Thread: Chicago two-flat with illegal (?) finished basement suite?

Hi all,

My husband and I are considering buying a legal two-unit building in Chicago that also has a finished basement unit. All three units are currently rented out, but the basement unit is not legal (says the realtor). I would assume the basement conversion was done without permits then? Although the ceiling height looks good, all the windows are normal windows, and it has its own new-looking electrical panel.

I guess I have three related questions:

1) What are the repercussions if I buy this property and continue to rent it out as the current owner is doing? If City inspectors find out, will I be fined or put in jail? Or will they just make me kick out the renter, rip out the kitchen and bath, or what?

2) Are there ramifications if I buy the property and STOP renting out the basement? In other words, am I still likely to be fined for owning a property with an illegal basement kitchen/bath, even if I bought it long after that work was done?

2) What would need to be done to make the unit legally rentable? I am leery about inviting an inspector into my home, because you never know what else they may discover that I perhaps would not have wanted to fix. And can I allow an inspector access to help me make that basement apartment legal WITHOUT allowing him access to the other two units (in case there are problems I don't know about in there?) The building is already zoned as 2-4 units, I think, but I know there are more issues to deal with, and you hear a lot of horror stories about building violations in Chicago.

Thanks so much for any help you can offer!

Emily

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You are asking questions that are beyond the scope of a typical home inspection by a home inspector. A "city" inspector can enforce building and zoning codes. Even if a home inspector finds defects, a home inspector cannot and does not do anything more than make recommendations for remedy and repair. A home inspector can't "red tag" anything. But a home inspector may find defects that will affect your decision to buy and you should definitely hire one.

As for your questions concerning legal issues, I suggest consulting with an attorney experienced with real estate issues.

Pretty much what Lon said…

Why did the Realtor say the basement unit was illegal?

I think you are mixing up the types of inspectors. There is the Home Inspector (HI), who you hire, that will look the property over for you and make recommendations, a very good idea to consider, and highly recommend that you tag along, because what he finds could save you a lot of money and headaches, or used to get things fixed before you buy, or used to lower the asking price.

The City/Town/Village Building Inspector (BI) enforces the building code and will write correction orders. He will show up when you have work done, or if a renter complains, depending on local ordinances and rules. In most cases, the BI will have the ability to look at the entire building if a renter complains, if he suspects work was done without permits, thinks there is a life/safety issue, or whatever other reason.

To answer your questions:

1 – I never heard of anyone going to jail for something like this. I’m guessing, every area is different, that you might be fined and/or given a 30 day to-make-corrections notice. If the work was done without permits, you might be gutting the basement, removing rock and insulation, so the BI can see the rough work.

2 – Same as answer one.

3 – You would have to contact the local building inspection department to see their requirements, and they might reroute you to a designer of some type. Usually, the BI will only look at the areas you are working in, they don’t have time to wander around buildings without reason. Usually a BI will not come out to look things over to see what needs to be done, you submit plans to them for review and they might conditionally approve them, or deny them with reasons.

I think you could be walking into a hornets nest based on the little info that you mentioned. Pay the bucks and get a HI out there, if you are serious about buying it.

Your potential trouble may also be with your Lender. Based on their lending practices.
You may also have to have the property inspected by the city/local gov for certification/registration and if you have a tenant I would think you would be cited. Telling a tenant they have to leave may put you on the hook for their future rental cost somewhere else.

Some areas require that units be inspected to meet health or safety criteria. Then there is the possibility that if there is not registration of rental units at present but there may be in the future. Which happened in Maryland.

The best thing is to have the building and units meet zoning, building code, certification, health/safety, registration and any other thing that would make the entire building legal before you purchase it. If you buy the property then you are on the hook for the building and everything in it, including the tenants. Saying that you bought it this way is not an out for responsibility. Title transfer includes everything good and bad.

By example in Baltimore City Maryland you buy a building with lead pain in it you also buy the liability attached. Which is why there are many abandoned properties. Remediation is 3 times the value of the property. Rental income will not cover the investment into the property. Renting it without remediation is like giving the tenant a winning lottery ticket.

Simple solution - get permission from the seller to allow you to have it inspected by the city.

You may need to agree that you will not use that inspection information as a reason to not buy the house if the cost to correct is $ xxxx or less, if that cost is greater then you can use that inspection information as a reason to not buy the house.

No
No
A bit of a complicated answer here in the City
No you cannot call a City inspector in prior to ownership. There are liabilities involved that could allow the Seller to sue the daylights out of you. Talk to your attorney
Calling the DOB to do an inspection once you own the property also isn't a good option. Once again liabilities involved
You can call the DOB and ask, even you can ever get anyone on the phone. However, DO NOT give them the property address.
You can call or email me and I can give you details.

As an AHJ for 30 years, I have never seen someone go to jail for simply owning an illegal apartment. However, I've ordered many of these apartments to be removed when I find out about them. Also, if I can find out who the licensed contractor/electrician/plumber was (if there was one), I will file a complaint with the state licensing board to get them fined and/or get their licensed revoked. Usually, it's an unhappy former tenant who informs on them or a bank or realtor who is doing their due-diligence. Banks are getting much tougher and won't lend money unless they have something in writing from the local AHJ confirming that a questionable apartment is illegal. I've seen this becoming more of an issue in the last 3-4 years. If the apartment is an allowed use under zoning, I would allow them to legalize it, which would require permits, inspections, opening walls/ceiling to make sure electrical, etc. was done properly. Jail could come into play if a tenant is injured in an illegal apartment. I have seen twice in Boston, recently, the owner being charged with manslaughter when someone was killed by fire in an illegal apartment.

Originally Posted by Markus Keller

No
No
A bit of a complicated answer here in the City
No you cannot call a City inspector in prior to ownership. There are liabilities involved that could allow the Seller to sue the daylights out of you. Talk to your attorney
Calling the DOB to do an inspection once you own the property also isn't a good option. Once again liabilities involved
You can call the DOB and ask, even you can ever get anyone on the phone. However, DO NOT give them the property address.
You can call or email me and I can give you details.

Did you notice that I said to get permission from the seller?

Seller would lose if they sued after giving permission.

something else to consider... a third apartment typically results in a change of occupancy from a "two-family dwelling" to a "multiple dwelling." Here in NY, and probably plenty of other jurisdictions, that would trigger many more code requirements, like fire sprinklers, multiple exits, up-to-date smokes, etc., that will fall on your shoulders to complete.

Sorry Jerry, no I didn't see that.
3 units is our cut off. 4 units and over is when additional requirements kick in. A two flat is pretty much handled same as a single family for most purposes.