I’m buying a home and want to rent out the basement. How do I ensure it’s legal?
Renting out a basement apartment, also known as an accessory apartment or second suite, is a common way to cover some of the costs that come with home ownership. But it’s crucial that you ensure that the apartment is legal.
I always recommend doing your homework before choosing a real estate professional to work with, and in a case like this it’s doubly important. Meet with at least a few potential candidates and be sure to ask them about their expertise regarding apartments, basement or otherwise.
It should go without saying, but you’ll want to confirm the legality of the basement apartment before you put an offer on a property.
Your real estate representative should be able to confirm that the home is zoned for a multi-unit dwelling. Each municipality has its own rules, but your representative should be able to explain the local requirements and help determine whether the home qualifies. Your real estate lawyer is also a valuable resource.
It’s important to note that new legislation requires municipalities to allow basement apartments, but the provincial government has not set a deadline for municipalities to revise their planning policies. As such, restrictions on basement apartments are still in force in many cities.
If the property has appropriate zoning, you’ll also need to ensure the basement apartment meets building code, fire code and electrical safety code requirements. Have your real estate representative ask the seller for the permits they should have received before renovating the basement. If the renovations were made without permits, you should seek legal advice to understand the costs and implications that may be involved with bringing the unit into compliance. There may also be municipal requirements or restrictions relating to parking spots for basement apartments.
Your broker or salesperson might also suggest extra protection by including clauses in the Agreement of Purchase and Sale. For example, where the seller could provide a warranty that the basement apartment is compliant with zoning, the fire code, the building code and the electrical code, and that the appropriate permits have been taken out and cleared. Discuss ways of protecting yourself with your broker, salesperson or lawyer.
I’m glad that you are determined to accept only a legal apartment. For the benefit of other readers, let’s look at some of the pitfalls of renting out an illegal unit.
Many municipalities have restricted the construction of basement apartments in recent years, and it’s fair to say that illegal basement apartments are fairly common in Ontario. But that doesn’t mean that buying one is a good idea.
If law enforcement finds out about an illegal apartment, you could be asked to dismantle the apartment or you could face fines or even jail time.
You’re also opening yourself up to a lot of liability—imagine if there were a fire, and during the assessment of your claim the insurance company found out about the illegal apartment. Your claim could be denied and you could also be on the hook for any losses that your tenant faced.
Ultimately, it comes to one of the most important rules in real estate: take the time to step back and understand what you are buying.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.