Risks of miszoned multifamily

[Max Abend]

I approached a real estate company to learn more about how the owner started and to learn his experience with REI. He mentioned that the best opportunities in southeast Nassau county are buy and hold multifamilies, but that most are not fully legal. For instance, you might be buying a legal triplex that has four or five actual units.

How hard would it be to get such a property rezoned for the extra units in Nassau county (town of Hempstead)? That'd pretty much be the only way I'd consider one of those properties. For someone who did buy, but didn't rezone, what are the risks?

[Frank Chin]

If your question is how hard is it to rezone, the answer is very hard and often next to impossible. Yes, there are many 2 duplexes, with no CO, three plexes up to five plexes with finished basements turned into apartments, also no CO. I owned several duplexes through the years with an extra apartment. As to whether the authorities are aware of it, Mayor Koch of NYC was asked what he's going to do with thousands of illegal units in the city during a re-election campaign famously said, tell me where to house the 200,000 to 300,000 people made homeless if I enforce it.

My wife has a degree in urban planning and worked in the planning department in Long Island where most municipalities handle their zoning and the policies and procedures are similar. City and towns have zoning maps where areas are designated for SFH, 2, 3 families, commercial, industrial.

Now, if someone comes in and say "I want to legalize my 3 family to a 5 family", what happens? First, the issue is, if we do it for this one case, are we going to do it for everyone. If there is a compelling reason, they can issue a variance. In your case, I see no compelling reason. If the discussion goes into there are so many non conforming units, so let's up zone. Then the issue becomes one of whether the area has the needed utilities, like power, water, sewer etc. Finally, the biggest issue that breaks the bank is the school system. Many Nassau county schools are so overcrowded that up zoning of any kind requires the construction of new schools, and school taxes are ridiculous. Any politician that raises school taxes would be in trouble. I own a rental in Nassau county and when I have a tenant with a school age child, I have to submit an avadavat to the town they that really live there or I would have to pay a fine equal to the student's tuition for the year, something like $20K for each student. Parents often borrow addresses of friends to get kids into better schools.

As I said, I owned rentals with extra unit, one such case where a duplex had an extra basement apartment. It was discovered, and I was issued a citation to correct, which requires the total removal of the unit, in my case, ripping the unit down to the bare walls. I didn't use it to rent out, I use it for my own office, and tried legalizing it. Can the local zoning board issue a variance? Spoke to the local homeowners association president and ran into the first problem. His association is opposed to my area, zoned for 2 family, up zoned to 3. Why? The schools and traffic. I'm told the association is very active, opposed it for years and the zoning board normally follows it's lead.

I further checked with a local expeditor who handles zoning problems and also an architect. Tells me the zoning board is not my only problem. Two families, three families, four and five are built to different standards. A three family requires fire escapes, concrete enclosed furnace rooms, among other differences. It is not cost effective to do this to a 3 family as it's easier to trade a 2 to a 3 family. And a 3 family is built to a difference standard than a four. 

So it is not simply to get a CO for more units.

In my case, as I was cited for having a unit not in the plans, I submitted building plans for my office, but not an apartment. I took out my bath tub, range in the kitchen. The owner two doors down combined his illegal one BR/Ba to his legal 2BR/1Ba to a 3BR/2Ba unit. So the answer is some imagination.