Pull the plug?

Question

I am under contract to buy a bank foreclosure that was built as a duplex but was made into a single family. I could close a few walls and it would be a duplex again (plus other work to rehab). The problem: The house is in a development with all other homes being single family. I received a call from one of the homeowners in the development who said he has a group of homeowners who will fight me if I try to make it a duplex again.

For the experienced flippers and RE investors. Is it best for me to walk on this one? If I walk I will lose my $1000 earnest money? I can't see anything good coming out of a lawsuit.

For the experienced flippers and RE investors.  Is it best for me to walk on this one?  If I walk I will lose my $1000 earnest money?  I can't see anything good coming out of a lawsuit.

Jon Holdman · Answer

IMHO, and I'm not a lawyer, the "The property shall only be used for residential proposes" would not preclude making it a duplex.  If it was used as a store or office then this clause might be an issue.  But a duplex is residential.

Or, does he somehow think "residential" precludes rentals?  That's also unlikely.  If these is a clause saying houses can't be rented, he might have a leg to stand on.

Given you have $1000 on the line, I think it would be worthwhile to spend $200 for an hour of a lawyer's time.

If there is no legal basis for this suit, then this is, again IMHO, a "taking".  The person is trying to take away a legitimate, legal use of this property because he doesn't like it.  If there are no zoning or building restrictions, you could knock down the house and build as many apartments onto it as you could fit and it would still be "residential".

Ibrahim Hughes · Answer

And it might serve you well to get on the side of the homeowner's association (if you can and assuming there actually is one). You may find that there concerns are something you can easily abate and avoid costly legal fees. I'm not sure of how well off this community is but the last thing you want to do is piss off a bunch of wealthy homeowners who have money to burn and fight you on principle.

I'm picking up a nice deal in an historic district. Got a call not too long ago from the homeowner's association wondering what my plans were, if I was going to maintain the property (it's vacant and owner is out of the country), am I familiar with the guidelines for what I can fix and not fix etc. I decided not to come off as a prick (not in my nature anyway) and work with them. They are now alerting me to other homes in the area that may be for sale.

So offer to sit down with them and address their concerns. The one thing I know about lawyers - some don't care to advise you that even though you are in the right according to the law, that doesn't stop someone from tying you up in court and costing you a fortune. Probably has something to do with the 2 kids the attorney has to put in college.

Ron K. · Answer

Lots of great information, thank you Guys.  Jon, I had the opportunity to chat with an experienced attorney this evening and he did not hesitate to confirm that the the deed restriction would not be an issue.  Scott, I have a call in to the township to discuss zoning issues and will make a trip to the courthouse.  I really think there will be no legal issues, but I will verify. I think Emilio hit on one of my fears (pissing off the people around me). I do believe the guy causing the trouble is fearful of the noise and I doubt he has talked to more than a handful of  others.  I did tell him to make me an offer on the property but he offered less than I am paying for it.  Right now I am leaning toward buying the property.  I had a Realtor whom I have a great relationship with stick his neck out for me to get the deal done so I don't want muddy those waters for future deals.  If things get bad I should be able to sell at a profit (and strip out the natural gas rights).

Emilio Ramirez · Answer

It would be important to find out why they don't want you to use the structure as a duplex.  Are they afraid it will bring their property value down? Are they concerned about transient tenants or noisy tenants?  Also, how big is this group? Is it just the one guy who says he represents the entire neighborhood or is there really a group of concerned neighbors? Is there an HOA?  Reason I ask is that even if you are able to legally turn this into a duplex, I would go out of my way not to make any enemies. If your plan is to buy and hold and if you piss these people off, they could make your life hell. They could call the cops or the building inspector for any and every little infraction. If you really want this property, it sounds like you will have to be very diplomatic with the process. Good luck.

Scott Hubbard · Answer

I agree with Jon, generally speaking, a duplex will fall under residential.

However, a deed restriction and zoning can be two separate issues and you should investigate further.  Updated zoning requirements may prevent you from altering the existing property as a duplex.  I have seen this where rural communities  had use less restrictive zoning in order to attract developers.  For instance, multiple use zoning could allow different types of structures to be built and then as the community grows more restrictive zoning requirements may have been introduced.

Visit the local county tax assessor to see the current zoning use.  Public records will be required to be kept, so you just need to find out where. If you are using an agent, they may be able to help you locate this information.

1.  Find out how this structure is assessed.  Usually it will refer to the structure as a single-family home or may describe it as a multi-unit or even a duplex.  If still assessed as a duplex or multi-unit, then your halfway there.

2.  Check the zoning designation to make sure it allows for a second unit.  It may refer to R2, MU, or Apartment, etc. Usually the current zoning will be part of the assessor's file since it is considered in their assessment of value.

3. Get copies of this information and see an attorney for his opinion.  Like Jon said, it is worth the extra couple hundred for the piece of mind.  In addition, you can have him write a letter giving his opinion on your rights to use the property.  Send a copy to the neighbor who is threatening you.

If the zoning has changed, then your going to have a fight on your hands as already explained. A zoning change is called a variance which will likely require you to publish a notice and will open you up to scrutiny.

Good Luck!

Ron K. · Answer

Guys,

Thanks for the great responses.  Here are the answers to your questions:

How exactly do they plan to fight you?

He said they would hire a lawyer to fight it

Q. How is the land zoned (single- or multi-family)? Was the conversion permitted?

A.I am not sure about the zoning, I will check.  The house is in small town America where believe it or not most locations have no zoning.  The property is a small residential development.  They would fight me based on a deed restriction that says "The property shall only be used for residential proposes".  I don't really see that argument holding water as a duplex is residential.  Also of interest, he stated that the developer build the duplex and the developer is the one who wrote the deed restriction.

Q What are the numbers if kept as a single family vs a duplex?

A The house is setup "townhouse" style so it would be an odd single family.  The past owners opened a few walls to make it a single family, but left both kitchens, both stairs, etc intact, so to make it a duplex will require closing a couple doorways.

Are the other homeowners willing to reimburse you the $1000 if you walk away?

Good question.  I would probably ask for more that $1000.  I guess I could always threaten Section 8 housing :)

Jon Holdman · Answer

You should contact both the building department and the planning and zoning commission and discuss their requirements for the duplex conversion.  If either involves any sort of public hearing and approval, then you are probably in trouble.  These guys will object and the commissioners or city council may side with them.

OTOH, if you're in conformance with the current zoning and the building department will issue a permit, then there may be little basis for their lawsuit.  They can certainly still file a lawsuit, but if you're in compliance with all the laws and regulations, their lawsuit amounts to a "we don't like what you're doing" claim.  In your conversation with the planning and zoning commission, you might ask what they think about this threat.

J Scott · Answer

How exactly do they plan to fight you?  How is the land zoned (single- or multi-family)?  Was the conversion permitted?

What are the numbers if kept as a single family vs a duplex?

Are the other homeowners willing to reimburse you the $1000 if you walk away?

Pull the plug?

Most Popular Reply