Does anyone rent out units less-than-legally?

[Tyler Brown]

So this is half pointless rant, half looking for suggestions.

My mother-in-law moved in with my wife and I, and we'd like to rent out her house; she has a large house in New York. Unlike most of the country, her locality requires permits for even renting out a single family home.

While annoying, I decide to do the right thing and try and get the permit, even though everyone I talk to says not to bother since nobody else ever does.

In order to get the permit, the town needs to inspect the property and review the Certificate of Occupancy and a land survey, so I file a Freedom of Information Request to get those documents from the town (which is a whole other ordeal). I finally get them, and go down to town hall.

My mother-in-law's house is pretty big - six bedrooms, and a smaller second kitchen downstairs. It also has a large deck coming off of the second story. That was all there when she bought the house 25 years ago.

The first issues come when I get the CO, as neither the deck nor the second kitchen are mentioned. I go to town hall to get more information, and find out that even if the second kitchen was legal with a permit and all, it would still have to be ripped out, since it's only legal as long as the homeowner lives there. No rental home can have a second kitchen. 

Regarding the deck that has been there for 25+ years - best case scenario is that an architectural firm would have to draft up drawings and a survey of it, and the town would have to inspect it and find everything up to current code. Worst case is that it would have to be demolished.

Also, the survey that the town had on file was too faded to read, so we'll need to hire a professional survey company to create a totally new one.

Plus the minutia of the things the town inspects is just frustrating. The house numbers on your mailbox are only 3" high? Hah, you just failed your inspection!

All this has me now leaning towards just not getting the permit, but I know that's potentially opening the door to trouble as well. Does anyone have any experience skirting the bureaucratic legalities and just renting a unit?

I'm sure if the town found out they could force me to bring everything into compliance with their regulations, in which case I'm right where I am now anyway.

The biggest thing I can think of to cover my bases in this case is very strong tenant screening.  Nothing is foolproof, but that should cut down on problem tenants which is where most issues would begin in this case, I believe.