I’m looking to sell my property; it has an apartment with a washroom and small kitchenette – can I ask my salesperson to include “separate apartment” in the listing?

With rental space in high demand throughout Ontario, real estate salespeople are seeing increased interest in residential properties that contain secondary apartment units. Noting that the property contains an income generating unit can attract particular interest from the right buyer.

Before you move forward with advertising your property as having a legal accessory, basement, or second unit apartment, you will want to confirm that the living space you’re describing meets local legal and safety requirements, like: provincial and municipal by-laws, including, electrical and fire codes, and if you are able to provide a buyer with a compliance certificate – if they are issued in your municipality.

When listing a property with a second unit, it is highly advisable that you work with a real estate salesperson or broker who has handled similar transactions. I also recommend hiring a real estate lawyer to provide you with legal advice to ensure you meet all the legal requirements in your area.

If the apartment does not meet the definition or requirements of a legal apartment, or is not by-law compliant, speak with your salesperson or broker to discuss your advertising options and disclosure obligations.

Misrepresenting a dwelling – in this case the legal legitimacy of a unit – can have potentially devastating ramifications for both a seller and potentially the new buyer. Real estate salespeople and brokers are bound to uphold ethical standards and cannot misrepresent the status of a property when asked, regardless of their duty to represent your best interests.

While Ontario buyers, under the legal doctrine of caveat emptor (buyer beware), are ultimately responsible for ensuring that the property is suitable for their needs, sellers have an obligation to disclose and provide supporting information as requested by prospective buyers.

The Real Estate Council of Ontario (RECO) recommends that real estate professionals, buyers, and sellers practice due diligence in researching a property’s status, safety and legal requirements, codes and by-laws, that may impact both the buyer and seller when listing or considering the purchase of a home with an accessory unit.

For buyers, I strongly advise that you ensure a unit complies with municipal zoning by-laws and with provincial building, fire and electrical codes, before you put in an offer or seek tenants for the unit. If the municipality were to inspect the unit and discover that it didn’t comply with local bylaws, you could be ordered to bring it into compliance or dismantle it altogether – at your expense. You could also face the possibility of fines.

Liability is another risk associated with renting out an apartment that doesn’t conform to current provincial safety codes. If the unit doesn’t comply with recognized safety codes, and a fire, flood or structural collapse results in an injury, a death, or just the destruction of the tenant’s personal property, you could face a major lawsuit. Moreover, your insurance company could deny your claim and you would have to pay for damages out of your own pocket.

As always, working with a salesperson or broker and a real estate lawyer is highly advisable when navigating the intricacies of a sale or purchase of this property type.

If you have a question for Joe about the home buying or selling process, please email information@reco.on.ca.

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.

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