Closing at risk due to zoning issue - Non conforming legal triplex

Investor · Falls Church, VA · Member since 2024 · 2 posts · 1 vote

We are weeks away from closing on a triplex in Pittsburgh and the appraisal showed that while the property is a legal triplex in the county and borough, it is non-conforming as its located in an R-1 zone, one block from R-2. The conventional mortgage is likely to be declined for this reason and we are evaluating zoning variances and DSCR/portfolio loans to try and save what is otherwise a solid deal in good neighborhood. Resale value, financing interest rate, and zoning costs/hassles are our primary concern here and strongly considering pulling out of the deal.

Has anyone been in a similar situation and what would you do?

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Kenneth GarrettPro Member

Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

10mo

@Jeff Hudak

Non-conforming only means that zoning rules have changed since the building was built or due to its occupancy. I’ve been a building and zoning official for years. There are two types of non-conforming uses. Legal and illegal. Illegal means it was never allowed.

The typical non-conforming building zoning ordinance in general states you cannot further alter the use to a more non-conforming use. You cannot expand the non-conforming use, but you can maintain it. In the event the structure were destroyed by more than 50% of its value, it would need to be brought into compliance.

Check the cities definition of non-conforming building or uses in their zoning code. I’ve bought a number of investment properties over the years that were non-conforming and I have not had a lender deny my loan based on it, but you should be aware of the rules. In the event it were to be damaged beyond 50% or whatever their rule is you then could apply for a zoning variance if needed.

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Ryan Muska
Lender · Saddle Brook, NJ · Member since 2023 · 431 posts · 231 votes
10mo
This should not be an issue on most loans. It is possibly a bank overlay that you are running into where the bank will not allow this type of loan to close like this.
Whether it is Conventional, DSCR, etc. there should be an easy fix for this.

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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
10mo
If its a legal triplex and its non conforming , it sounds like you dont need a zoning variance , sounds like has been done . Check with the city and verify .
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Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
10mo
@Jeff Hudak
Non-conforming only means that zoning rules have changed since the building was built or due to its occupancy. I’ve been a building and zoning official for years. There are two types of non-conforming uses. Legal and illegal. Illegal means it was never allowed.
The typical non-conforming building zoning ordinance in general states you cannot further alter the use to a more non-conforming use. You cannot expand the non-conforming use, but you can maintain it. In the event the structure were destroyed by more than 50% of its value, it would need to be brought into compliance.
Check the cities definition of non-conforming building or uses in their zoning code. I’ve bought a number of investment properties over the years that were non-conforming and I have not had a lender deny my loan based on it, but you should be aware of the rules. In the event it were to be damaged beyond 50% or whatever their rule is you then could apply for a zoning variance if needed.
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Jeff HudakPro Member
OP
Investor · Falls Church, VA · Member since 2024 · 2 posts · 1 vote
10mo
Thanks everyone for the input and reassurance here as this was a last minute curveball. Luckily we were able to find language in the borough code that not only allows for continued use of the nonconforming structure, but permits rebuild on the original foundation in the event of destruction so as long as it’s done within 18 months. The appraiser also noted that it’s quite common in the area so we’re glad to see that the code is favorable in these situations.

Our agent confirmed directly with the zoning department and is getting us a formal letter to clear this up with our lender. We will consider filing for a variance in the future to better protect the asset from zoning concerns. Hoping this post helps out others who may encounter this in the future when buying a small multifamily in residential districts.

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Matt DingusBusiness Member
Real Estate Agent · Pittsburgh, PA · Member since 2020 · 83 posts · 76 votes
10mo
@Jeff Hudak
I’m starting to see this come up more often in Pittsburgh, at least from my experience. Something behind the scenes must have changed or is being more strictly enforced.

We just ran into the exact same issue on a duplex we recently closed in the city. It should’ve been a straightforward transaction, but this zoning concern popped up and slowed everything down. Moving forward, I’m now double-checking the zoning map on the city portal to confirm the zoning district before we get too far. Having a legal occupancy alone isn’t always enough for appraisers or lenders.

In our situation, the mortgage officer/broker went the extra mile and got a letter from the City Zoning Department. We sent that to the lender, it cleared things up, and we were able to close.

@Scott Stayvas is a pro on the lending side to help navigate this situation if anyone else is running into this
[email protected]412-613-0018
RealtyCo - Matt Dingus Pittsburgh REI535 Reviews
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Scott Stayvas
Lender · Member since 2024 · 9 posts · 2 votes
10mo
Yes I can potentially help out with this one @Jeff Hudak shoot me your contact info and I can connect with you on Sunday or Monday. I am both a mortgage broker & investor and have dealt with the issue on both sides.
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