I have run into this mostly in Queens and Brooklyn and mostly with typical multi family properties, not condos, but I would treat each type the same. Each situation is different depending on physical layout, use, and Co. Assuming a three story structure with all three floors fully above grade and an apartment on each level. Most multi family zoning is R4, R5, or R6 defined as General Residence districts and allows use as a two family or three family. I have never seen this in an R2 or more restrictive zoning. If there is no Co on file and the house is being utilized as a three family, I value it as a three family. If there is a CO on file for a two family dwelling, I value it as a two family with a seperate kitchen and living area. Most homeowners will claim it is for family use or used as a summer kitchen or something. I state in the report what the owner claims. Based on a half hour inspection, I am not offering an opinion as to the actual use. Since the seperate area is above grade , I value it as living area. When preparing the Income approach, I do not consider any possible income from the additional unit. I do try and find other two family properties with similar uses. Usually if one homeowner does it, others have also.
The question of Legal use is a difficult one. I list what is physically present and try to let the market tell me how to value it. How it is actually being used versus it's legal use is often hard to determine based on a half hour inspection.
