What to do with Unwarranted Housing

I’ve always believed my in-law unit to be a legal unit, but I recently found out it is unpermitted. The current resident has been living there for a few years. How should I move forward?

Years ago, housing providers had options.  For starters, they could simply withdraw the unwarranted unit from housing use by securing demolition permits.  The local rent law allows a termination of tenancy in order “to demolish or to otherwise permanently remove the rental unit from housing use” assuming the landlord has obtained all of the necessary permits to do so.  Owners confronted with the scenario of discovering unpermitted in-laws would oftentimes terminate the existing tenancy and convert the previously separately rented dwelling into something else such as storage, additional living space for another apartment, or simply unused property.  But this practice mostly changed about a decade ago when the City began to require housing providers to legalize as opposed to dismantle unwarranted housing.  Thus, the Building Department stopped issuing removal permits and instead eased the pathway for owners to bring illegal units up to code and to obtain certificates of occupancy once legalized.  This policy coincides with the state’s push towards permitting and encouraging the construction of accessory dwelling units, or ADUs.  And in prior eras, owners could also just ignore the situation while continuing to collect rent, as there was case law from the 1940s suggesting that inhabitants of even illegal units had a monetary obligation to pay for their housing.  But that policy has also drastically changed.

Today, tenants living in unwarranted housing are now no longer evicted.  Instead, they are afforded the opportunity to remain in their housing subject, of course, to possible temporary removal while the landlord undertakes whatever steps are necessary to bring the space up to the requisite standards of a legalized rental.  That process could be as simple as upgrading some plumbing and electrical, or it could require extensive remodeling such as raising the ceiling height, creating a second pathway for egress and ingress, and/or properly constructing a new kitchen and bathroom.  Should the renovation process render the housing as unsafe or uninhabitable, the occupants may be moved temporarily with proper notice and with a relocation allowance, but upon completion, they must be given the right to return under the same general terms of tenancy that existed prior to displacement.  That said, this current policy promotes safer as well as more housing, and long-term tenants no longer face the prospect of permanently losing their homes.

As to ignoring the situation while taking in rent, forget about it.  Now, unlike in years past, housing providers are no longer entitled to demand or even collect monthly rent for unpermitted rentals.  Newer case law and statutes made sure of that.  The changes in the law allow tenants to even claw back the rent they paid for unpermitted dwellings as well as to seek damages for unlawful business practices and a host of other recognized claims.  As such, and for this reason alone, it is no longer advisable to simply sit back and do nothing.  Indeed, the courthouse is full of cases where tenants in non-legal housing either bring litigation against their landlords or, equally as common, stop paying rent and thwart any attempt by the landlord to process an eviction.  Also, the liability surrounding unpermitted housing could be herculean.  For instance, consider the owner who knowingly rents an apartment that lacks a second means of exit, and then a fire occurs that injures or kills the occupants.  This operator is likely to lose everything and might even be criminally charged. 

In sum, seize the opportunity to promptly legalize your unpermitted in-law.  Hire an architect and contractor to move ahead with proper plans and permits.  If needed, pay to relocate the tenants while the work is occurring.  At the end of the day, you will increase the value of your property and diminish the hideous problems that might arise should you pass on rectifying what can only be described as a most dangerous situation.

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