PropertyManagementMaven: Due Diligence on Zoning--Unauthorized Renting Can Lead to Major Problems Down the Road

We have all heard the story. "Well,  I am not sure whether it is legal or not, but the current owner rents the downstairs "apartment" for $1,200 a month, and she has never had a problem with the authorities". The response to this is that "She has been darn lucky, and if she does have a problem, she really has no B"

Illegal rentals are everywhere, and most of the time nothing happens. On the other hand, if I am involved as the attorney for the buyer, I have a major probem. The buyer could be getting into a legal situation with the person the buyer rents to based on the only real warranty that a landlord must give every time there is a leasehold "THE WARRANTY OF HABITABILITY". In other words, if the tenant stops paying rent, or worse yet, seeks legal assistance because of the condition of the "apartment" or for any other reason, the owner has no recourse, and quite possibly, may have to disgorge whatever rent has been paid to date.

What is more deadly, however, at least in Massachusetts where I practice real estate law,  is the spectre of an action againt the owner for a violation of consumer protection laws and possible double or treble damages, plus attorneys fees.

The zoning status of any building is easily ascertained at Town Hall or City Hall. It is part of our due diligence to determine same. Once we have done so, there are ways to change zoning status, especially in areas where multifamily use is permissible. That is the correct course of action, at least in my mind. I may kill a deal or two taking this position. On the other hand, all of know that sometimes the best deal is the one we never make.