Illegal Unit In Apartment Building

[Terrel L. Shields]

The MV definition references a buyer acting prudently

An investor acts prudently when they assess risk. What that risk is cannot be determined without assessing the buyer's appetite for risk. Warren Buffet takes risk no "prudent" small cap investor can stomach. But Carl Icahn, Kyle Bass, etc. can do likewise. They are not "imprudent" in the least.

 

[Mike Kennedy]

IF the property was located in Sonoma County, CA - illegal means exactly that .............

The Sonoma County Code imposes mandatory civil penalties for building, zoning, non-storm water discharges and certain health code violations. These penalties may be calculated in one of two different ways. When a permit can be issued to legalize a violation, penalties may be imposed from three to ten times the base permit fee. If the violation cannot be approved or legalized by a permit, you will be given (30) days to cease the unlawful use or demolish the unlawful structure.

What will happen if I don't get a permit and resolve the violation?

Code Enforcement staff strives to assist the property owner to obtain compliance. If permits are not obtained, a "Notice of Abatement Proceedings" will be recorded against the title of the property. This recorded document serves to notify the public of the violation and may prevent you from selling the property or obtaining refinancing or title insurance on the property.

In addition, an administrative abatement hearing may be scheduled in an attempt to gain compliance. If the Hearing Officer orders that you correct the violation and you do not comply, your case may then be referred to County Counsel to be pursued in Superior Court. This could result in a judgment against you, increased costs and penalties, the County entering your property to physically remove the violation, and in some extreme cases, owners may be sentenced to jail time.

http://www.sonoma-county.org/prmd/FAQ/code-enf.htm

The above process is NOT unique. It behooves each Appraiser to perform requisite due diligence NOT ONLY ON ZONING issues but also Building & other governing Municipal Ordinances.

Should a specific Municipality NOT have similar Local, County and/or State Laws governing BOTH Zoning and Building Legal Uses ............simply report the due diligence performed and the impact, if any, the lack of governing ordinances has on market appeal and market value of a subject's property.

 

[CANative]

Just try to get someone from PRMD to go out to Annapolis and do something about this...

 

[timd354]

Coming soon to a theatre near you - Highest and Best Illegal Use.............??

I would posit that in areas where an additional unit is technically illegal but the local zoning authorities have along history of not enforcing the law and there is no indication that this will change in the near future that the unit should be treated as a defacto legal unit for purposes of the highest and best use analysis.

 

[Mark K]

I would posit that in areas where an additional unit is technically illegal but the local zoning authorities have along history of not enforcing the law and there is no indication that this will change in the near future that the unit should be treated as a defacto legal unit for purposes of the highest and best use analysis.

Most residential zoning/permit infractions in this area have little or no effect on value due to the lack of enforcement.

Last fall I appraised a SFR on 40+/- acres that was located about 2,000' from the road in the woods. 20 yrs ago the owner built a 2,000 s.f. concrete block, detached garage/shop with two nice, 2-BR rental units above it, all without permits and in a SFR-AG zoned area.

I asked the zoning dept. (without giving address or location) what they would do about it and the reply was basically "If we find out where it is we'll probably make him get a permit." Permit cost about $400. The assessor has all the info on the structure and he's paying taxes on it.

 

[J Grant]

I would posit that in areas where an additional unit is technically illegal but the local zoning authorities have along history of not enforcing the law and there is no indication that this will change in the near future that the unit should be treated as a defacto legal unit for purposes of the highest and best use analysis.

This from a lawyer? That's like saying it's okay to steal as long as nobody is looking.

A # of units is legal, or illegal, The fact that the enforcement may be lax does not make the unit "defacto legal" (how is that accomplished?).

Lax enforcement can mean the market will pay more for an extra illegal unit as buyers are wiling to take the risk it is unlikely to be enforced to remove it or not rent it . Which still makes HBU a 12 unit building if 12 units is max allowed by zoning. The price 12 units plus an extra one might trade at reflects added value in use (additional rent) for the additional illegal unit.

 

[J Grant]

Mark-"If we find out where it is we'll probably make him get a permit." Permit cost about $400. The assessor has all the info on the structure and he's paying taxes on it."

It's not the cost of the permit, it's the process of getting the building up to code that can be very expensive or even require removal of building if zoning flat out does not allow it.

Assuming zoning allows it, the permit inspector will come out, and see if electrical, plumbing construction etc is up to code, if framing beneath the drywall has the wrong nails or wood they can make the walls be taken down to studs etc. Bringing a structure to code/getting it approved for permit can be minor and cheap or extensive and expensive and we can't always know by looking at a building.

For example it can cost 20k to bring a building up to code to get that $400 permit.

 

[Mike Kennedy]

I would posit that in areas where an additional unit is technically illegal but the local zoning authorities have along history of not enforcing the law and there is no indication that this will change in the near future that the unit should be treated as a defacto legal unit for purposes of the highest and best use analysis.

Maryland

Lack of adequate sewage disposal; rodent infestation in two or more units.
Under Maryland law, if a landlord fails to repair serious or dangerous defects in a rental unit, you have the right to pay your rent into an escrow account established at the local district court. But the law is very specific about the conditions under which rent may be placed in escrow. You must give the landlord proper notice and adequate time to make the repairs before you have the right to place rent in escrow. The escrow account can only be set up by the court.

The serious or dangerous conditions include, but are not limited to:

• 
  
  
  • Lead paint hazards that the landlord has failed to reduce.
  • The existence of any structural defect that presents a serious threat to your physical safety.
  • The existence of any condition that presents a serious fire or health hazard.

Illegal Units routinely fail the Physical Safety/Fire and/or Health Hazard Conditions test.


Under a law that was passed by the Maryland General Assembly in 1986, every county in the state must adopt a housing code that meets minimum statewide standards. Some counties and Baltimore City already have comprehensive housing and building codes that are enforced by local authorities.

https://www.oag.state.md.us/Consumer/landlords.htm#laws

 

[timd354]

Maryland

Lack of adequate sewage disposal; rodent infestation in two or more units.
Under Maryland law, if a landlord fails to repair serious or dangerous defects in a rental unit, you have the right to pay your rent into an escrow account established at the local district court. But the law is very specific about the conditions under which rent may be placed in escrow. You must give the landlord proper notice and adequate time to make the repairs before you have the right to place rent in escrow. The escrow account can only be set up by the court.

The serious or dangerous conditions include, but are not limited to:

• 
  
  
  • Lead paint hazards that the landlord has failed to reduce.
  • The existence of any structural defect that presents a serious threat to your physical safety.
  • The existence of any condition that presents a serious fire or health hazard.

Illegal Units routinely fail the Physical Safety/Fire and/or Health Hazard Conditions test.


Under a law that was passed by the Maryland General Assembly in 1986, every county in the state must adopt a housing code that meets minimum statewide standards. Some counties and Baltimore City already have comprehensive housing and building codes that are enforced by local authorities.

https://www.oag.state.md.us/Consumer/landlords.htm#laws

Glad that you think that you know my markets or Maryland landlord/tenant laws better than I do but if you actually knew the markets here you would know that in many areas (especially Baltimore) illegal units are no more likely to have any of these issues than any other unit. In any case, the escrow rent law does not distinguish between a legal or illegal unit and it and any landlord who runs afoul of this law basically had to try to run afoul of the law because landlords must being given notice of the defect and adequate time to repair the defect before a court will issue this remedy.

 

[timd354]

Mark-"If we find out where it is we'll probably make him get a permit." Permit cost about $400. The assessor has all the info on the structure and he's paying taxes on it."

It's not the cost of the permit, it's the process of getting the building up to code that can be very expensive or even require removal of building if zoning flat out does not allow it.

Assuming zoning allows it, the permit inspector will come out, and see if electrical, plumbing construction etc is up to code, if framing beneath the drywall has the wrong nails or wood they can make the walls be taken down to studs etc. Bringing a structure to code/getting it approved for permit can be minor and cheap or extensive and expensive and we can't always know by looking at a building.

For example it can cost 20k to bring a building up to code to get that $400 permit.

The question is not really how much will it cost to bring the illegal unit into compliance if the permit inspector cracks down on the unit, the germane question is what value does the market place on the illegal unit (which is determined by multiple factors including the perceived likelihood of an enforcement action and the perceived likely costs that would result from an enforcement action.