I’m thinking about purchasing a home that includes a basement apartment, and I’m concerned it might not be legal. How should I proceed?
I’m glad you’re performing some necessary due diligence. There are many risks associated with renting out a basement apartment in a building that isn’t zoned for accessory apartments, or that contravenes municipal or provincial codes. I recommend working with a real estate salesperson or broker who has handled similar transactions. If the unit is already occupied, ask potential salespeople about their general familiarity with the Residential Tenancies Act because tenants have rights and you don’t want to violate them. Be sure to consult with a real estate lawyer early in the process to get proper legal advice.
You will need to know if the property has been zoned for a multi-unit dwelling and if it meets all of the requirements of the building, fire, and electrical safety codes. The City of Toronto, for example, allows for basement apartments in detached and semi-detached homes beyond a certain age, but there are many additional bylaws and rules you will need to understand before you proceed.
Some municipalities will issue a certificate confirming the apartment complies with relevant bylaws. Your salesperson should ask the seller’s representative for a copy (if it’s applicable), as well as copies of permits, inspections and approvals the seller should have received before they created the apartment. You would be well advised to make that a condition in your Agreement of Purchase and Sale (APS).
If the apartment isn’t bylaw-compliant, you could simply not rent out the unit, but it’s worth talking to your lawyer and your representative about the steps you’ll need to take to ensure the home doesn’t have deficiencies as a result of how the unit was constructed.
I strongly advise against buying the home and then renting the apartment to a tenant without first ensuring that the unit complies with municipal zoning by-laws and with provincial building, fire and electrical codes. Just because it may be happening now, doesn’t make it right or legal. If the municipality were to inspect the unit and discover that it doesn’t comply with local bylaws, you could be ordered to bring it into compliance or dismantle it altogether. You could also face the possibility of fines or even jail time.
There’s another substantial risk involved with renting out an apartment that doesn’t conform to current provincial safety codes: liability. If the unit doesn’t comply with recognized safety codes, and a fire, flood or structural collapse results in the damage to the tenant’s personal property, an injury, or a death, 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.
If you have a question for Joe about the home buying or selling process, please email firstname.lastname@example.org.
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.