Illegal Garden Unit Solutions Needed-Can I Rent as Office Space?

Question

My family recently purchased a Multi-unit in Chicago (our first). The basement unit was unrented but had two bedrooms, a kitchen and bath already in place. We wanted to make the space a lot nicer to rent to a family member or use as our own dwelling. We did spend quite a bit of money on the unit assuming that if we lived in the unit, or a family member did, it would be fine and within the city rules. Wellllll... we received an unexpected visit from a city building inspector while we had a painter at work. Then all of our plans came crashing down.

Long story short, we have a court date with the city and have been told by our city permits rep that NO ONE can live in an illegal dwelling unit. Not the owner (us) not a family member- No one!!! We were shocked by this information and now do not know what to do with this beautiful space!  We are being told we need to now either DECONVERT or DUPLEX it to make things right with the city.

Question:  Do we deconvert and call it all a complete loss? Do we duplex to salvage all the work completed (spend more $ on it)?

Question:  Can we rent this space out AS IS as office space? Can we rent AS IS as Airbnb?

Help!!!!!!!! Has anyone been stuck here?  Really need your help; thank you and God bless.

Jonathan Klemm · Answer

@Michelle Boyle - Super sorry to hear this.  Dealing with the City on this stuff is horrible, but you aren't alone.  You should definitely talk to a licensed Chicago architect like @Prashanth Mahakali or @Samuel Cardenas, who @Sarita Scherpereel mentioned above.

It's easy to deconvert, you just have to cap the gas and pull the stove typically.  You also need to check and figure out why it is not legal?  Is it a zoning issue?  Ceiling height issue?  Exit issue?  You should PM me and can provide you a great zoning attorney.

I'd run some analysis after you get a full picture of what the processes will be for your two options.

Sarita Scherpereel · Answer

I'm so sorry this happened to you. It is the biggest risk of owning an illegal unit in Chicago. Are you in Chicago proper or one of the surrounding villages? Just want to make sure before I speak on this.

After the city finds out about the violation it's very hard to keep the unit as illegal. Duplexing down will allow you to rent this legally. I think that's your best option at this point. You will likely need to hire an architect for permits especially since the city now has you on their radar. @Samuel Pavlovcik can you chime in on this?

Putting in the work in the lower lever might have to be removed/redone to make it conforming to a duplex or an illegal unit. Either way, this will be expensive. Without knowing what you've done at the property it's hard to give an exact number. Please contact your realtor and an architect on how to get out of this cheaply.

Other options are to rent then space out in other ways. I've seen artists rent space as a studio. Especially in Logan Square and Pilsen. The risk in using this as an Airbnb is that if they city comes back and someone is still living in the same. An illegal space should not have someone living in it.

For me, there are a few things I need for a client to by an illegal space. I really want them to be able to get full value out of the building if they can't rent the space.

Jonathan Greene · Answer

We deal with this a lot in NJ, but most of the time when we have an illegal (usually 3rd) unit in the basement or attic, we uninstall the stove and remove it, close, and then put it back. As an owner in NJ it's much easier to live in an illegal unit whether it's technically legal or not, I know a lot of people who do it. When they get tough about it, it's never about fire safety and always about money. Specific to Chicago, @Sarita Scherpereel may be able to help with some advice as to how to navigate the situation.

Samuel Pavlovcik · Answer

@Sarita Scherpereel, thanks for the mention.

@Michelle Boyle, you definitely are not alone with this issue. It is likely that the unit is likely "Illegal" because it was finished out without a permit being issues for the work, as that is most common. That being said, there are various reasons as to why a permit was not pulled, and it is typically because the unit would not be considered as a legal unit even if a permit was pulled, due to various reasons as previously mentioned by @Jonathan Klemm. It is a good sign for them to offer you the option to duplex down, as typically if work was done without a permit they will require you to rip everything out, even if you bought it this way! You put the address into the link provided below to look up any previous permits or inspections, which may provide more info.

https://webapps1.chicago.gov/buildingrecords/

Best of luck!

Kenneth Garrett · Answer

@Michelle Boyle

What is the city asking you to do to make it a duplex?  As far as components you meet that criteria? Bedrooms, kitchen, bathrooms.  Do the bedrooms have egress windows.  I’ve been a city building inspector in the suburbs for years.  Fill in the details.  You have a court order or they threatened you with it.  A court order can only be issued by a judge.

Sarita Scherpereel · Answer

@Jonathan R McLaughlin I agree, the realtor should have presented the risks and how to work around them prior to purchase. Also, they should have guided on best contractors to work with so that you're not opening up yourself to more risk.

As I mentioned in my comment above, duplexing might be the best option since the city has you under their radar. Without knowing the restraints of the property it's really hard to say what is guiding the city's decision. Does the unit have two forms of egress? Legal ceiling height? Just a few reasons the city might have flagged this. I wouldn't recommend doing anymore work on the property until you've connected with an architect. They can walk you through how to fix the property.

Jonathan R McLaughlin · Answer

@Sarita Scherpereel I’d be curious what sarita has to say since she knows the market. I’d have a complaint about my realtor if you used a buyers agent and  if they didn’t flag this problem area. Not a legal complaint—you are responsible for what you buy—but a boy you didn’t do your job and I’ll never recommend anyone use you and I’m talking to your broker complaint.

Did you really not know or did you get some version of someone telling you “ technically it’s illegal but everybody does it and it’s never a problem” ? I’m not trying to beat you up but buying on that assumption is never a problem till it is. Did you permit the work you did to improve it?

It sounds daunting, but sometimes you can lower the floor to get required ceiling height, build out exit windows etc.

Alan Dunlap · Answer

Sounds like someone reported you to the city.  That sucks.

Search BP.  Posts on  basement units have been submitted several times over the years.

If you do duplex, you should be able to charge higher rent on the duplex unit.  That may help make up for the loss.

What were you told about the unit when buying the property?  Zoning should have shown whether the unit was legal.

If it's not legal now as residential space,  do you want to risk the city coming back when it's short term rental?

https://www.chicago.gov/city/en/depts/bldgs/supp_info/illegal-conversions0.htmlhttps://gustancho.com/buying-home-with-illegal-apartment

Marc Winter · Answer

Michelle,

Now that you've jumped into your first investment, you've learned a valuable lesson you are sure not to repeat.  Learn and understand your local codes (landlord/tenant and building codes) before you dive into the short end of the pool.

In this situation, apply for a variance to legalize the unit for duplex, as the city mandates.  That would be the path of least resistance.  You can up the rent and be legal.  And sleep at night.

You could try hiring an architect or facilitator who MIGHT find another way around, however, be warned--try to make an illegal space any type of rental, Air BNB or whatever, and you'll step right in it.  The inspectors already have you on the radar--don't poke the bear with a stick.

Ask me how I know...

Good luck!

James Mc Ree · Answer

The best answer for you is to call a local attorney.  You have a serious legal matter and shouldn't rely on a bunch of armchair advice you are about to receive, mine included.

Start with how the property was marketed to you through the transaction.  Was it marketed as a triplex with a basement unit?  Did your title insurance confirm the units?  Does your homeowner insurance include zoning insurance for unfortunate discoveries like this (this is sometimes an extra you have to add on and almost no one does).  These are some avenues for sticking someone else with the bills.

Municipalities often have ordinances that say basement or below-grade rooms may not be bedrooms.  Check your municipality's ordinances for this.  You are probably out of luck if they have it since it can't be home without a bedroom.

In my experience in PA, you usually have to do what the inspector/zoning officer says; however, they might not have the whole story.  How did that basement unit come into existence?  Can you find documents, permits, etc that indicate the municipality was previously aware of or approved it?  You may get yourself grandfathered if it is existed prior to zoning, for example.

As to an office, check your municipality's zoning to see if offices are allowed in your zone.  If allowed, you may have a solution there.  A storefront could be another option if retail is allowed in your zone.  Short term housing (AirBnB) won't work if housing isn't allowed in the basement.

Duplex is probably your best option if you can't get regulation relief.

Illegal Garden Unit Solutions Needed-Can I Rent as Office Space?

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