What is the problem with Illegal apartments?

Question

I've noticed many three family homes have a fourth apartment in the basement and it's considered "illegal", yet many have tenants.What are the problems with having such apartments and what's the worse case scenario for having them? Thank you

Nathan Gesner · Answer

It could lead to fines. It could lead to death if you don't have legal egress windows for people to get out in case of an emergency. If your insurance company finds out about it, they could cancel your policy and refuse to cover a claim, even if it's a valid one.

Mary M. · Answer

The biggest issue, IMO, is safety. If someone(s) die in a fire in your illegal dwelling it would be terrible. And it does happen (ghostship in oakland for example)

Nick W. Graham · Answer

@Patrick Reagan. A New Jersey Court ruled less than a week ago that Landlord was responsible for Tenant relocation costs associated with an eviction for an ‘illegal’ apartment.  So there’s that, too!

Kenneth Garrett · Answer

One more thing to add is your insurance claim may be denied in the event of a fire by installing an additional illegal unit.  If you read your policy you could jeopardize your policy.  It’s just not worth it.

Patrick Reagan · Answer

Great point,Kyle.Thanks so much!

Kyle J. · Answer

@Patrick Reagan  Something else that wasn't mentioned is that, in many jurisdictions, courts have ruled that landlords can't collect or even request rent from a tenant in an "illegal" unit.

So you rent it out and things are going splendid initially (like most relationship), but then one day your tenant gets upset with you for something and decides to stop paying.  You will have no method to enforce your lease/contract because you rented out something that the law says was never legal to rent out in the first place, and your tenant ends up living rent-free.

Here's a little more reading on this if you're interested: https://bornstein.law/illegal-units/

Kenneth Garrett · Answer

@Patrick Reagan

It’s dangerous and illegal.  In case of fire how does one get out of the building without an emergency escape.  Would be ok if your mother or father lived there and they perished in a fire.  Really, we do have any morals or ethics as landlords.  Do the right thing and use it for storage.

Jon H. · Answer

@Patrick Reagan

The worst case scenario will vary by jurisdiction. In NYC, adding an illegal apartment to the home can lead to a fine of tens of thousands. All it takes is one tenant in the property filing a complaint. Not worth the risk.

Taylor L. · Answer

It would be impossible to properly insure, because you would be unable to tell the insurance company exactly what's going on at the property.

If you get caught by the local code enforcement, they certainly have options at their disposal to stop you, said options would likely depend on where the property is. These things are worth doing correctly and running like a proper business, the downside to getting caught is just too great.

What is the problem with Illegal apartments?

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