Legalities of duplexing down or Airbnb in illegal garden unit?

[Nilusha Jayasinghe]

Hey all, I'm under contract for a legal 2 flat + illegal garden unit in Logan Square which we want to house hack and then maybe rent out whatever space can be rented out if we move out. The plan is to rent out the top unit to a long term tenant and for us to live in the middle unit until we move out (if we ever do). We're able to afford the place as a 2 flat, but still pondering legal options for monetizing the garden unit, if any exist. The garden unit is nice, finished, has a kitchen, and 2 bedrooms+1 bathroom, 2 egresses, stairs connecting it to the unit above as well as an exit to the outside but ceiling height is 6'5". The zoning is RS3, so we'd have to wait til ADUs are allowed city-wide + dig down to meet the ceiling height requirement if we want to make it a third legal unit which is not something that financially makes sense right now.  

One idea while we live in the unit above, is to make the garden unit an Airbnb. The Department of Buildings said that if we state in the application that the Airbnb is part of our living space and not a separate space, then it'll be approved. But, I wonder if being an city-approved Airbnb host with a legit registration # is enough grounds to stand on legally if an Airbnb client reports/sues me because of, I don't know, a medical injury because of hitting their head on the short ceiling (even if I disclose info about the ceiling upfront on the listing). Any thoughts on this?

And let's say we move out of the middle unit some time down the line. The ideal scenario then is to rent out the middle unit + garden unit together  as a duplex down. My thinking is that since the basement is an illegal unit, we'd put in the lease that the garden can be used for rec space/gym/office space but not as bedrooms, no one should live there/sleep there. But I don't know if that verbiage is enough to protect me in the event of a lawsuit for example if there's a fire down there and someone that is in fact sleeping down there gets hurt. I also don't know if there's a specific process we have to go through with the city for it to be recognized as a duplex down.

Basically, I just don't know if the status as an illegal garden unit (the lack of ceiling height and correct zoning) prevents me legally from using the space for either of these ideas and legally, or if it's just dead space. I know people all over the city use illegal units for all sorts of things, but my goal is to maximize profits while ensuring I'm doing things legally and protecting myself from liability. Anyone have any thoughts on these questions above? If no, what next steps would you advise for me to get the legit info I need- hire a lawyer or call the City's Zoning Dept?

Thanks in advance!

[Sarita Scherpereel]

You're really missing the point on what makes this unit illegal/non-conforming. The city of Chicago will issue a zoning Certificate -which you have to have to close. This is essentially a certificate of occupancy for your building. Ultimately, that is what dictates the legally of that unit. Not your lack of ceiling height or egress. As many of us dominantly working with this inventory, have seen those things be "grandfathered in". As was mentioned on the other post you created- there is a difference between a non-conforming/illegal unit. And even if the ADU was on your side the cost and time to do it is such a waste when there are some many other buildings/deals in Chicago.

I feel really frustrated for you. Your realtor should be guiding you through this process and clearly they are not informing (or they are not aware) of what the risks are with trying to have an airbnb in a non-conforming/illegal unit. If you're not using a realtor, you need a better attorney. Most of these questions should be guided through them as they know your transaction better than anyone of this forum. My concern is someone who does not understand Chicago rules and regulations on units, airbnbs or the AUD profess in Chicago will direct you on these topics. Most of these concerns should have been understood prior to going under contract. As you've now likely wasted (or will waste) money on an inspection. 

This building is not the only one in Chicago. You will find a better deal that makes you feel comfortable. From these posts it really feels like you're forcing yourself through this risk which will feel like a burden after you close and not an opportunity.