As a Real Estate professional I've often worked with many first-time buyers, and love the experience of assisting them with their first home purchase. But as home values, especially in Toronto, are high and growing yearly, they are finding it ever-increasingly difficult to afford a home, and need extra income from somewhere to carry the mortgage. One of the main questions I am often asked is, "Can you find me a home with a rentable basement apartment?"
What Is A Basement Apartment?
A self-contained basement apartment can be labelled by many names such as: second suite; granny flat; in-law apartment; accessory apartment; retrofitted unit; or just plain rental unit. Each term essentially denotes the same thing, and the goal is to charge rent to offset the cost of owning a home. Most units are usually in the basement but this need not always be the case. It could be the second floor of a house or that an addition has been added to the property and rented out. Regardless of circumstance, all must meet certain requirements in order to be considered legal.
There are many specific items that go into the making of your 'rental unit' legal. Some of these include:
1. The unit itself must be self-contained, and as such have its own kitchen and bathroom.
2. The second unit must have two methods of escape (egress). As homeowner you should make the unit as safe as humanly possible for your prospective tenant.
3. It must have self-closing doors. This is so if a fire starts in the basement it cannot travel upstairs (and vice-versa).
4. The additional unit should be equipped with its own working smoke and carbon monoxide detectors. Additionally, it would be prudent to provide the unit with a fire extinguisher, one rated for A,B,C fires.
5. The dwelling, including any additions you may have added since initial construction, must be a minimum of 5 years old.
6. The floor area of the rental unit must be smaller in square footage compared to the rest of the home.
7. Fire retardant drywall should be used throughout.
8. The unit itself must comply with the Fire Code, any existing zoning by-laws, as well as property standards. If you are building a brand new second suite addition to your home you must first obtain the proper building permits, and comply with the Ontario - as well as - local and municipal building codes.
9. The extra unit may require more parking spaces on site for additional tenants. In reality, not all inner city properties have any parking at all, and with the increase of renters with cars, it can make getting parking permits for the street difficult. In certain areas of the city there are some exceptions to this rule of having the owner provide enough spaces on the subject property for extra automobiles, so it is best to look into this well in advance.
To find out if your existing rental unit complies with the regulations, you should have it inspected by the Fire Marshall. This service is not free, but necessary to ascertain if your 'second suite' meets code requirements. If it does not you will be asked to upgrade or modify the unit at your expense.
Latest forecasts predict that in 2011 an increasing number of homeowners will face up to home repossession. If your home is repossessed and you do not move out by the date set by the court you will be issued with an eviction notice.
An eviction notice is an order informing you that you will be removed from your home on a specific time and date. The eviction notice will be personally handed to you at least three days before you are expected to leave. On the date of the eviction the bailiff will explain that you are being evicted and that you must leave the property right away. You will be given a maximum of ten minutes to pack a few personal items. After this you will have fourteen days to collect the rest of your possessions such as your clothes and furniture. If you do not remove your possessions in this time then the bailiff will arrange for them to be disposed of.
You can however attempt to get the eviction process stopped. When the bailiffs hand you the eviction notice they have to give you a form to request another court hearing. You should use this form to explain your circumstances and outline the reasons why you want the bailiff's visit to be stopped or delayed. For the eviction to be stopped you will need to present strong evidence that you are able to clear your arrears and will be able to keep up with your mortgage payments.
Even after eviction it may still be possible for you to get your home back. If the mortgage lender has not sold your house and you can raise the necessary finance to pay off the mortgage then you can apply for an injunction to stop the sale of the property. The exception to this is if contracts have already been exchanged with a buyer. In this case you will be unable to prevent your home being sold.
This past summer the California Legislature approved Senate Bill 931 (SB 931) amending Code of Civil Procedure CCP §580e to provide for anti-deficiency protection to certain short sales.
Short sale sellers have been traditionally faced with the possibility that their lender would seek a deficiency i.e., the difference between the sales price set forth in the short sale and the existing loan balance.
While in many sales for less than the full balance of the existing loans, the paperwork provided by the bank provides for a waiver of the deficiency, most such paper work contain a warning to the seller that the bank was retaining its option to recover the deficiency by an action in court.
With the passage of SB 931, which went into effect on January 1, 2011, a borrower that comes within the language of the statute no longer needs to worry that he or she will be sued by the lender for the difference between the loan balance and the sales price received by the lender.
It should be noted, however, that this anti - deficiency protection is afforded only to a loan secured by a first trust deed. Furthermore, it applies only to a single family residence which the statute defines as " a dwelling of not more than four units."
There are certain limitations to this anti - deficiency consumer protection statute. The first and most important limitation is that it does not apply to junior liens. Thus, the holder of a note secured by a second trust deed would still retain the right to sue for the non - payment of the note. Another limitation is that it applies only to human borrowers not corporations. Interesting, however, there is no requirement that the human borrower be an owner occupant. Finally, this statute does not apply when the borrower commits either fraud.
While this statute, on its face, may be a boon to short sales in that it insulates the homeowner from deficiencies in connection with a sale for less than the balance of the loan, there is a potential that this recent enactment will have a chilling effect on short sales because note holders, who can no longer sue for a deficiency, will likely require higher payoffs to offset the potential recovery that they formerly had when deficiencies were possible.
New To You RE NOTE: Some form of legislation NEEDED to be passed, as economic recovery could be set back, dramatically, years down the road when these lenders/servicers seek actual judgements - or sell their "rights" for deficiency to 3rd parties.
CA's SB 931 is a step in the right direction -
Look for other states to enact similar policies
When you sell a property, certain disclosures are mandated by state and federal law. Do you know what they are? Are there other disclosures that are recommended--even if not required?
Let's address those issues.
Federal law requires disclosure of lead-based paint hazards on any property built before 1978. This is generally done on an EPA-approved form and the buyer is given a copy of the pamphlet, "Protect Your Family from Lead in Your Home," available at the EPA's website. The law requires that you give your buyers a 10-day opportunity to test the house for lead.
Every state has different required disclosures, so it is best to research your own state's law. A good place to start is www.findlaw.com. Common disclosures include radon, mold, asbestos, meth labs, whether the property is in a flood zone, and other health and safety issues.
States like California require disclosure of "seismic hazards." Colorado requires disclosure of the source of water. Some states require disclosure of the existence of child predators in the area ("Megan's Law"). The bottom line: Learn your state's disclosure requirements.
Typically, your real estate broker will ask you to fill out a 4-page property disclosure to give to the buyer. In most states, this is not a mandatory disclosure, rather a disclosure that the buyer demands in the purchase contract. I would recommend you fill it out either way, answering as truthfully as possible.
COMMON LAW DISCLOSURES:
The common law rule is that you are required to disclose any known "latent" defects. That is, you must disclose anything that you know about that is not easily discoverable by a visual inspection of the property.
For example, if you opened up a wall to fix a mold problem and then sealed it up with new dry wall, there's no way for the buyer to know this. Such an issue should be disclosed to your buyer.
Sellers commonly mistake the "as-is" clause in the contract as a substitute for full disclosure. It is not. Even if you are selling the property "as-is," you must comply with state, federal, and common law disclosures. Failure to do so could result in a lawsuit for monetary damages or rescission of the contract.
The bottom line is that disclosure is the name of the game. When in doubt, tell the truth, tell what you know or have reason to know. You will avoid many problems down the road.
A deed is required when real property is bought, sold, or traded. The document is used to provide information about the realty from the time of its inception to the current date. A new deed must be recorded through the county recorder's office each time the property is transferred.
The type of deed used will depend on the transaction used and the type of property being transferred. Each state governs the type of deed used, so the parties involved should consult with a real estate lawyer to ensure property transfers abide by state laws.
The four most common real estate deeds include: Warranty Deed, Deed of Trust, Quitclaim, and Deed in Lieu of Foreclosure.
A Warranty Deed is used as a written guarantee that the seller owns the property outright and states the property is unencumbered from a mortgage note, liens and judgments. There are two types of warranty deeds which include: General and Special.
A General Warranty is used to claim the person selling the property owns the real estate; is legally allowed to sell it; and the property title is clear. General warranties cover the property title from the date of origin. The seller can be held financially responsible for costs to clear the title if problems occur after the sale.
A Special Warranty only covers real estate during the time it was owned by the seller. Special Warranty deeds are typically used when transferring commercial properties, foreclosure real estate, probate properties, and real estate transferred to a trust.
A Deed of Trust is essentially the same as a mortgage note. The document records information about loan terms; property description; names of borrowers; and the person or company providing the loan.
The funding source can be a financial institution, private lender, or property owner who has engaged in seller-financing. The entity which provides financing is named on the title as the beneficiary which grants them authority to repossess the property if mortgagors default on the loan.
The Deed of Trust is secured with a promissory note and several other documents such as a Truth in Lending statement. Many borrowers fail to read the entire contract, but it is crucial to examine any deed used to secure real estate. It is best to consult with a lawyer or mortgage provider when uncertain about terms or legalese presented in deeds.
A Quitclaim Deed is used to add or remove a person's name onto real estate titles. This document is often used to add a spouse after marriage, remove a spouse after divorce, and to transfer real estate bequeathed through a last will and testament. Quitclaim is required when transferring ownership interest. This deed has various uses within each state, so it is best to seek legal counsel.
Deed in lieu of foreclosure is used when banks allow borrowers to return property "in lieu" of undergoing the foreclosure process. This deed transfers property interest to the mortgage lender and removes borrowers' names from the title.
Those who accept a deed in lieu must carefully read the fine print. Many banks hold borrowers responsible for deficiency amounts between the loan balance and sale price by issuing court-ordered deficiency judgments. This can be very detrimental to borrowers who owe more than their home is worth.
Always have this type of deed reviewed by a lawyer.
Huge budget deficits are rekindling the torch for non-tax revenue sources. As a result, the state might more stringently enforce New York unclaimed property law. Examples of unclaimed property range from uncashed vendor and payroll checks to unclaimed insurance policies. After a set amount of time and several attempts to contact the rightful owner, New York law requires businesses to turn over these assets to the state. The state then becomes the perpetual custodian of these funds. The New York unclaimed property tax law is one of the oldest in the country and was enacted in part to protect individuals from losing their assets to businesses who were conveniently lax in their notifications to debtees.
However, since a majority of funds remain unclaimed and non-liquid assets are auctioned eventually, unclaimed property has evolved into a revenue source. According to the National Association of Unclaimed Property Administrators, there is about $33 billion in property that has already been escheated, or turned over, to the comptrollers of the fifty states. Estimates also speculate that only 20% of businesses correctly abide by these laws, meaning that the corporate landscape is ripe for audits designed to enforce New York laws. Non-compliant businesses would not only be required to turn over this type of property, but also be subject to fines and, in cases of fraud, possibly face criminal prosecution. Rather than being an unsuspected windfall, these forms of payments represent a significant liability. A successful auditing procedure has several components.
In an environment of budget deficits and tax shortages, failing to report property represents a potentially costly risk to businesses that are already vulnerable in a poor economy. Unless you delegate your reporting responsibilities to a trusted auditing company, you will need to train staff to apply the complexities of New York law. When the fine for willful inaction is $100 for each day past the filing deadline, ignoring your property could be a costly decision.
Are you interested in complying with state escheatment laws or learning more about unclaimed property in general? KeaneCo has been helping businesses comply with state escheatment law and unclaimed property laws for over 30 years. Contact them today and get expert help with unclaimed property reporting, compliance, and audit prevention.
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