"legal duplex" vs. "non-legal duplex"

[Mike Purvis]

Hey guys,

I'm looking in the GTA for a duplex or a triplex. I see a lot advertised as a non-legal duplex but still advertised with multiple units. What are the legal issues of renting out a unit in your house when it's not legally a duplex or triplex?

How hard is it to turn a non-legal duplex into a legal duplex/triplex. How much does this cost in terms of fees from the city (ballpark)?

Thanks!

[Joseph Weisenbloom]

I am curious about this as well. I know this question can vary strongly based on where you are located. Some cities are more lenient than others with this kind of stuff.

[Gary McGowan]

Many answers to your question.
The main difference is the city can shut your building down if it has an illegal unit. Yes this happened to me on a triplex. Zoning only allowed for a single family home. The Ontario government back in the early 90's past a bill that mandated all municipalities must allow a min of two units per property. A legal-non conforming unit is one that ex sisters before 1994 and has not changed use since.

All municipalities have different laws on what is required. Not all areas actually allow two or three suites. In Newmarket you can legally add a second suite and in Vaughan you can not at the moment. Oshawa and Whitby yes.

I would stay clear of properties that are not legal and look at areas where I can add a suite if I could not find what I'm looking for.

As for cost. This can be all over the place. Fire rated separation between the units (5/8s drywall). Fire suppression in the furnace room. Fire rated doors on the furnace room, entry doors for the units. Electrical inspection. Fire inspection. Building inspection. Min ceiling height. Min parking. second egress for each unit.

Just a few thoughts.

[Filipe Matos]

If you do not have a clue, I would hire a real estate agent that knows the different bylaws in the different neighborhoods. Before buying call the city to ask what that street allows for, do not ask about the specific house or you can open a can of warms.

Hire also a Fire consultant that knows the bylaws in the area.

If you really want to buy an illegal unit and legalize it later, then also hire an experienced architect/engineer that is used to legalize rentals.

The most "friendly" area for illegal units is Downtown Toronto, there is an extreme need for apartments , if they would shut down all illegal units, there would be thousands of tenants on the street.

If you still think about buying an illegal unit and keep it as is, make sure you comply with Fire cod - that is non negotiable - and have an exit strategy in case you are sooner or later shutdown by the city.

If you get shutdown and cannot or want to legalize it, you will have to change doors or exits, remove kitchens, etc... etc....

[Henry Zwo]

I live in St.Catharines On... and I can only tell you my experiences as they apply to me here. Having a illegal unit only gets ugly if someone complains to the City By-laws officer. They will investigate and it then becomes a crap shoot as to what can, may or will happen. ( an aside here... our building inspectors seem to be fair folk and will many times give you the benefit of a doubt.

Now if you decide to sell a building that has a non conforming unit, you will not get the selling price if it was a conforming unit. The seller can lose thousands. One will have difficulty recouping their investment costs in updates.

And getting a bank loan may also become an issue. When I come with my hat in hand looking for an real estate loan, my bank ALWAYS asks for the financials for the unit. Mine will not consider any financials from non conforming units, and will give you a difficult road to obtaining financing. Mortgage brokers here also work along the same guidelines.

The thing is (at least in Niagara), getting a unit to legal status may not be as difficult or as costly as many seem to think. The biggest trigger is safety of the tenant. That is paramount and supercedes all other aspects. Costs will be commensurate to what needs to be done to bring things up to code. ie... Electrical updates are not cheap, nor are plumbing issues.

Another aspect to consider is the insurance component. I talked to my insurance company about this. Mine will not cover me if I have any non conforming units. I can only imagine that there are many out there that hedging their bets against serious issues that will need ones insurance company to help them out. This could cost you!

So, buying a non conforming unit may present positive opportunities if one's homework has been done and you are going in with eyes open.

[Account Closed]

@Henry Zwo 

what type of properties do you own in the Niagara region? I have a student rental there and looking to expand in that area.

[Frank D.]

Find units that are Legal non conforming 

if you cannot find Legal....what this means is the building is old and does NOT meet the current building standards but the city allows it...to operate under its current usage...

ie. Legal non conforming triplex

as the previous posters mentioned illegal units can cost you lots of headaches with city and fire depts should someone complain...and as soon as do anything to collect rents owing they will complain......!!

[Henry Zwo]

In regards to Ajay's question, I own 3 properties in St.Catharines - a 5 plex, 3 plex and a townhouse. None of the units are student rentals. 

For me personally, student rentals, I stay away from them simply because of the work and hassle needed to keep these units in repair, and you are constantly working to rent them. Friends of mine have entered and exited this market. In this area, the successful student rental owners, use property managers that have expertise in this area and/or are locally based.

Student rentals can be a profitable niche if you have the proper organizational skills and support people, patience, and a good "evil eye". My business plan is geared to small multi's with long term tenants.

Oh... And banks down here do not provide mortgages for student rental properties. You may find a mortgage broker, though the one that I use does not. 

In regard to illegal units, I agree with Frank in that if you get a tenant who is in arrears or who wants to get out a lease early, if they find out they are living in an illegal unit, they will use that against you. It just adds up to hassles that you want to avoid.

Converting a usable space to a illegal rentable unit always looks appetizing to us owners at first glance. Many of us have done that math. However, the smart thing is to step back and do the analysis of how much more it will cost to make it a legal rental. Doing it up front usually doesn't add much to the final cost. Yes it will take more time (building inspector, insurance adjusters, qualified trades for the electrical, plumbing etc, )to get the proper stamps of approval, but it is time and money WELL spent.

You will get this investment back with little issue, when you go to sell the place at some future time. As I mentioned in my other post selling a building with an illegal unit will not get you back that investment and a smart negotiator will use that against you, up to and including calling the authorities if they can't make a deal with you! I know an investor who has done this several times.

Non conforming units can be bargains or nightmares. I have seen both in my area. It has depended on the owner of the property and how they saw the place. With non conforming units that I was interested in ( but did not ultimately buy), I brought in a building inspector, but also an electrician, and plumber to do my due diligence. In all cases ( 4 buildings that I was considering), they found serious issues that would have cost me $10-30K and then some to bring up to code. Because of these experiences, I am shying away from the non conforming units....for the time being anyway.

[Account Closed]

@Henry Zwo  great insight!

Student rentals are definitely a lot of work. Screening the students and the timing you look for next year tenants is crucial. However, when things work out the CF is awesome! And as a new investor that's what I am looking for. Money in the bank! My goal however, is to learn and eventually move to multi-unit investing.

There are some lenders who provide mortgages for student rentals. You have to search hard. I find it BP really picky and controlling when you start discussing mortgages and lenders here on the post so don't want to violate their policies.

Cheers everyone!

[Ryan Teixeira]

Frank Dec in regards to Hamilton, if the listing states 'legal non conforming' duplex, triplex etc, what does that mean and how are the bylaw sheared towards these properties? (I saw you invest in Hamilton)

[Anand Saxena]

Hi all

Seems to be a interesting discussion. 
I am currently looking at a duplex in belleville Ontario that has been existing since before the city bye laws came into force. How ever i am unable to get any documentation for the same. I have been told that it is a legal non confirming duplex which has two tenants currently. How can i get the necessary evidence?
What should i do under these circumstances? Can the city  help me out? Whom to contact.

I will appreciate any suggestions on the above matter
Thanks
Anand

[Hai Loc]

Originally posted by @Anand Saxena:
Hi all

Seems to be a interesting discussion. 
I am currently looking at a duplex in belleville Ontario that has been existing since before the city bye laws came into force. How ever i am unable to get any documentation for the same. I have been told that it is a legal non confirming duplex which has two tenants currently. How can i get the necessary evidence?
What should i do under these circumstances? Can the city  help me out? Whom to contact.

I will appreciate any suggestions on the above matter
Thanks
Anand

Getting the city involved may open up a can of worms. You should ask around if its common to have non conforming duplexes because in Toronto they are everywhere and the city doesn't make an effort on cracking them down because it will dissolve a lot "tens of 1000s" of affordable housing for tenants/students and not to mention added income for investors  

Just providing information. Not giving any advice or direction. 

[Anand Saxena]

Thanks Hai
My concern is how to split the utilities between the two up and down units and add separate meters for electricity, water and gas. Can you advice?
Anand

[Gagan P.]

Bigger concern, if you intend to finance it, would be to ensure its legality as a lender won't take the income for the second unit into account if you're planning on getting a loan.

I would speak with neighbours who've been in the area for years, as well as find old zoning regulations. If you're purchasing it and the seller is who said this, you could put the onus on the seller as a condition in the Agreement of Purchase and Sale.

As for your question, Anand, you need to contact the city to do this. Water they may or may not do, but the other two are possible. Just to clarify, this is a DUPLEX, not simply something that has a basement apartment, correct?

Typical conditions for water are that the plumbing must be separate for both units (this applies whether duplex or legal basement). If it's a true duplex then this won't be an issue and is already done.

Electricity and gas: Same thing a bit easier for these, but some providers require proof of legality of second unit. But same thing, you'd want to ensure no breakers are shared between units.

[Eric Nguyen]

@Mike Purvis Are you referring to Canada's rules for a legal suite or a legal duplex in the US?  Generally need separate entrances, utilities, egress windows, and all the same safety precautions for each unit.  Also parking may come into play in certain areas