Using fully finished basement as "Duplex with separate entrance"?

Question

I'm looking for some input.  The property is around Cypress Hills near East NY which are supposed to an up and coming Brooklyn neighborhoods.  It is a legal 2 family with two apartments and a fully finished basement.  The basement is essentially an apartment -- two means of egress, a bathroom, kitchen cabinets and sink but minus the stove and fridge.  While I do see the potential benefit of marketing it to renters as a possible "duplex with separate entrances" or an apartment with extra rec room / storage space, I'm concerned with possible C of O issues.

As long as a stove and fridge are not placed in the basement, is that ok?

Could a microwave and mini fridge be used in the basement without issues?

If anyone has experience with such setups - particularly NYC BPers as laws may be different in other states.  Please let me know if it's a good idea; or a potential major headache.  Does anyone have creative suggestions on how to make this work?   Please let me know.  Feel free to PM me.  Thank you.

Thomas S. · Answer

You need to contact your local municipal office to get the answers specific to your location.

John Hickey · Answer

@Daniel C.

i would run this by and expeditor/architect....soemtimes ther is more than one way to skin a cat.

Doing anything that doesn't comply with your CO could cause trouble. In the real world that happens, look for other options. Sometime there are legitimate options.

If you have a finished space what about just making the first floor a duplex? Might be easier to change the CO to recreation space...very common and an expeditor might be able to do that.

Think long and hard before you AIRBNB that apt. This is a hot button with the city. They have a task force looking for violators, if you also have a non compliant space they will hammer you. Now on the other hand if you could live in the basement yourself and rent out the first floor as part of your own apt on AirBNB i think that might be safer.

But again check with and architect and expeditor they can give you legal options. Or at least let you know which rule your breaking. Some rules are more serious than others.

Frank Chin · Answer

@ Daniel C.

As I mentioned, the eviction attorney advised me that someone can drag things out. The way it's done, M2M is not going to help.

For tenants, he tells he could get one or two postponements, usually the excuse is tenant is sick, and this is good for two months. Then, he tells the court he found out you're renting an illegal apartment, the judge is going to have you evict the tenant in the illegal unit first. As to how long that takes, depends on what approach you take. You do this even for M2M tenancies.

If you're a mean guy, tenants living in illegal units does not have to be evicted. If the buildings department is notified that the unit is illegal, it's occupied, they simply come, eject the tenant, and put up yellow police tapes. I wouldn't do that unless the tenant gets mean and uncooperative. One RE agent told me of this trick when he was selling an illegal rooming house, the tenants won't leave, so he offers to call the buildings department to evict them, if I'm serious on placing an offer on the property. He calls this method "calling cops on yourself".

The kindest way is offer cash for keys, either for the illegal unit, and/or the legal unit as well. Having the police come and eject tenants, similar to the recent United Airlines incident, is not my style. In fact, in the eviction where I had the good tenant give me written vacate notice, he being an auto mechanic offered to do a few jobs on my car for free. He felt bad about causing me problems. That's the way I like to maintain tenant relations.

As for showers in the illegal unit, I've seen plenty of them in units built in the 50's. I've had appraisers, inspectors come by, and no one ever complained, so I get the feeling they're grandfathered.

As to how to rent the additional unit, it's simpler to rent the upstairs unit to a couple, and downstairs to a single person. As to using it as a mother-daughter, I tried renting to someone with a home based business, looked at folks living with their parents, therapists needing a home office to see patients etc. Problem with this approach is takes you a lot longer to find tenants, and involve the risks of running a business from the house.

Oh, the way prevent the problem with home based businesses with employees is you make it clear one they take on employees, they have to move on, for insurance and zoning reasons.

Remo F. · Answer

@Daniel C. The only issue I can see may perhaps be that there is a full bathroom.

Yes you would have to remove the stove and cap the gas line, (Very Easy) a day before the appraiser arrives. You can even leave the fridge in there

If it's simply a toilet in the basement then you're good.

Having a tub or shower may be the issue.

You can also check the CofO on the website below. If there is one available it should be on there.

http://www1.nyc.gov/site/buildings/index.page

key in your details then you click on "View Certificates of Occupancy"

Frank Chin · Answer

I myself owned several of these in Queens, as well as family members we partnered with. Only once in 35 years did some neighbor complain about some other neighbor 2 doors down, the building department inspector came down the street, and wrote out a complaint, mainly because I was dumb enough to have 3 mailboxes out front. But these units are all over the city, just about every 2 family I looked at has it, and most have ranges and stoves.

Here are the issues:

1. If this worries you, go to the building dept., pull the approved floor plan, C/O, query about violations. Oh, some violations, environmental, are not filed together with housing code violations, so you have to ask where to go to find them.

2. When I did refi's some bank inspectors came with the floor plan. When the inspector wrote me up the complaint says building not in accordance to floor plan, so you have to know what the floor plan is. The good thing is, people look for 2 egresses, and banks are OK with it.

3. If you do rentals, work with an insurance agent, but through the years, they've been OK with it, as long as it has two egresses. They know the C/O is 2, but you got 3 units, sorta.

4. Looks like the seller is aware having a fridge and stove would be red flags. Now, a bathtub in the bathroom would be too, because these buildings have toilets approved, but not full bathrooms. Again the floor plan would help.

5. Most people would think the problem is insurance, but it's eviction. If you have legal tenants, for some reason you want to evict them, a sharp eviction lawyer would ask you about the illegal unit, and if it's rented, would not allow you to go ahead with the eviction, till the illegal tenant has left. Our eviction attorney use to work for legal aid, and this is one of the tricks to drag it out. It only happened once, rented to 2 single guys, the upstairs legal unit, and we had to coax one guy to give us notice to vacate, and then lock the other guy out, as one tenant can give notice for both.

6. I did try to rent the unit as a duplex with the other unit, once to a guy with a home based business, some design work with computers. Well, his business go large to point he had to hire employees. Here, I got an insurance problem because my insurance policy does not cover businesses, and I could be liable if someone got hurt.

7. A few words about the complaint regarding the illegal unit of mine. In NYC, people that are in the business of clearing violations are called "expediters". In my case, we have to pull floor plans, have new floor plans drawn, file plans for some construction. The expediter cost me $1,500, the plans costs another $1,500, plus filing fees, minor construction total $6,000, not bad. Oh, he had to file an appeal, and we got downstairs, approved, with something like what you have. We submitted plans called "a home office, with entertainment bar (reason for kitchen cabinets, and small bar sink)". The only thing major we did was to remove the bathtub, so it'll pass inspection. We reinstalled it a few years later after we're tired of it laying in the back yard.

8. Can't have it legalized because to go from 2 family to 3, you need fire escapes, concrete wall furnace rooms. Furthermore the area is zoned two family, and a strong home owner association will have the zoning board reject it, request for a variance, even if you done the upgrade work.

Daniel C. · Answer

Thanks for the eye opener @John Hickey.  Murphy's law at work.  I will definitely involve attorney and architector / expeditor to try to make sure things are legal and up to code.

Daniel C. · Answer

@Frank Chin, the "calling cops on yourself" to expedite the quick eject of unwanted tenants sounds like an interesting tactic - although probably best reserved as a last measure.  I'm sure there is likely some steep fines and violations associated with going this route.  I would prefer the payout incentive to have the unwanted move as well.  Some tenants know just how to take advantage.

This is an older building with recent rehab done.  I am obtaining the floor plans and checking with my attorney about the shower to see if there is some creative way of making it work.  But I may ask the shower be converted to a closet - if it will save me headache and frustration should I have to evict.  I'll be sure to have something in lease regarding number of people in the unit(s); and not allowing home multiple employees for the business.

Thanks @John Hickey.  Small issues I can deal with.  I'm concern with the more serious ones; and trying to evice a tenant whose studied "Screwing your landlord 101".  I'm dealing with one now who doesn't pay for 3 or 4 months; and then catches up because they figure by the time things get serious enough to show up for court, they'll catch up.  I'm looking to get a good eviction attorney / PM temporarily just to handle that situation.  But getting back to current situation, I was going to just consult with my attorney, but I will also check with an expeditor on options like a rec space or similar.  Thanks.

Frank Chin · Answer

I bought and sold a number of these through the years. We never asked for permits when we bought and buyers never asked about them when they buy, and banks all provided mortgages.

I described a situation above in thread where years after I bought, I needed permits and legalize. Not only did I have to spend the money, but time, and if they found something not up to code, what was there had to ripped out, redone, wait for an inspection, and if the inspector doesn't like it, repeat. It can drag on for a while.

I don't know the reason for your seller selling, but if he's retiring to Florida, or like my mother-in-law, got sick and no longer can play landlord, they would be in a hurry to sell. My MIL got something similar in Elmurst, bought it in 1981 for $110K sold in 2005 for $850K, except she got a ground floor unit instead of a basement. She would not tolerate being hung up with permits, her home ripped apart with a buyer insisting on permits. Nine out of ten buyers would be happy with the basement the way it is, and buy as is.

The umbrella is useful when tenants sue for negligience, or passersby slipping and falling sues you. It would not coverscases where you bought property not exactly up to code.

Daniel C. · Answer

Update on this property in East NY --

According to the Seller, a remodel was done that did not need permits. The building was remodeled / renovated last year, but I do not know the scope of the work they performed. The renovations were pretty good overall, but some things were done a bit sloppy. My Inspector did a great job finding all the issues which the Seller agreed to fix - all of them. After waiting for the counter-signed contract, we received word that the Seller cancelled.

I spoke with the Agent and he suggested that the reason Seller "may" have backed out was "probably" due to the insistance of permits being provided. It seems that there are a number of developers / flippers who bypass obtaining permits to avoid delays and/or use cheaper contractors. I have since found 2 other renovated properties in East NY Brooklyn that I'm intrested in - both of which also do not have permits.

If the renovation on a property was done well; and the Seller agrees to fix any found issues, is it still mandatory to have proof of permits?

Would having an umbrella policy in addition to regular insurance be useful?

Using fully finished basement as "Duplex with separate entrance"?

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