Potential 2 to 3 family conversion in Union City NJ

[Ryan Cheung]

Hi, I am looking at a deal in Union City, New Jersey. This property is currently a two family, and is in pretty good condition. The first floor and basement are currently being rented out as one unit, and the second floor is a separate second unit. The basement is fully finished with a separate entrance, and according to the agent, can legally be converted with the installation of larger egress windows in the basement. I have a few questions: How much would it cost to convert the basement? I am expecting it to cost about 10-15k with the installation of the egress windows and permit process, and take anywhere between 6 months to a year. Is this estimate correct? The basement and first floor are sharing utilities. If I were to separate the units, how would I go about separating the utilities, and how much would it cost? Are there any alternatives to separating them? Also, only the basement has access to the circuit breaker. If the power goes out on the first floor, how can the upstairs tenant turn their power back on? Will I have to add another breaker? Any input or advice would greatly be appreciated. Thanks!

[John Errico]

Hey Ryan, I don't want to discourage you, but I can tell you from personal experience it's an absolute nightmare. The Union City building department is one of the most difficult entities I've ever encountered and now several months into my similar project as the one you proposed, I still haven't accomplished much of anything. I don't want to intentionally denigrate anyone who works there since they are likely trying the best they can, but, as someone who has attempted to work with the building department on numerous occasions, it is frustrating at a level I've never before experienced.

You first issue will be zoning: it's likely if it's a 2 family currently, you'll likely have to apply for a change of use, which requires a separate legal process to have the city permit you to construct a third unit. I luckily did not have to go through this in my (ongoing) project for complicated reasons, but it's conceivable that you could be denied at this stage, due to parking concerns or other concerns. This will be an added expense and will likely require an attorney. I am trying to convert a non-basement unit, however it's conceivable that converting a basement unit is even more restrictive, perhaps due to restrictions on the depth underground a bedroom can be, regardless of egress windows (not sure about Union City's interpretation of laws like this).

Second, the actual permitting and construction process is and has been beyond insane. You'll first need to hire an architect to design the unit. At minimum, the city will require you to sprinkler the whole unit, if not the whole building (this is one of several ongoing issues where it appears that the city has as different and/or more restrictive interpretation of the law regarding this than mandated by New Jersey). Sprinklering the whole building is a large expense, likely requiring running a new, dedicated water line to the house. You'll also likely require putting additional sheetrock on the ceiling, and a rear egress from the unit that discharges to a public right of way/street (if you don't have this--like your building is connected on both sides--you'll need an easement from the neighbors, which is another additional expense). My architect, a rotating series of contractors, and others involved in the project have been attempting to determine why our permits for this work have been continually denied, but it is extremely difficult to get answers. For example, you'll submit a permit with the required information, and receive the permit back from the city, asking to provide the information that, if they had turned a page or read what you had written, is amply provided.

There may also be additional complications with the state (you'll need to obtain a green card and be inspected by the state for 3+ family occupancy), and complications with the city. For example, if the city see a finished basement, even if it is unoccupied, they will threaten to fine you and impose violations if you don't return it to its unhabitable condition (particularly if there is, say, a bathroom there)--I have no idea of the legality of this, but I have had this occur to me.

In short: I've come to the conclusion that the city has no interest in you doing this, and will attempt to actively impede your progress at every step. I budgeted $50k for a project that did not require zoning approval and was not a basement, and I think I'll probably end up a bit less than that, but still substantially more than your estimate. If you're going to undertake this, I would highly recommend having an experienced attorney who has worked with the zoning department before, an experienced architect who is familiar with how Union City works, and, most crucially, a contractor who knows how to work with the building department. Particularly on the last point, if you have a contractor who thinks that he/she can file a few permits with the city and that's it... that is NOT what will happen. You or your contractor will be required to personally meet/call/otherwise communicate with the inspectors at be for whatever building code subdivision you are working with, to see why your applications are being rejected, what it is that they are actually looking for (and then if that is actually legally permissible to be required or not!) and so on. This is a many, many, many month process. I'm 5 months in on this and still haven't gotten anything approved by the city, with no hopes of that happening anytime soon.

Frankly, the only reason why I even attempted to undertake this project was that the property cash flows and is a good deal as a 2 family, and I didn't have to go through zoning for the 2-to-3 family issue (it actually already has a green card from the state, as well). I would never have purchased this property if I relied on it being converted to a 3 family to make money.