How do I ensure the basement apartment in the home I want to buy is legal?
It’s great you are looking to protect yourself by making sure the basement apartment is compliant. Having lived in one of those a few times, I appreciated a landlord who made sure to comply with the many bylaws and codes in place to protect me. There are a couple ways you can determine whether a basement apartment you’re interested in purchasing as part of a property is up to code. This is something you’ll want to do before you put in an offer.
As always, I recommend you hire a registered real estate professional to help you navigate the buying process. It’s important you choose a representative that’s right for you. Because you’re setting out to purchase a property that comes with a compliant basement apartment or secondary unit, interview a few candidates and discuss their expertise with this type of dwelling. Keep in mind that a duplex or triplex is a completely different kind of property.
Once you select your representative, discuss your after-purchase plans to enable them to confirm whether the home will suit your needs with proper zoning for a secondary unit, and compliance with various bylaws and codes. Your real estate lawyer can also be a valuable resource here as your lawyer can give you advice about both the building codes and the specific by-laws in the area, as by-laws relating to basement apartments vary between municipalities. In fact, some municipalities will issue a certificate stating whether the apartment complies, upon request. Both professionals should be able to explain the intricacies of homes with this type of additional living area.
If the property has the appropriate zoning, next you’ll want to ensure the basement apartment meets all the requirements of the building code, the fire code, and the electrical safety code. Your real estate professional can ask the seller to provide copies of the permits and approvals the homeowner should have received before turning the basement into an apartment. It is possible the unit was built or converted without permits. In this case, you’ll want to seek legal advice to understand the costs and implications that may be involved with bringing the unit into compliance, if permissible.
Consider securing your interests by including the appropriate conditions in the Agreement of Purchase and Sale; your real estate representative is a good resource for this option. For example, you could require the seller to show that appropriate permits were taken out and cleared, or you could require the seller to provide a warranty that the apartment is both zoning and code compliant.
Keep in mind that there are risks associated with renting out a non-compliant apartment. You may be ordered to bring the unit into compliance, to dismantle the apartment, or you could face fines or even jail time should law enforcement learn you’re renting out a non-compliant apartment. Another consequence? You’re opening yourself up to liability.
Take, for instance, the unfortunate scenario of having a fire at your property. Hopefully no one will be injured, but there are also insurance issues. It is possible that your insurance company may deny your claim upon learning of a non-compliant basement apartment. This would mean that you would have to fork over the funds to cover the losses faced by your tenant, as well as yourself, in property damage, not to mention lawsuits.
As with any transaction in the buying and selling process, it’s important that you make informed decisions. Researching and asking the right questions can save you some grief down the road.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.