What is the best way to approach fixing illegal conversions?

Question

I hear the DOB is getting more strict in terms of illegal conversions but I see so many listings for houses that have obviously been illegally converted. I hear the fines are 15k per unit. There are so many listings that go something along the line of "2 family house set up with 3 units" or "3 family house" but the 3rd unit is in the cellar when you check the c/o online it says its a 2 family house. From my point of view there is so much risk to something like that. If there is a fire or something happens to the cellar tenant, I'm sure the insurance company will void your insurance stating the house was not used as intended. The tenants can basically black mail you by threatening to report you to the DOB.

I don't want want to deal with that so I was wondering how to approach removing an existing tenant from an illegal unit. If you go through the eviction process will you be fined by the DOB for renting an illegal unit in the first place? I guess if you can prove you bought it like that then the fine won't go to you right? Has anyone dealt with this before?

Hanna Edwards · Answer

@Bin Chen,

Not sure what you are asking.  Because the property is a single block/lot all units at that address are considered one lot. So if someone looks it up they will see it. If you are asking whether a vacate order would be issued: generally one is not issued unless there is a major problem. I have seen illegally converted lofts with violations for years with people living in them. The fines, I am not sure of the exact amount. The one illegal conversion I personally dealt with only had a fine for work without a permit. The way to cure the violation once received is to vacate the unit and either demolish the improvements (that means taking out the kitchen and maybe the shower/bath as well from the illegal unit).

As for evicting or paying the tenants to leave: first it sounds like you have a current situation where an apartment is unpermitted. Otherwise just make an offer to a seller that he deliver the entire property vacant.

Tenants calling after the fact aren't likely to get you a fine. First, they aren't likely to do it. They got their money, they have little reason to be adversarial once they are out. And inspectors usually won't write a violation if the place is vacant and renovations to cure are underway.

You mention bedrooms with no windows. That is different from an illegal apartment. An illegal apartment is one that doesn't appear on a certificate of occupancy. It may or may not meet building and fire code, but it still would be "illegal" or "non-permitted".

As far as bedrooms with no windows, you can have what is called a "2 room studio" where the kitchen/living area has proper windows and egress and then there is an extra room, usually called a storage room. You can't call it a bedroom but if your tenant decides to put a bed in there after he has possession, that is his business (make sure your documentation is very clear it is not a bedroom). That type of apartment is able to be legalized through the filing process.  If you come across one of those, I wouldn't be worried about it. Just be willing to do the filing. And buy it vacant.

Hanna Edwards · Answer

The as-built condition of the house becomes the responsibility of the current owner, so yes, you - assuming you are the owner - would be responsible for a fine if DOB issues one.

Having a tenant in an illegally converted unit is indeed tricky - first, since they aren't renting a legal apartment, they technically don't have a valid lease, but they DO have tenant's rights, so you would have to go through the court system to get them out. Simply being in court wouldn't necessarily trigger DOB to investigate the home, but if the tenant is adversarial, they could stop paying rent and also complain to HPD via 311.  That might trigger DOB and/or FDNY to come out and issue a violation.  The benefit might be that a vacate order may also be issued, so at least you'd have the tenant out.

Your best bet is to ask them to leave nicely.  Say that you need the space for yourself. If they are on a lease, tell them you can't renew the lease.  If you have already been down this road and for whatever reason they wouldn't leave (they should leave if you give them enough notice and they aren't aware that they have any leverage in the matter), you need to speak to a landlord tenant lawyer about the next steps.  At some point, though, the unit status might come out, so you have to be willing to take that blow.

If you haven't bought the property yet, you can demand the house be delivered vacant before closing. Then the problem belongs to the seller.

Finally, you can take steps to get the unit legalized, assuming certain conditions exist (ie, there's 2 means of egress and large enough windows in at least one room to satisfy light and air requirements). Even if you have to do some construction to get to that point, it might be the best way to go in terms of adding value and not getting jammed up by an existing tenant.  You can also separate the utilities. There's no guarantee that you wouldn't get a fine if DOB gathers that the unit is actually occupied as an apartment, but it does happen that people who attempt to legalize existing illegal conditions before they are discovered by the city avoid a fine.

Bin Chen · Answer

@Hanna Edwards Thanks for the insight.

I hear the fines are around 15k but an eviction can cost more than that in lost rent if that's the case that might be a good last resort option. If that is the case would it just be just be issued for the illegal unit or would it be for the entire house?

I've also heard people pay the tenants to leave but I feel that can be easily exploitable. ie tenants call after moving out threatening to report while you're doing the renovations.

I just feel that almost every house I've been looking at has this issue. There are so many illegal basements or bedrooms without windows. Someone who isn't aware its illegal might buy them and get screwed over.

What is the best way to approach fixing illegal conversions?

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