Question on unauthorized suite in BC

[sepmo]

I would like to buy a property in port coquitlam, BC. It currently has an unauthorized suite. I would appreciate any experienced investor giving me some advice on this topic. My questions are



1. Is there any legal liability if I rent out unauthorized suite ? Can tenant sue me based on the fact it is unauthorized suite ?



2. I asked my insurance agent, he said insurance will cover the unauthorized suite, so if there is fire, insurance company will try to recover unauthorized suite as long as city is permitted. Is there anything that I should be aware from insurance side on unauthorized suite?



3. Usually how much does it cost to convert unauthorized suite to a legal suite ?



Thanks a million

 

[SamPerren]

1. Most insurance policies have general liability insurance. Ask your insurance broker. I use Park Insurance through REIN. Anyone can sue anyone for anything. Will they win? Unless there are damages they can demonstrate they suffered because of something you did/ failed to do, they will not win. So make sure the windows open and there are smoke alarms.



2. Include something in your lease to encourage tenants to get insurance for thier possessions in case of fire, and make it thier responsibility to clear snow and ice. Make it clear your insurance doesn't cover thier contents for theft/fire. Renting out a home is a low risk venture so many investors own property personally. Owning property in a company is an expensive way to further insulate yourself.



3. Depends what city you are in. In my city costs include the application fee($1500), the penalty if you are caught with a non conforming suite($1500), if approved costs to expand the driveway to three spots wide($2000 guess), separate heating for each unit($5000 plus), separate meters($2000 or more), fire rated drywall between units($2/sq ft materials plus labour), fire doors($500ea), wired smoke alarm system ($500), proper sized windows in bedrooms($500-1500ea), and of course permits and inspector fees.



I have a friend who just put a legal suite into an unfinished basement. Took her 4 months(did lots of work herself) and she spent ~ $25,000.



Cashflow is much better with a second unit, I know many landlords who put one in illegally and "risk it out. " Maybe have an extra large reserve fund in place in case you are forced to make it legal or rip it out, or move on to find a legal suite.



Cost/benefit to putting in a legal/non conforming suite is like many things in life : It depends



Sam

investkamloops.com

 

[sepmo]

Thanks a lot for your detail explanation. It really helps me