In this episode of Get Real Wealthy Season 2, Quentin discusses the illegal versus legal secondary suites.
Quentin says that an accessory dwelling is usually a dwelling that’s found in addition to a primary dwelling. So the primary building could be a single detached, semidetached house or one house beside the other and then in the basement of that, there is another unit. Usually, there is another entrance into that unit. Sometimes it’s from a shared common area. Sometimes it’s a separate entrance from the outside going in. So the accessory dwelling unit can be in the basement, an addition on the back, or the top. Sometimes it could be an exterior building, like a pool building or a garage that has another living unit on the same lot as the building.
There are some units that are illegal, which were created without permits. They don’t adhere to building codes, the bylaw, or the fire code. So if you are buying a building that has an accessory dwelling, you need to make sure that it’s legal. Sometimes there are properties that are legal and non-conforming, though, meaning that they were built perhaps years earlier, met the code at the time, and perhaps they are grandfathered in as being legal but they do not conform to current building codes or the bylaws. He adds that he stays away from the illegal suits because they can easily be shut down if someone complains.
There are different rules that are out there that allow you to legalize a unit. Sometimes there are pieces of legislation that allow you to grandfather in units. Every municipality is different in this regard. He adds “what I would love to see is that any unit can be made legal as long as it needs fire code, because by law, I think it’s a little out of control when it comes to parking regulations and green space.”Quentin further says that there are some risks associated with illegal units. Putting an end to the unit itself can be a big risk because all of a sudden you’re losing an income source. If it doesn’t meet fire regulations and there’s a fire in the unit, and your insurance provider wasn’t aware that it was an illegal unit, it could cause some issues for you.
In conclusion, he says that you should make sure that you have all of those pieces in place. As a professional investor, he likes to stay out of illegal units, adding “that’s the way that I like to play and I try to stick to legal units as much as possible. Sometimes I may have a building that has an illegal unit in it and I work to through the process to convert it to make it legal.”
Quentin D’Souza is the Chief Education Officer of the Durham Real Estate Investor Club. Author of The Action Taker's Real Estate Investing Planner, The Property Management Toolbox: A How-To Guide for Ontario Real Estate Investors and Landlords, The Filling Vacancies Toolbox: A Step-By-Step Guide for Ontario Real Estate Investors and Landlords for Renting Out Residential Real Estate, and The Ultimate Wealth Strategy: Your Complete Guide to Buying, Fixing, Refinancing, and Renting Real Estate.