Under Contract, Can I Back Out Because of Bathroom Removal?

Question

Hi all,

I am a first time investor currently purchasing a two-family home in Clifton, NJ. I am currently under contract with the last step being to obtain a Certificate of Occupancy from the town. The current Clifton, NJ zoning laws do not allow any (partial or full) bathrooms in the attic and only allow partial bathrooms in the basement. The home that I am purchasing has four bedrooms and four full bathrooms (one full bathroom in both the attic and the basement). This is how the home was listed and this is how the home is currently being tax assessed. I spoke with the Tax assessors and the building department who informed me that back in 1995, the township requested to remove the bathroom and the kitchen from the attic. When I did my walk through, I did not see a kitchen in the attic, but I still see a full bathroom. My question is, if the city refuses to issue a certificate of occupancy unless the seller removes the full bathroom in the attic and the shower in the basement bathroom, can I back out of the deal? I spoke to my attorney and he said the contract does not explicitly state how many bathrooms/bedrooms the house has, but it is only stated in the listing sheet. He said if I do back out, I can risk getting sued and it would be up to the judge to decide. I am concerned as a quick google search showed me that a bathroom adds on average, $28,000 of value to a home. This removal would significantly devalue the home and I would also be receiving less rent if I rent the attic and top unit together with only one bathroom as opposed to two bathrooms.

Please advise,

Thank you

Mark F. · Answer

Your attorney and agent need to be talking about this issue. I've researched this extensively in NJ as I was worried about the same thing. I passed inspection with no issues in my town. If your seller fails to get a CO then you can't get the house most likely, depending on financing, since its uninhabitable.

If the seller changes the setup to comply with the codes then you're SOL unless your attorney says otherwise. I've got some news for you. If the seller is informed they must remove bathrooms to get a CO, they'll do it. At that point if they don't, it's very unlikely they will sell the house to anyone. And in this market there's a ton of reasons to sell.

This is the reason dealing with finished attics and basements is sketchy. Every township and situation is different and most people, including just about all the people in this thread and on BP, have zero knowledge or dealing with this in NJ. Let alone your specific township which again varies so much.

If the town building inspector breezes over it, then you're golden. Again, get your lawyer on the phone asap WITH your agent on the line. They need to be coordinating this as that's why they're getting paid.

Mitch Messer · Answer

@Akram Ramdan These are all great points that you really should discuss with an experienced local attorney. Getting your $20K earnest money back is easily worth the cost of an hour-long consultation to get an informed answer.

Matt Devincenzo · Answer

It seems to me that this statement is not true...they warranted that the seller isn't presently in violation of zoning, based upon which you made on offer on the property. Yet you say they were supposed to remove a bathroom in 1995. e.g. they are in fact in violation of present zoning for their CofO which changes what you are offering on. That said it is certainly a very local custom that you need local advise on. Here you get a CofO when the building is built and it is just there...there is no getting a new one, or reinstating it unless there is something that caused the home to be uninhabitable.

Wayne Brooks · Answer

Look elsewhere in your contract, for language regarding the property being in the same condition. If they had to remove a 600sg addition to get the CO, that doesn’t mean you’d still have to buy it just because “they got the CO”.

Mike Cumbie · Answer

The CofO requirements are way different in NY and NJ than most other places. It even will vary from village/town so you really need some local help on this one. For instance in a little village I work in. :

A CofO is issued once building is complete. People may now live and occupy the building (YAY!!)

B. If wanting to use as a rental, must get a CofO (same name/same terminology just different thing). Where the building inspector comes in and makes a sign of the cross. You also pay a couple hundred dollars to be blessed as a rental. They reinspect rentals, but not single family dwellings.

C. If a single family residence in order to lose a CofO they have to condemn it (if it was built earlier than a CofO was required then the building inspector just waves their hands and remove occupancy status... even though there is no CofO to remove)

D. Rentals can lose CofO after not being rented a year. and shall never be a rental again unless blessed by inspector. However if you are a single family resident close the door and let them knock till they get bored they have no teeth.

E. If a rental the building inspector will reinspect every year to verify it is safe (At their whim, smoke detectors, handrails, step height a little high this year, crack in cement, flowers don't jive with the neighborhood "aesthetic".

Mark F. · Answer

Good luck and I hope it works out for you. I don't as my experience is limited in this subject to what I've read on here and my own due diligence. Any update to your situation?

Andrew Syrios · Answer

I would speak to an attorney, but that would seem like a reason you could back out of a contract, especially if you're still in your inspection period. But you may want to consider simply asking for a price reduction first and foremost.

Akram Ramdan · Answer

@Mark F. you’re completely right, thank you for your honesty. Property had 7 offers using the sellers agent was my way of securing the deal. I will say that the tax assessor stated there’s a note on the file for the house that states this request of bathroom removal in 1995 but since it has been there for so long most of the time they tend to let these things go. So if it does come down that hopefully I can try to use the documentation that the city has for that request and claim that they were in violation of a zoning ordinance from 25 years ago and didn’t disclose that to me. Do you have any other examples of this issue I kept searching and couldn’t find anything else. Thanks a bunch.

Mark F. · Answer

Okay this is my opinion so take it for what its worth. First I'm not a lawyer. I think if you are feeling the need to ask the forum about this issue and you don't have an agent repping you, that's a red flag. I get it, its competitive here and you want that edge to get a deal but this is where you need a solid investor agent with experience. To help you work through the issue. If this was me, or if you had an experienced agent, you would have had this taken care of in your due diligence phase. Pulling OPRAS, talking with Clifton city hall getting clarification on this and just generally educating yourself in this space or having a well rounded grasp on finished attic and basements. Not trying to be a dick but please take this as a learning lesson regardless of the outcome. I've read a bunch of old threads on here of people asking questions like this in Northern NJ and I learned so much.

Ok thats out of the way. You can present that info to the agent and see what happens. You should also tell your attorney that. Your def in a tough situation now as you don't know what the sellers going to do and it sounds like you don't have enough firepower on your team, which is just an attorney in this case.

Technically they may be in violation but you'll have to prove that to a judge. May be easy may be not, you'll need evidence. Not just hearsay, which is what a tax assessor saying this that or the other in 1995 is (hearsay). You'll need a lawyer which will cost money and time, do you see where this is going?

I see you're at the final end of your process. I'd say your best bet is wait for the CO, hope they dont fix it and pull out.

Akram Ramdan · Answer

Hi @Mark F., Thank you very much for your input. I currently don't have a buyer's real estate agent and I used the seller's agent for this deal. I spoke to my attorney about it a couple weeks ago and the only thing he said to me was I can ask for a credit to lower the purchase price of the home due to the bathroom removal. He said backing out would be difficult and if I did, I would risk getting sued and it would be up to the judge to decide. The only thing in the contract that I see with the most promise is what @Matt Devincenzo said. The contract does say the seller's use of the property is not in violation with any zoning ordinances. If they received notice from the town to remove the bathroom in the attic in 1995, aren't they technically in violation of a zoning ordinance? Not sure what else I can do in this situation.

Under Contract, Can I Back Out Because of Bathroom Removal?

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