Homeowner Living in Non-Conforming Unit?

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Homeowner Living in Non-Conforming Unit?

Lindsay Wilcox
Multi-family Investor · Indianapolis, IN · Member since 2013 · 96 posts · 12 votes

This might be a pretty unique question, but since I know there are several people who started their RE journeys buying a MF house and living in one of the units, I'm hoping there might be someone who can shed some light on my question.

Background: I own a triplex with legal non-conforming zoning (zoned for duplexes) that I bought with FHA financing in September 2013. I am currently living in one of the three units and have since I purchased the home. The house was originally a 4-plex with a basement unit until Indianapolis passed egress window laws. The basement does not have conforming egress windows, and was decomissioned as a 4th unit and then mostly un-finished.

My question(s): If I were to re-finish the basement, could I live in it? I understand I can't rent it out to other people because it doesn't have conforming egress windows, but if I lived in it, that would free up the totally legal unit I'm living in right now for a third tenant! Would it cause any kinds of problems, say, when I went to sell it? Would any of those problems go away if, instead of a full kitchen, for example, I just put in a mini-fridge and a microwave? Could that make it a "bonus space" rather than a 4th unit if I sell it in the future? It needs some work, but not enough to deter me if I could potentially make $500-$600 more per month off my current unit!

Does anyone know where I would start to research these questions on my own? I'd like to learn how to figure things out on my own instead of always having to hire an attorney.

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Bill S.Pro Member
Moderator
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
12y

Personally, I won't live in basement space without an egress window. They are in the code for a reason. All the money in the world does you no good in a pine box.

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  • Taylor Jennings
    Indianapolis, IN · Member since 2013 · 354 posts · 90 votes
    12y

    Great question. I'm interested in hearing the answer!

    0Reply
  • Justin B.
    Lakewood, OH · Member since 2013 · 193 posts · 60 votes
    12y

    I have a duplex that originally was scheduled to be a triplex in the basement which is now left unfinished. I have to still check to see if the county requires window egress standards. It probably needs 5k to finish and it will add more on the price. Project in motion....

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    12y

    I can't say what would have happened if it was still a non-conforming unit being lived in today but if any work is done it must be done up to building code. Building code is egress windows for bedrooms not egress windows for rental units only so I don't think it can be done unless you put the egress windows in. I say this because if I were to put a bedroom in my bi-level today I would need to increase the lower level window size even though it is big enough for me to get out it isn't the required size of window. I would also check if you can restore the unit now even with the window replacement, might be you could but maybe not. I am thinking one of the construction experts might chime in with more information but that is my understanding.

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  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    12y

    There is a reason that basements require egress - SAFETY. Do you want to be living in an unsafe unit? Would your insurance company want to insure that? Would some building inspector notice this code violation? What about getting utilities metered for this unit?

    If you aren't going to make it a legal unit, don't bother.

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    It is not a legal living space, period. That means no one is allowed to occupy.

    1Reply
  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    Could you do it and get away with it, maybe. But the egress window requirement isn't for renting, it's for occupancy so it would still be a code violation for you to live in it. You could call it any sort of space you want, but the issue comes back to it being an illegal unit to occupy and therefore liable to be able to get you a "red tag" code violation meaning you'd have fines and have to correct the situation.

    1Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    12y

    Personally, I won't live in basement space without an egress window. They are in the code for a reason. All the money in the world does you no good in a pine box.

    3Reply
  • Lindsay Wilcox
    OP
    Multi-family Investor · Indianapolis, IN · Member since 2013 · 96 posts · 12 votes
    12y

    Codes don't only exist for safety. A lot of times, codes exist to cover people's...assets. Obviously if I were concerned about the safety, I wouldn't live in it, but just because the windows aren't large enough for the code doesn't mean there aren't safe exits.

    I don't think a building inspector would care because I'm not talking about "adding another dwelling to the building." I'm talking about building a "den and bathroom with a kitchenette," which would be a completely legal option with minimal complication. I don't think the space itself would have any legal issues, and in fact plan to finish it out as exactly that whether I live it or not. I'm just asking about whether it's legal for me to live there too.

    Utilities have a single meter anyway that I pay, so that's not an issue either.

    How does it work to get a red tag code violation? Done code enforcer just walks around my neighborhood and decides my house seems fishy?

    I'm not trying to be unnecessarily argumentative, and I appreciate your feedback. I'm just trying to figure out whether a little out-of-the-box thinking can make this workable or not.

    0Reply
  • Lindsay Wilcox
    OP
    Multi-family Investor · Indianapolis, IN · Member since 2013 · 96 posts · 12 votes
    12y

    Just asked my insurance agent and he said since it already couldn't be rebuilt as it stands the event if a total loss (due to the nonconforming zoning), it wouldn't be an issue them. The premium might go up a little because of the increase in sqft, but that's all.

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  • Eric Belgau
    Insurance Agent · Olympia, WA · Member since 2014 · 168 posts · 88 votes
    12y

    It's not going to be an issue for most insurance agents because it probably won't get in the way of writing the business (unless it's placed with an insurance company that has strict risk inspectors).

    But if you're going to make an unfinished space habitable, including adding a kitchen, and you're going to get permits for the upgrades, I imagine at least some of the work will need to be inspected. It seems doubtful that the guy inspecting your kitchen will miss the egress problem.

    It would be awesome if you could create a safe place, occupy it, and free up the unit you're living in to bring in a paying tenant. It would be equally the opposite of awesome if you dumped cash into finishing the space and then you couldn't live in it because somebody noticed what was going on.

    Maybe if you had a really good artist paint a picture of a window in the bedroom, nobody will notice!

    0Reply
  • Lindsay Wilcox
    OP
    Multi-family Investor · Indianapolis, IN · Member since 2013 · 96 posts · 12 votes
    12y

    Haha. I do know some convincing artists!

    The thing is, I'm not planning to "finish" it like most people would consider something "finished." I live alone and can very easily get by with a mini fridge, Crockpot, and microwave, so I don't expect the basement will have a "kitchen," per se. I think it will have a wet bar, which is a pretty common thing to put in basement "bonus spaces." And then I'll set a microwave and/or Crockpot on the counter sometimes.

    Similarly with the "den." It's just a room with some bookshelves...into which I will place a bed and an armoire.

    I think any inspector would really just see a den and bar in my basement (there's already a bathroom). The fact that I intend to sleep there and store food in the fridge at the bar--is that really anyone else's business?

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  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    12y

    Well if you dont get permits , and nobody turns you in like a tenant ,and there is no kitchen you could probably get away with it . But if there is a fire and you cant squeeze out the little basement window and you die , the extra money wont help you at all.

    0Reply
  • Lindsay Wilcox
    OP
    Multi-family Investor · Indianapolis, IN · Member since 2013 · 96 posts · 12 votes
    12y

    Matthew, egress windows have to 15 sqft under the law in Indianapolis. Suffice it to say my 3'x4' windows are more than large enough to actually exit if necessary. They're just a touch too small for code requirements, and since I can't rent the unit out to anyone else anyway, I don't think it's worth the expense to make them slightly larger.

    I do love all the unsolicited feedback about whether anyone else would make the same decision I'm considering. That definitely isn't what I asked. I asked whether anyone knew if it was legal, not whether anyone else would like to live underground with a mini-fridge and a Crockpot. That part is my business! I've spent months at a time living in a tent. I'm not asking you to live my life.

    1Reply
  • Jean BolgerPro Member
    Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
    12y

    Well, having a 3x4 window that is big enough to get out of makes a big difference in how people are going to view this. Since you left that out of your initial description i don't think you should get defensive about comments that show concern for your safety. There are plenty of basement windows that are barely big enough for a cat to get out of.

    1Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    12y

    I would think the only way it would be "legal" is if it were part of another unit and you were a roommate . This way it isnt an additional unit .All you would need is a double door like they have in connecting motel rooms .

    1Reply
  • Pete T.
    Real estate investor · Las Vegas · Member since 2013 · 798 posts · 171 votes
    12y

    @Lindsay Wilcox, I dont think anyone is attacking your way of doing things, just trying to make you aware that it doesnt make it legal and the reason. I personally dont think you would have any issue living in the basement, but why create the possibility. Also, I am sending you a PM if you have your mind made up to do it.

    0Reply
  • Pam R.
    Investor · Delaware, OH · Member since 2013 · 224 posts · 64 votes
    12y

    I agree with Matthew. I am not a lawyer by any means, but from what you describe the primary issue is that property is not zoned for 4 units. You can call the basement whatever you want, but you are not permitted that 4th unit. It's just like a SFH house needs an occupancy permit. If there's no permit, you're not allowed to live there. It doesn't sound like you have an occupancy permit for a 4th unit - whether it's the attic, basement, or shed in the backyard. That's why Matthew's suggestion makes sense - it must be part of an existing, approved unit to meet the legal 3-unit designation.

    As far as breaking the law for living there...I don't know. Lots of homeowners have bedrooms in basements without the legal egress requirements. I don't know of any who have been cited for it.

    I wouldn't worry about future sales - just don't count it as a "space," or tie it to one of the existing units, or decommision it. Here in Ohio, a finished basement isn't considered in the sq footage of the house if it doesn't meet the proper egress requirements. But the sales ad will always point out "finished basement not included in sq footage." Everyone knows that is real, usable space.

    1Reply
  • Lindsay Wilcox
    OP
    Multi-family Investor · Indianapolis, IN · Member since 2013 · 96 posts · 12 votes
    12y

    Is they're a difference between "part of another unit" and "space any of the other residents can use upon request"? Like, I would like to refinish the space even if I stay in the unit where I'm living. I'd put in a wet bar (and probably a karaoke stage, but that's beside the point!) and a den that would probably have a Murphy bed in it any time someone comes visit from out of town (again, I'd there them). I'll probably also turn another part of the basement into storage for the other units. As far as I understand it, that's a completely ordinary, acceptable thing to do with a basement. No special permits required.

    So what's the actual difference between that and making those exact same physical changes to the space and throwing a microwave the counter and storing stuff down there sleeping there?

    A) How would anyone know that's what I was doing?

    B) Why would anyone care?

    C) Does anyone have a legal ability to fine me/make me move/sue me for it, and if so, how do I find the laws about that so I can weigh my options (again, not that I don't want ask attorney, but I also want learn about things myself, and most attorneys, like most people, get confused when I start trying think way outside normal boxes)?

    0Reply
  • Lindsay Wilcox
    OP
    Multi-family Investor · Indianapolis, IN · Member since 2013 · 96 posts · 12 votes
    12y

    That was supposed to say "(again, I'd sleep there, not them)." My phone appears to be eating blocks text.

    0Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    12y
    Originally posted by @Lindsay Wilcox:
    Is they're a difference between "part of another unit" and "space any of the other residents can use upon request"? Like, I would like to refinish the space even if I stay in the unit where I'm living. I'd put in a wet bar (and probably a karaoke stage, but that's beside the point!) and a den that would probably have a Murphy bed in it any time someone comes visit from out of town (again, I'd there them). I'll probably also turn another part of the basement into storage for the other units. As far as I understand it, that's a completely ordinary, acceptable thing to do with a basement. No special permits required.

    So what's the actual difference between that and making those exact same physical changes to the space and throwing a microwave the counter and storing stuff down there sleeping there?

    A) How would anyone know that's what I was doing?

    Someone could turn you in , or an inspector could drive by and see work trucks .

    B) Why would anyone care?

    Nobody would really care

    C) Does anyone have a legal ability to fine me/make me move/sue me for it, and if so, how do I find the laws about that so I can weigh my options (again, not that I don't want ask attorney, but I also want learn about things myself, and most attorneys, like most people, get confused when I start trying think way outside normal boxes)?

    Only time will tell .

    Other problems you will have ........Mail , you only have 3 units so technically you will not have a legal address . If caught , you may lose your non conforming status , All work will have to be done without a permit . the government could sue you or fine you , IF they catch you . Now this is why I suggested enlarging an existing unit , keeping it as "3" units you become a roomate , your section is behind a locked door , and you and your "roomate" share the same address .

    0Reply
  • Ginger C.
    SFR Investor · Warsaw, IN · Member since 2014 · 59 posts · 13 votes
    12y

    Living in northern Indiana I know that I was told by a realtor that, even though our downstairs bedroom(house built in 1961 loooooonnng before egress window codes were created) did not have "legal" egress windows, because there were 2 other 'means of exit' to the room (via the laundry which does have a large enough window and the LR is accessed through the bedroom, and through the door to the family room which has both a sliding glass door AND an egress window we could still list it as a 4th bedroom when we sell. We decided against selling at the time and this was a couple of years ago. So, long winded way of saying, you may be just fine to occupy YOUR OWN SPACE any way you wish since I am assuming that as it was once a separate unit it has at the very least an exterior entrance.

    0Reply
  • George Paiva
    Investor · Milford, CT · Member since 2012 · 592 posts · 285 votes
    12y

    I was just going to ask about how many exits as well. I mean if I were in your shoes and there was a few hopper windows with 2 exits I wouldn't be too concerned about safety living in the basement. Just keep it on the down low.

    0Reply
  • Elizabeth Colegrove
    Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
    12y

    My agent who is a friend was talking about some other matter tonight while drinking wine. She made a valid point, it's not an issue till it's an issue. Her comment was, real estate is not about the 99%, but about the 1%. What would worry me is if one tenant or someone else gets upset and uses this against you?

    0Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    12y

    It can be an issue. In our area regardless of what you call it the town will call it a bedroom and expect it to comply with code so unless the door is in the "den" here they want to see egress windows. That may be different in your area. A studio without the wall would have a different looser requirements or they may accept it as "part " of another unit. I would think that is your best strategy for what you want to do but even then the number of bedrooms per apartment is something the town would care about here.

    The short answer is they probably are not going to restore the unit but if they would restore the unit with egress windows AND the cost was not too high, I would restore a legal unit rather then risk living in an illegal unit. Now if the building isn't wood cost might be too high. I see your point about the window size difference but some things are what they are.

    0Reply
  • Lindsay Wilcox
    OP
    Multi-family Investor · Indianapolis, IN · Member since 2013 · 96 posts · 12 votes
    12y

    Come to think of it, if I, for example, dropped a trap door from the unit I'm living in now down to the basement, not only could I live down there and rent out the unit I'm living in now, but I could choose who was going to live there based on any qualities I wanted at all, since technically they'd be my "roommate" and not my "tenant." All anti-discrimination laws are out when someone is sharing your residence, right?

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