3 family actually a 2 family after purchase

Rental Property Investor · Newark nj · Member since 2022 · 5 posts · 0 votes

I bought a 3 family house and come to find out, after closing it is actually a 2 family as per zoning. What should I do?

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Jeremy Horton

Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes

The fact that they tried to zone it for a 3 family and it was denied (while the property was in escrow) is a giveaway that this was intentional as well. And it proves they knew it was a 2 family and falsely advertised.

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Nathan A.
New to Real Estate · Sunnyvale CA and Maplewood, NJ · Member since 2022 · 257 posts · 161 votes
3y
Sometimes non-conforming properties are grandfathered in despite the zoning. Talk to the city and find out whether that applies to you.
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Roy Furbert
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Rental Property Investor · Newark nj · Member since 2022 · 5 posts · 0 votes
3y
Quote from @Nathan A.:
Sometimes non-conforming properties are grandfathered in despite the zoning. Talk to the city and find out whether that applies to you.

Thanks Nathan. I spoke to the city about that and all they said was that all of their records have my house as a two family. And that I have to put in an application to request for it to be a 3 family. I’m going to look more into it though. Thanks again.

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Nathan A.
New to Real Estate · Sunnyvale CA and Maplewood, NJ · Member since 2022 · 257 posts · 161 votes
3y
It's a shame the property was marketed that way then. I suspect you've already done this but it would be worth talking to your lawyer to see whether you have any options. I believe the standard New Jersey Realtors contract says the seller doesn't make representations about zoning, which wouldn't work in your favor. But it's unfortunate this didn't get flagged prior to closing during the certificate of occupancy process.
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Richard F.
Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
3y
Aloha,

If you were represented by a licensed Real Estate Agent, they should have discovered this during their due diligence and obtained these answers prior to the end of your inspection period, or identified it as a contingency item to be cleared prior to closing.
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Roy Furbert
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Rental Property Investor · Newark nj · Member since 2022 · 5 posts · 0 votes
3y
Quote from @Nathan A.:

It's a shame the property was marketed that way then. I suspect you've already done this but it would be worth talking to your lawyer to see whether you have any options. I believe the standard New Jersey Realtors contract says the seller doesn't make representations about zoning, which wouldn't work in your favor. But it's unfortunate this didn't get flagged prior to closing during the certificate of occupancy process.

Right! It’s crazy how this was still sold as a two family. Somewhere someone should have known it was a two family before selling it. The seller tried to put the application to zoning for a 3 family during the closing process but it was denied. I found that out from zoning after I bought it. I’m getting quotes from civil litigation lawyers on how much it would be to go after who ever is responsible. One lawyer mentioned suing the realtor (Keller Williams) because they have insurance. I like the sound of that because I would think it would be easy to collect from an insurance company as opposed to an individual like the seller.
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Roy Furbert
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Rental Property Investor · Newark nj · Member since 2022 · 5 posts · 0 votes
3y
Quote from @Richard F.:
Aloha,

If you were represented by a licensed Real Estate Agent, they should have discovered this during their due diligence and obtained these answers prior to the end of your inspection period, or identified it as a contingency item to be cleared prior to closing.

Hello Richard. I don’t think my agent did either one of those things. I have talked to a few lawyers about this so if they find her at fault she’ll be named in the lawsuit as well as anybody else at fault. Thanks.
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Roy Furbert
Name all of them in the complaint and let them fight it out as each will need to get an attorney to defend themselves.
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Jeremy Horton
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
3y
The fact that they tried to zone it for a 3 family and it was denied (while the property was in escrow) is a giveaway that this was intentional as well. And it proves they knew it was a 2 family and falsely advertised.
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Michael Brattelli
Real Estate Broker · Medford, NJ · Member since 2018 · 236 posts · 177 votes
3y
@Roy Furbert Everyone involved will get named in the lawsuit like @Chris Seveney said.
This whole thing smells like fraud from what you're describing but it depends how it was marketed and what the MLS said. The fact that the seller applied let alone got denied during your contract looks really bad for them. Talk to a really good lawyer.
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Michael Brattelli
Real Estate Broker · Medford, NJ · Member since 2018 · 236 posts · 177 votes
3y
@Roy Furbert also if it is Fraud then the Realtor’s E/O insurance most likely won’t cover that so you’d be suing the realtor directly for treble damages. Best to go after everyone
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
3y
“As per zoning”?
So the buyer was aware of the issue and closed anyway. These things matter in lawsuits.
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Mike Bussing
Montrose, CO · Member since 2015 · 11 posts · 5 votes
3y
@Roy Furbert
The zoning app shows the didn’t disclose and misrepresented
Your lawyer will name all parties
This is why you pay big dollars to realtors for their knowledge and to protect you
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Mike Bussing
Montrose, CO · Member since 2015 · 11 posts · 5 votes
3y
@Roy Furbert
Also neighbor or tenant will turn you in and then what?
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Shawn McenteerBusiness Member
Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
3y
Hi @Roy Furbert illegal triplex and quads have worked well for us over the years. Our strategy has been converting them into luxury duplexes. We have gotten high rents on the properties and attracted very desirable tenants collecting more rent with only 2 tenants to deal with can be a very lucrative way to go. Most properties that are none conforming 3rd level tend to have easy conversion into 2nd level unit. Illegal basements units are not so easy to convert. Tell me a little bit more about the property, perhaps there is an alternative that will make this work for you.
973-975-3895
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Shawn McenteerBusiness Member
Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
3y
Couldn't agree more @Mike Bussing. This is very common in North Jersey. Most buyers agents will just assume 3 units equals tri-plex
973-975-3895
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Vanessa RegaladoPro Member
Property Manager · NJ · Member since 2019 · 129 posts · 37 votes
3y
@Roy Furbert your attorney didn't find this out while you were in attorney review. As a property manager I see this all the time when clients to me. The only suggestion I have is to rent the third bonus/illegal apartment with one of the other apartments (Depending on the property layout). Meaning if the illegal unit it on the third floor, rent it together with the second floor. You can also see if you can get approvals from the City to make the third unit legal.
[email protected]201-232-5381
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Lilly ShamamBusiness Member
Real Estate Agent · NJ · Member since 2023 · 13 posts · 3 votes
3y
Did you review your appraisal report? Your appraisal should have also noted that it was a legal non conforming or non conforming use. Call the appraiser and see if he did research and called the township. In addition look in the report and see if he included 2 and 3 unit properties. Difference in value may be minimal. How many meters are there?
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Jared HottleBusiness Member
Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
3y
Obviously alot of people talking about what your next steps are and possibly suing and also some very creative approaches to making it work. If you take the extreme ownership approach I think this could be a good excuse to work on fixing the systems that got you to this place. Checking zoning with the city, asking for most recent city inspections, etc may be a good thing to add to your systems.
[email protected]319-288-5382
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Richard F.
Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
3y
The first, and usually easiest place to check is the online property tax records. It took about .3 seconds to come up with the Essex county tax board website, and about 5 seconds to locate "records search". Enter the address and review the info provided there, which includes Property Class Code, zoning, building description, year built, total square feet, and more. The info may not always be complete, but it certainly is your best starting point in most locales.

I pull a Property Tax report immediately when someone is asking about our PM services, to first of all verify they actually own the property, but also for the wealth of info it provides including links to permits, deeds, basic past and current loan info, and more.
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