What happens if there is a fire in an illegal unit?

[Gillian C.]

Tons of investors I know have illegal units in their buildings, especially ground-floor units. So what happens if there is an incident (fire, for example) that originates in and/or harms someone in an illegal unit? Are you just taking on that liability in renting out an illegal unit?

Many units in our area are illegal because they either have low ceilings or have only one exit. I personally would never rent out a unit with a single exit or other serious safety issue, but what if you make it safe but it is still not a zoned unit? Are there ways to mitigate this risk or protect yourself, or does the technical  "legality" only matter if the unit is unsafe or not properly outfitted?