Just bought a single family with basement ADU that turned out to be illegal.
Member since 2020 · 2 posts · 0 votes
Just bought a single family with basement ADU that turned out to be illegal.
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Member since 2018 · 1k+ posts · 1k+ votes
1yQuote from @Jonathan Rieder:
Hi all,
Looking for some guidance. We just bough out 2nd property (single family with a 2br ADU in basement) with the intention of renting out the ADU. Unfortunately someone from the town had to come out due to an unexpected boiler replacement a week into owning. This resulted in them noticing that there appears to be an ADU so he look through the records and I guess had never been permitted. Any advice on this? Do I need to go through the whole process of getting this permitted now or can I just pull out the kitchen and say its another room ('ve been told that's a thing)? Also is there anyway to turn this back on the seller (who it turns out lied about quite a few other things), we were under the impression it was a legal ADU. I assume a lot of people will say this was due to lack of due-diligence and in that case I supposed I've learned a lesson here.
1. You should have done due diligence, yes.
2. Your lawyer should have told you what the building was zoned/rated for. Did you tell his there was an ADU so that he would know to check?
3. See about getting the ADU legalized. Sit down with the zoning people and alderman and see if that's possible.
4. You may be barred by the doctrine of merger, but depending on what representations were made, you may have a case against the seller. Probably not, though, since ADU status could be checked independently by you. Ask your lawyer.
6 Replies
- Member since 2018 · 1k+ posts · 1k+ votes1y
Quote from @Jonathan Rieder:
Hi all,
Looking for some guidance. We just bough out 2nd property (single family with a 2br ADU in basement) with the intention of renting out the ADU. Unfortunately someone from the town had to come out due to an unexpected boiler replacement a week into owning. This resulted in them noticing that there appears to be an ADU so he look through the records and I guess had never been permitted. Any advice on this? Do I need to go through the whole process of getting this permitted now or can I just pull out the kitchen and say its another room ('ve been told that's a thing)? Also is there anyway to turn this back on the seller (who it turns out lied about quite a few other things), we were under the impression it was a legal ADU. I assume a lot of people will say this was due to lack of due-diligence and in that case I supposed I've learned a lesson here.
1. You should have done due diligence, yes.
2. Your lawyer should have told you what the building was zoned/rated for. Did you tell his there was an ADU so that he would know to check?
3. See about getting the ADU legalized. Sit down with the zoning people and alderman and see if that's possible.
4. You may be barred by the doctrine of merger, but depending on what representations were made, you may have a case against the seller. Probably not, though, since ADU status could be checked independently by you. Ask your lawyer.
- Member since 2020 · 2 posts · 0 votes1y
It was specifically stated in the add that there was an ADU, which I assumed needs to be truthful and that an illegal ADU would not be considered an ADU, am I incorrect on this? Realtor and Title company were very aware there was an ADU.
thank you so much.
- Member since 2018 · 1k+ posts · 1k+ votes1yNeither one of whom (realtor, title company), pass judgement on the legality or code compliance of an ADU.
Quote from @Jonathan Rieder:
It was specifically stated in the add that there was an ADU, which I assumed needs to be truthful and that an illegal ADU would not be considered an ADU, am I incorrect on this? Realtor and Title company were very aware there was an ADU.
thank you so much.
Always INDEPENDENTLY check:
zoning
code compliance
building classification
local rules re Airbnb etc and whether you can assume those statuses
title
inspection of building conditions
environmental conditions
schools
everything else — this is not a complete list.
Never trust/assume. I have said it before and I will say it again, my wife’s friend said it best when she said “The last time I trusted someone, I had twins.”
- Did you use a real estate agent? Did you get a disclosure statement? Was it a NAR approved disclosure statement.
I suspect the rules regarding the disclosure statement vary by jurisdiction. Where is the property located.
assuming the seller added the ADU and did not disclose the ADU in disclosure forms, you may have recourse (depending on the rules of your jurisdiction) but it may cost you some legal fees. In CA (my market) the seller is required to make honest disclosure statement and you can collect for material non-disclosure.
I suspect you already have learned that you need to check the status of all permits. However this does not exempt the seller from an honest disclosure statement.
Note: The area may not be zoned for an ADU. a basement may not have egress required of having a bedroom in the basement. The potential issues can be a large list depending on the jurisdiction.
Good luck - 1yAlan AsriantsBusiness MemberReal Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
It is the due diligence of the Buyer and the Buyer's agent to verify things like this, but sometimes things are able to be slipped through the cracks. If the seller purposefully marketed the property with an ADU and claimed it to be legal while 100% knowing it wasnt is subject to sellers disclosure law per your state.
Did your township conduct a U&O inspection? Were you given a certificate by the township on clear use and occupancy from the seller?
You might have a case here if there was clear misrepresentation against the seller.
Just FYI if you decide to go the lawyer route your lawyer will sue everyone involved.
Interesting that appraiser didn't catch it either. I had a situation just like this recently. Its in lawyers hand now because getting the ADU permitted was not possible through township, so they are trying to remedy their losses.
Make sure you get a GOOD lawyer. This client I knew got a very bad lawyer who got the suit thrown back into his face due to so many technical mistakes.
Try going through township first, maybe its an easy process. Litigation should be last resort, but dont wait around. In PA statue of limitations is 2 years
Alan Asriants - New Century Real Estate 592 Reviews - Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes1y
If you pull the kitchen out it really isn't an ADU at all and should be part of the other unit. You could just continue to rent it out assuming the city's not involved and assume it's grandfathered in. Lots of people do this kind of thing. But it's probably worth getting it permitted assuming it appears to be done right. That will help a lot with resale and refinance values.
I would also ask if you bought this through a real estate agent and if so, what the seller disclosed. If they didn't tell you the ADU wasn't permitted that should be actionable and I would talk to an attorney.
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