feature and pricing accordingly, make sure you have had all required approvals from the municipality and fire department, in writing and be prepared to share those with a buyer. Very commonly, people try to get around this requirement by saying there is an in-law suite. In-law suites are not intended to be used to generate income and are not permitted to have a stove or stove hook-up for that reason.
If You Are A Buyer
Any offer on a property advertising an accessory apartment needs to have appropriate clauses in the offer to protect you. Have the seller warrant and provide evidence of having obtained an appropriate building permit, approvals for a secondary suite, fire and electrical inspections. Obviously, if you are assuming a tenant, there are a whole raft of other considerations but that’s a topic for another day. This is a case of buyer beAWARE and know what that you are buying but you are paying for.
Marg Scheben-Edey is a Broker with RE/MAX four seasons realty limited, Brokerage in beautiful Collingwood, ON. With three decades of experience, Marg is a leader in the local real estate marketplace and is ready to help guide both Buyers and Sellers in achieving their real estate goals. Email Marg