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Abigail, Home Buyer in Chicago, IL

Legality of divided units

Asked by Abigail, Chicago, IL Mon Mar 10, 2008

We have an offer in on a legal 2flat, which currently has 4 rented units (1st floor is one unit, 2nd floor is illegally divided into two units, and the attic is rented). When we questioned the legality of this to our realtor, no eyebrows were raised. Same with our mortgage broker. UNTIL today, when we asked our mortgage broker again and this time he had concerns. We don't want the deal to fall through, and we're not necessarily opposed to making that 2nd floor back into one unit. What are our options so that some day when we bring in City Inspectors, say to look at finishing the basement, we aren't hit with some complications? Also, this is a short sale, so the bank has to approve everything.

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Hello Abigail,

You may be interested in researching "Certificate of Occupancy."

Here's the City of Chicago's definitions:

1. A Certificate of Occupancy indicates that a building conforms to the general, special and structural requirements of the Chicago Building Code. No person shall use or rely upon the certificate or the information contained therein as a basis for any legal action against the city.

2. There are three basic types of Occupancy Certificates

"Full" Occupancy, which covers an entire building.

Advance or "Partial" Occupancy, which covers a specific, completed portion of a multiple dwelling building under construction.

"Temporary" Occupancy, which is generally reserved for special events or circumstances in buildings other than residential buildings.

FYI: If the renovations were done with a permit, the buildings department should be able to help you research whther the owner applied for a change in the certificate of occupancy to reflect the proper amount of housing units (e.g. a one or two family legally converted to a three or four family home).

As a buyer, you would not want to be the person holding the bag if an inspector making the rounds decides the attic apartment is an illegal apartment conversion, etc. For example, my girlfriend's buddy brought a one family, wanted a two family, had a lot of expensive contruction done, but failed to have an engineer approve and file the conversion plans and change the certificate of occupancy as required in NYC. The owner was eventually fined by the NYC Dept of Buildings, was forced to relocate the tenant (who was entitled to all rent monies being returned for living in an illegal basement apartment, which was absolutely beautiful by the way) and then was forced to rip out the entire project (which was never inspected or certified as being up to code). The fines went into the thousands, at a $2,500 increment, based upon how many days it took to "restore" the one family home.

Chicago is not NYC, however, may I suggest you ask your agent and attorney to look into the C of O and building permit history for you? You can start reading up on the subject at CityofChicago.org and use the site search for "certificate of occupancy." The resulting links may prove to be quite useful. Wishing you well on your purchase and research.

Regards, C.
( http://www.TannStarr.com )
1 vote Thank Flag Link Mon Mar 10, 2008
totally, completley, but respectfully, disagree with Nick on this one. The City of Chicago requires that every seller purchase a zoning certification stating the number of units in a building of 4 or fewer units. this scenario is the very reason that they do. the title company will demand to see it and so should you. if you apply for a mortgage loan and intend to use the rental income to support the payments, the discrepency will sound all sorts of alarms with lenders and title company escrow agents. and besides, (god forbid) if the attic catches fire and someone gets hurt, AND you know that it is an illegal apartment that you have been renting out to that injured fellow, how do you think that is going to fly with your insurance company or a jury?

that inspector who comes out to look at your basement rehab and sees that there are illegal apartments will very likely cite you as the owner for code violations. you will have to fix them or restore the building back to a 2 flat.

i'd consult your lawyer about this before doing anything else...
1 vote Thank Flag Link Mon Mar 10, 2008
I recommend you obtain and consult an attorney immediately. How long has your realtor been doing real estate? And did your realtor set you up with this mortgage broker? Sounds like you possibly are working with an inexperienced realtor and mortgage person. Obtain a attorney who specializes in real estate only and have him/her provide you with the "real scoop". And my the way the information provided by Mwass below is the appropriate and truthful information that should have been told to you by your realtor and mortgage person.
0 votes Thank Flag Link Fri Apr 4, 2008
You should be fine. Banks care more about the income. The city has more important issues- Like an 15% sales tax and $10.75 transfer stamp.
Web Reference: http://www.KaleRealty.com
0 votes Thank Flag Link Mon Mar 10, 2008
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