In-Law Suites – Yes or No?

By now, you’re likely familiar with Hamilton’s meteoric rise in overall property values. If we had a nickel for every time we’ve heard someone lament that they didn’t invest here YEARS ago…well, you know the rest.

This being the case, the natural (and perhaps unfortunate) consequence of growth is the corresponding spike in the cost of rental housing.  According to a recent CBC report, area rents in parts of Hamilton have increased a whopping 40% in the last 8 years!

CMHC released their report on rentals in early 2020, and this is how the averages stack up for Hamilton:

Average bachelor apartment:               $826 /month
Average 1-bedroom apartment:           $1020/month
Average 2-bedroom apartment:           $1219/month
Average 3-bedroom apartment:           $1450/month

*Condos, basements, and multi-family apartments often fetch higher rents than larger apartment buildings (figures shown above). Many two bedroom basement apartments rent for $1500-$1600 per month!

Hence, If you are a home owner, you have likely considered, at least once, whether to rent out extra space to supplement your income and help out with the mortgage. After all, It makes good financial sense to have part of your investment ‘pay for itself.’

Another positive for home owners is that buyers are willing to pay more for properties that have a second, self-contained living space.  So, if you have a property with the space for it, should you add an in law suite to sell for more?

The answer is…maybe.

Things to Consider About In Law Suites as a Seller:

The first thing to consider is legality. Provincial and municipal by-laws can be enforced as the authorities see fit. Compliance with these by-laws could be forced upon the owner after a complaint by a neighbour, a tenant, or a tip called in to the City by anyone who chooses to make a report.  A random inspection could even be triggered by an MLS listing on a property that is for sale.

When a municipality chooses to investigate an in-law suite, if it doesn’t comply with local by-laws, the owner may be ordered to bring it into compliance, or even to dismantle the suite altogether. Besides the expense this would incur, there may be fines imposed.

There is also the matter of liability.  By-laws are designed to take into account the safety of the residents of a dwelling.  A property owner could be held liable in the case of loss, injury, or death that results from a fire, flood, or structural collapse due to non-compliance with building codes and applicable regulations.  There could be an expensive lawsuit, and the insurance company may even be within its rights to deny any claim, resulting in huge out-of-pocket costs. At a minimum, make sure your insurance company is aware of the apartment and its well documented in your policy.

It should go without saying that no landlord would ever want to have to live with the knowledge that anyone had been injured, or worse, due to preventable negligence.

If you already have a second living space in your single family home, and you want to sell your property, it is important that you be as transparent as possible with potential buyers. Never insinuate or state outright that there is a legal unit where there have been no certificates of compliance or permits issued. Provide any documentation you have in your possession and answer all questions honestly.

Things to Consider About In Law Suites as a Buyer:

Many buyers find themselves quickly getting priced out of the market. The solution, for some, has been to buy a home with a rental unit in it, or to add one to offset the mortgage expense.  This can be a great way to break into the market, but please go in with eyes wide open.

When buying a property that already has a secondary suite, remember that once you own it, you are responsible for it.  Just because a previous owner has always rented out the basement doesn’t mean that you’ll be able to. You could be forced to take it out or bring it into compliance at any time. There is no automatic provision to “grandfather it in.”

If you are considering a property with “in-law potential,” be sure to do your homework.  Find out if the by-laws would allow an in law suite.  You can do this by calling the City of Hamilton at 905-546-2489 and speaking to someone in the building department.  There are many factors that will be considered, including zoning, parking, egress (safe exits), and others. If you are depending on the income from a basement apartment to afford the mortgage, be sure you can have it without worrying about breaking any laws.

If rental income is of critical importance, a much safer option is to buy a legal or legal non-conforming duplex. These are often more expensive and harder to find, but are already compliant with local by-laws. If you cannot find one, buying a property that could be converted is another option.

I Want a Legal Accessory Unit – Where Do I Begin?

Zoning is a very important consideration.  The City of Hamilton will tell you that, with few exceptions, an eligible property (one that meets the required criteria) in an area that is zoned “C” or “D” is a good candidate for conversion to a legal duplex.  [In case you’re wondering, a third unit will almost never be allowed.]  An easy tool to find out which zone you are in can be found here.

There are some basic features that must be present for a property to qualify for conversion:  There must be enough parking (typically one per unit), the distances from the building to the property lines, or setbacks, must be sufficient, and there must be a minimum number of square feet of living space and ceiling height in a basement suite.  If any of these criteria are not satisfied, you will either require a minor variance or you will not be permitted to have duplex status.

We highly recommend that you consult with an experienced builder or architect who can guide you through the Municipal by-law maze.

To those of us who don’t work at the City, there are sections of the applicable by-law that seem to directly contradict each other.  The Property Standards By-Law even acknowledges that this sometimes happens.  Look at this direct quote from page 27 of the CONSOLIDATED BY-LAW NO. 10-221:

32(2) Where a provision of this By-law conflicts with the provision of another by-law, Act or regulation in force within the City, the provision that establishes the higher standard to protect the health and safety of persons prevails.  

Our opinion is that the extra effort and investment required to create a legal in law, or duplex, is well worth it in the long run.  Your investment property, when done properly, will pay you back in peace of mind, personal safety, and financial gain.

If you have questions, we would be happy to help you research any property you are considering so that you can make an informed decision about creating or renting out an in law suite.