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Do secondary (basement) units have to be legal?
We have helped many people buy a house and sell their condo while lowering their monthly payments. And even live for free. We do this by creating income with secondary suites, including laneway and garden suites..
A secondary suite is legal when it goes through the building permit process. There are legal non-conforming units that were built with a permit but the building code has since changed. Some of our units fall into this category.
Most of the secondary units in Toronto are not legal, or would be difficult to prove. The municipality hasn’t cracked down on illegal suites. I think this would be a quagmire if they did. And the city would lose rental stock.
I think the risks, while small are worth considering:
1. Banks could start requiring suites are legal to count the rent in affordability calculations.
2. Insurance companies may stop insuring non-legal units.
3. Building inspectors will take a look at the legality of units if they are inspecting the premises for other reasons. Especially if you make them angry.
Determining if you have a legal suite can also be difficult. Some may have been legal in the past. But records are dubious past a certain date so I wouldn’t rely on them to be legal.
Which is potentially why banks and insurance companies may be avoiding that quagmire.
One of our neighbors bought what they thought was a triplex (not our clients) and it turns out it wasn’t. Their contractor angered the building inspector as he was inspecting some minor upgrades. The building inspector then “cracked down” on what was actually a single family dwelling. This was costly for the owners to bring it up to code at the same time losing rental income.
One of the benefits of not having a legal unit is that you can use it for short term rentals. Which is helpful if you also want to use the space for guests and as a play area in the winter.
One of the things we recommend to our clients is to make sure that any units on your property meet current fire code. And we have a third party consultant that helps with what you need to do.
If you are considering a property with an income suite, make sure you are working with an experienced team. Preferably with realtors that understand building code, the landlord/tenant regulations, and have income property themselves.
This question came to us the other day from a fellow realtor. We are realtor friendly and are known in the industry to have expertise in renovations, income suites and developments.
If you have any questions about income suites, a topic we are very passionate about, please email or book a call!
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