Bought a 4 unit but tax record shows 5 units, what to do?

Question

Hi everyone. I recently purchased a property in Providence and it was listed as a 4 unit and the building really does have only 4 units in it. However in the tax record this is listed as a 5 unit. The deal was made as a 4 unit and I even got conventional loan for it. I thought the lawyers would record the deal in the city and it will get converted to a 4 unit on the records too. However I went to the city to check 2 months later and they told me I have to start from scratch to get the record changed and they could put a lien on the house for no-permit work done if I don't.... What should I do?

I am talking to the closing attorney and the Realtors but they are just finger pointing..

Has anyone gone through this before? Any advice would be helpful

I am talking to the closing attorney and the Realtors but they are just finger pointing..

Has anyone gone through this before? Any advice would be helpful

Anthony Thompson · Answer

@Robert Chen I'd ignore what the tax record (tax assessor) has, you want to find out what the building department has on file as the legal use. You can get the phone # here (use the Contact Us link on the page; BP won't let me post the phone) but you may have to go in person to have them pull the card; they're at 444 Westminster St (somewhat across from AS/220).

I suspect the building department will have 4 units, and then down the line you can try to get the tax assessor to update their records to reflect the 4 legal units - which you should do as soon as you can, because you're probably being taxed a lot more at 5 units than 4.

Either way, the deal has already closed, you're not going to get any help from the closing attorney or Realtors. I wouldn't worry about the bank, they chose to make the loan and they have their own records & due diligence. Keep paying the mortgage, obviously :)

Converting from a 5 to a 4 is common due to fire coding and sell-ability. Hard to believe, but because it's a residential vs. commercial loan (4 vs. 5), a 4 unit can in many cases sell for more than a 5 unit, just because the pool of buyers is so much more.

And you will want to add "confirm legal use with building department" to your due diligence check list for future deals. :)

Frank Chin · Answer

There's people called "expediters" whose function is the consult and deal with permit issues. In NYC, I used these folks on a number of occasions.

And the money they can save you can be substantial. When I had the illegal basement unit, the city people said I have to demolish it, and turn it into a vacant basement first, the way it is in the building plan, And then I had to build the basement office from scratch, I had to submit drawings and get approvals. There were fines on top. I need permits both for the demolishing phase, the building phase. Total cost of all of this, $25K to $30K.

In other words, I had to start from scratch.

I hired an expediter, told him I have a business, and use it for my office. There were only minor changes needed to turn the apartment to an office, For instance, an office does not need a bathtub, a stove, so these would have to be removed.

He first approached the city and he was told what I was told, everything was to be ripped out, and put in again. Our plan was rejected. But he had a meeting with the assistant commissioner, whom he knows, the rejection of our plan was overturned, and approved. The whole project finally cost me $6,000 (compared to $30K) including the expediters fee.

He even filed the paperwork in such a way that it didn't trigger any fines. I googled your area, and found: Expediting in RI Check under services, then additional services. I would pay for consultation on what the "starting from scratch" is.

Robert Chen · Answer

I wanted to give a final update on this thread. So I moved out of Providence and after stabilizing the property I decided to sell it as the market was quite hot and I could make a fairly good return. During the selling process, all this issue with the building in the town and tax record came to surface because the appraiser was VERY diligent at his job..

So anyway I had to correct the records. It wasn't as bad as I had thought and a few lessons learned here I hope to help someone else out.

First is that the tax records and building department don't talk to each other. It is actually really easy to get the tax record changed. All I had to do was call the tax department and tell them that the record is wrong and have them come take a look. The tax assessor came the same week I called and did a 10 min walk through to confirm this was just a 4 family and changed it that day. A month later it showed up online too so everything there was all set. If I had done this earlier the appraiser wouldn't have seen any issues as he initially just wanted to see the tax card.

Second is that the building inspection is willing to work with you but there are a lot of red tape... The building inspector was sympathetic to my issue and agreed that it is weird how the city has 5 units while the building is just 4. He came for a walk through pretty quick and confirmed. However, after that he needed me file a permit, provide a floor plan, and get electrical, plumbing, mechanical, and fire department signatures. I drew the floor plan myself with a software and he accepted it. Electrical, plumbing and mechanical signatures were very easy as they understood the issue and signed without coming to the property as they know there were no work done. However, fire department wouldn't sign off until a full fire alarms inspection was done. Being a 4 unit, it is also a different procedure than the regular smoke cert for 3-units or lower. After all that, new CO for 4 unit was finally given.

Through out this entire thing, everyone, including the city and the tax assessor were surprised the appraiser had such issues. They actually told me the appraiser should just go by what he sees because they admit the city records could be wrong.. I am not sure what to make of it but I am glad at the end it is done.

Nelson Taylor · Answer

In Providence the right arm def does not speak to the left arm.  I once sold a house that was taxed as five units, zoned as a single family and it was being used as a triplex.

Frank Chin · Answer

I have the same exact problem as OP.  In NYC where I am, the finance department had me down as a triplex and the  buildings department has me down as a CO is for 2, after they discovered an illegal unit. I corrected matters with the buildings department, a big fuss that ran a year, but Finance did not update theirs.

I cannot change my CO from 2 to 3, as the area was zoned for 2, cannot get a variance due to local homeowners association opposition, with the added issue 2 families are built to different standards than 3.

OP's issues is the same where he is, he's better off with CO as a 4 rather than 5, particularly if the area is zoned for 4. With 5, he is in commercial territory. At 4, he can still obtain NOO residential loans with it's advantages.

Where I am, investors generally try to add units in basement, so typically they add an illegal unit in the basement of a duplex, or one in the basement of a 4 plex. I looked at a great number of these, and often there is a difference between building department and finance department records due to this. Usually it's the result of the removal of illegal units, some voluntary, and some after they discover the illegal unit.

And I hesitate to contact the Finance department to correct their records because each time something like this is required, I believe they do an inspection, and you don't know what till turn up. I might be paying more in RE taxes than I should. As it is real estate values here are crazy high, so are the rents, so I might as well quit while I'm ahead.

Brandon Ingegneri · Answer

If you are assessed as a 5 unit, do you have the ability to create a 5th unit and get the additional unit performing?  If so, why not just take advantage of the situation?  It is much more difficult getting the zoning approved to ad a unit as opposed to reducing one. Once you do it, it is unlikely that you will be able to reverse should you want to down the road.

If you are adamant on eliminating the 5 unit zoning classification, you will need to speak to the zoning department and then the tax assessor's office.  Depending on the situation, you may need to speak to an attorney who deals with zoning issues, but I would definitely explore the possibility of creating a 5th productive unit.

David Sisson · Answer

@Nelson Taylor and I bet that the building dept thought it was a 2 family LOL.

David Sisson · Answer

I want to echo what Anthony said. The tax assessor's information will often reflect something different than what the building dept has. Why? Often because of illegal units. The tax assessor is very good at getting the money, but doesn't talk to the building dept. What you want, is the assessor to update their info to match what's on the ground, and what the building dept has, so you are taxed at the correct rate. If the building dept also shows 5 units, you might want to just drop the issue, in case you ever want it to "become" a 5 unit, you've already got permission to do it.

Robert Chen · Answer

Hey @Fan Bi this was in the neighborhood called "Valley".

Fan Bi · Answer

@Robert Chen Do you mind me asking what part of town this was in?

Bought a 4 unit but tax record shows 5 units, what to do?

Most Popular Reply