Illegal or Legally Permissible "as-is" ? County or City Municipality? What does the specific, applicable, Ordinance stipulate as "the cure" options. Does the Assignment require reporting on fannie 1004_05 ? (if so see FANNIE guidelines on illegal use)
Hi Mike
Each and every controlling authority has its own regulations governing what needs to have a permit. The question is not so much is there a permit, per se, but is it allowed by zoning to have a garage conversion and if so, under what condition.
If garage conversions are common place (both with and without permits) and accepted by the market, you can satisfy Fannie's requirement by showing that.
Now the question of rebuild; can a garage conversion be rebuilt if destroyed even though it did not have permits originally? If garage conversions are allowed by zoning, why not?
Next to consider is the likelihood of the controlling authority to issue a permit retroactively for the current garage conversion. If this is a common occurrence, then it should be described as well in the appraisal.
The check boxes on zoning being legal, nonconforming or illegal goes with the next row of check boxes of highest and best use. If garage conversions are allowed (with or without permits) and if the market assigns a premium for the conversion of the garage as oppose to the garage in its unaltered state, you would have to appraise it to its HBU. If the garage conversion proves to be less value than a garage, then you would appraise it to that. If the conversion of the garage is neutral or equal value to a garage, then either can be the HBU.
The waters become muddy and it is no longer a black and white case of having a permit.
OTOH, if the controlling authority is really tough and enforces zoning by causing the conversion to be either put back to a garage or torn down, then you have a case for illegal. You should be able to back that up by showing no conversions without permits in the market have transferred.
Personally, I would not check the box illegal if there was any possibility that the controlling authority would allow it. I would be giving a legal opinion as to the exact nature of the law and the opinion as to what the controlling authority will do.
Can you imagine checking the illegal box on zoning and being sued?
