Holding the Hot Potato- Illegal rental properties in Hamilton
Many years ago, the City started to investigate licensing rental units in the City of Hamilton. A couple years ago the City realized that there were going to be unintended consequences if they jumped too quickly into a licensing regime, primarily the loss of much needed affordable housing. It was realized that many units in the City were not compliant with zoning by-laws and had not been built with a permit. In September 2013 the REALTORS® Association of Hamilton-Burlington along with social housing agencies were successful in getting Rental Licensing “tabled” until stakeholders could participate in a Rental Licensing task force established by the City.
The Blue Team – Hamilton Zoning By-Law enforcement officers
At the same time the City tabled the Rental Licensing motion, they hired additional By-Law enforcement officers to blitz neighbourhoods in the City. With special training in communications and decked out in spiffy non-threatening blue golf shirts, By-Law officers are hot on the trail of property standards violations and zoning infractions. Pre September 2013, there were reports that By-Law officers were showing up in uniforms. Tenants described them as aggressive and threatening. Tenants now describe the new and improved “Blue Team” as nice, helpful and caring. The friendly, smiling Blue Team aka City of Hamilton By-Law Enforcement are in constant motion, leaving owners with fines, charges and orders to remove illegal units.
The Hot Potato
Remember that game where a group of people pass around a hot potato and whoever is left holding it when the music gets shut off is the looser? Illegal rental properties are no different. Buying an investment property should be financially rewarding-especially in an affordable city like Hamilton. The real profit on an income property containing illegal units is usually realized by the owner that created the illegal units. At that point it becomes a Hot Potato and the person holding onto it when the City comes calling is the looser. The Seller who sold the property as a legal duplex being sold as a 5 unit building has successfully passed the risk on. The Buyer who has purchased it thinking they can either continue as 5 units or easily change the use is the one assuming the risk. There’s also a good chance that the same MLS® listing information that attracted a Buyer to the property has also been read by the “Blue Team” over their morning coffee. Buyer beware.
Easy Conversion: NOT
About a month ago I received a call from “Bob”. He was interested in getting his 2 family home legalized under Section 19 of the Hamilton Zoning By-Law. I inspected the property and it met all the requirements- or so it seemed. During the rental licensing debate in 2013, we were told that owners “simply needed to get a building permit to change use”- that is to change from single family to two family. The key word here is “simply”. I decided that I would accompany Bob to the building department at City Hall to see how “simple” the process really was.
The City of Hamilton does not have a streamlined process in place to make adding a secondary unit under Section 19 easy. After 3 trips to City Hall and approximately 6 hours of time, we finally received “all” the information Bob needed to proceed. After a few more google searches, I discovered that the City does have their Building Permit application on their new website. City of Hamilton Permit to Build/Demolish
What you’ll need to fill out the application:
Building Permit requirements for “Conversion under Section 19- adding a secondary unit.”
Properties must satisfy minimum requirements under Section 19.
- 699 square feet per unit (only above grade space and basements: anything that’s 50% above grade)
- lot size of 270 square meters
- one parking spot per unit and it cannot be tandem parking
- parking cannot take up more than 50% of your front lawn- rear parking is allowed.
You will also need the following before you take your application to City Hall.
- Zoning verification from the City of Hamilton Order Zoning Verification Certificate online
- The following drawings done by a Designer with a BCIN if you’re creating a two family, and an Architect if your property will end up having 3 or more units. i.e.) legal duplex adding an additional unit making it a legal triplex or legal triplex adding on an additional unit making it a legal 4-plex.
- Structural drawings (including cross sections)
- Mechanical drawings (showing HVAC system)
- Electrical drawings
- Plot plan to scale or recent survey showing parking, additions etc.
- You may also be advised that you need full architectural drawings- the Designer/Architect will guide you on this.
The drawings MUST indicate fire separations, drywall ratings and anything that you’ll be doing or is already there for the additional unit. There’s also the possibility that you’ll have to bring all of your units up to current code.
Once you have your drawings and after consultation with your Designer/Architect, you feel certain that you meet the requirements under Section 19, you can proceed to the Building Department and apply for a building permit.
Bob hasn’t completed the process, so I’m not sure what the cost of the drawings will be, but I can point you to a couple firms in the City that can assist you. If your property doesn’t meet all the criteria for a Section 19 conversion, you can always apply to the Committee of Adjustments for a special exception- however, there are absolutely no guarantees that the CoA will approve your application. You’re best to seek the advice of a Design/Architectural firm that is very familiar with obtaining building permits in Hamilton.
Nick DeFilippis of DeFilippis Design and Development in Stoney Creek at 905-643-2250.
What can you do?
Know what you’re buying! If you’ve already purchased a property and you’re looking to legalize your illegal rental unit(s), order a Zoning Verification Certificate and contact a Hamilton designer/architect first. It will save you a tremendous amount of time and money. It’s best that you take control and not wait for the City to stop by. Once the City determines that you’re in violation of the Zoning By-Law you may have additional fines/charges to deal with along with severe time limitations.
Buying an Investment Property in Hamilton- do your due diligence.
New from the City of Hamilton!
Just because the zoning permits your use, doesn’t mean the City recognizes the use. The above zoning map will simply tell you what your zoning is. You won’t know if the use of your property is legal until you obtain a Zoning Verification Certificate from the City. If you’re a Buyer, the Seller may already have one but if they don’t, make sure it’s part of conditions in your Offer. Remember that when you’re purchasing an income property, you’re paying for the income the property is going to generate. It’s extremely important that you make sure that the income is secure. If you find out that the unit isn’t legal, you can make an informed decision factoring in the cost and/or likelihood of making it legal before you become the legal owner of a “hot potato”.
This is a section from a City of Hamilton zoning certificate. The property this certificate refers to was sold 4 times over the past 15 years as a 4-plex. The last owners ended up holding the potato. A year earlier, they paid fair market value based on the property being a 4-plex. It wasn’t until the By-Law officers showed up that the owners obtained a Zoning Verification Certificate. Their worse fears were confirmed when it showed that the City recognized their 4-plex as a single family home. The property didn’t meet all the requirements for a Section 19 conversion and it was necessary to apply for and receive a minor variance to simply add “one” additional unit. After thousands of dollars in costs, the end result was a legal two family home producing $8000. less annual income.
CMHC, the Province and Secondary Units
CMHC has recently announced that it’s loosening it requirements to obtain default mortgage insurance for 2 family homes. CMHC new initiatives
Ontario has mandated that all municipalities allow “secondary suites”, but there are issues in Hamilton that make things a bit more difficult. First, Hamilton Building Code is much more stringent than the Ontario Building Code, especially the minimum square footage requirement for rental units in existing dwellings and ceiling heights in basements/cellars. In a City where hundreds of 400 square foot condo’s are being built, it’s hard to understand why the City is standing firm on its 699 square foot minimum for a secondary suite in a house- but that’s the way it is. Also, the City passed an amendment to the Zoning By-Law in the spring of 2015 allowing for development in “cellars” ( a space that is more than 50% below grade) . If this space qualifies for a building permit it can be used in the overall square footage calculations for some permits. The disappointing part is that the City of Hamilton Building Department is not recognizing this new change for Section 19 conversions.
The following is a sampling of issues my readers have experienced over the past couple of months. The names have been changed for privacy reasons.
Bill: Tenant in an unauthorized triplex. Tenant on main floor called the City who sent the Blue Shirt brigade in. The owner is holding a hot potato. The current owner will now have to deal with landlord/tenant issues and making the building legal.
Joe & Hilda: Recently purchased a raised ranch in the lower City- had been a duplex for 30 years. The Blue Shirts arrived while on a blitz in the area and Joe and Hilda have now spent thousands of dollars getting their unit legalized on top of getting fined and taken to Court by the City for a Zoning By-Law infraction.
Uri and Anna- Torontonians who immigrated to Canada a couple of years ago. Purchased a property in Hamilton with 6 units. 4 in the main house and 2 in a coach house. After a visit from the Blitzing Blue Shirts, they were caught holding the hot potato. They had to vacate the coach house and reduce the main house to 2 units. Because the remaining tenants are protected by rent control, Uri and Anna cannot even increase the rent to cover the additional living space the remaining tenants have. Their potato was super hot!
Please don’t get pulled into the game. Yes, Hamilton offers great investment value but only if it’s legal or stands a chance of being legalized. Please remember, the City of Hamilton did not squash the idea of Rental Licensing, they simply tabled the idea until they could get their ducks in a row. The idea of Rental Licensing in Hamilton is still very much alive.