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THE

Case Study - Property Use Remediation

 
 

We often look for properties with “issues”.  Buildings with deferred maintenance, tenant issues, zoning issues, etc.  Often these can be purchased at a discount so long as the current owner understands their problems.


We won’t get into Realtor duties, knowledge and ethics here, but overcoming this hurdle can often be a deal breaker as the Seller may not have the experience or advise to understand that their product is inferior and that the market “comparables” are really in a much better position.


Assuming however, that you have found a property with known issues or have even acquired a property with unknown issues, you need to deal with that.


The toughest situation emotionally, for the small investor, is when you are confronted with an “unknown issue” which notifies itself to you in the form of a By Law Enforcement Letter.


This particular case deals with a Zoning Issue.


The Property was purchased at a premium given that it was in exceptional condition and generated a very strong monthly return. 


The Property was in an R2-A Zone in the HRM and was functioning as a two bedroom apartment building.  Formerly a semi detached home it was converted into an 8 bedroom apartment and a two bedroom apartment.  In other words, anything that could be used as a bedroom was used as such.


At the time of purchase two of the bedrooms in the eight-bedroom portion were not rented and the owner was taking them out of service to create common rooms.  The furnishings were still present (this was a fully furnished building)


Within 30 days of ownership the HRM By-Law enforcement division sent a letter to the owner, stating that several complaints had been filed:


  1. 1.   The Property was functioning as a Rooming House

  2. 2.   The property was functioning as a Lodging House

  3. 3.   The Property was functioning as a parking lot

  4. 4.    Illegal coin operated laundry on the premises


By Law Enforcement demanded access to the building to inspect it.  A Very short timeline was given.


Meeting with the By Law Enforcement Officer (a retired Police Officer) was held within 48 hours of the receipt of the letter.


The Officer inspected the property and felt that it was indeed acting as a Boarding House.


He also found:


  1. 1.   Bedroom doors had locks on them - in his opinion that qualified the property as a Boarding House

  2. 2.   More than five rooms in the entire house were in use - he wanted the two bedroom unit shut down and three of the rooms in the other apartment taken out of service

  3. 3.   The Zoning letter from the City was wrong stating that the property was zoned to have four apartments in it.

  4. 4.   The Landlord attempting to rent out the parking space attached to the property was in violation of zoning - making it a parking lot for hire.

  5. 5.   The coin operated laundry in one of the bathrooms was illegal.

  6. 6.   The rooms which were used as bedrooms, that, in his opinion, were originally a Livingroom and a Diningroom would have to be returned to that use.

  7. 7.    The two rooms that had been bedrooms, but at the time of his inspection were obviously not in use, but were being used for storage created an issue, as, under all of the items in storage, were two bedframes that were assembled.  The By Law Officer felt that this made them in use bedrooms.


Following the threats of a $10,000 fine and legal action we were able to prove:


  1. 1.   As the “rooms” in the house prior to September 17, 2005 were in use as follows:  six bedrooms in the main house and two bedrooms in the lower apartment, the property was grandfathered for this use.  This is defined in HRM by design and the Provincial municipalities Act.  The Officer insisted that this was wrong, until we presented a signed affidavit of use from the owner of the building at that time.

  2. 2.    The Officer insisted that the presence of door locks on the doors defined the building as a Boarding House.  Again - Incorrect; the Legislation states that door locks MUST be present on bedrooms IF the Property IS a Boarding House.  It makes no mention of anything to do with locks on bedroom doors if the Property is NOT a Boarding House.

  3. 3.    The City reissued a new Zoning Confirmation Letter stating that the Building was only Zoned for Two Apartments  and not Four; Irrelevant - the City’s first letter created an estoppel for them; the owner can convert to four units if they so desire.

  4. 4.    In a Boarding House, Laundry may not be located in a bathroom - since this was not a Boarding House the laundry was fine where it was.

  5. 5.    The Tenants were joined on the lease for the property in the six bedroom apartment as “Tenants in common”

  6. 6.    A Landlord can certainly charge for parking, despite what this Ex-Police Officer felt; and the Landlord continues to do so.  It is also not a prerequisite that the Renter of the space be a tenant in the adjacent building.


How did we deal with this?


first of all, we took notes during the initial meeting and determined all of the Officers Issues.  We were very non confrontational and continually asked for guidance and advice.  While very reluctant, we were able to glean enough of his personal issues to formulate a strategy.


We reviewed the Municipalities Act and Halifax by Design to determine the legislation.


The Officer, we found was very difficult to deal with, frequently changing his requirements


As the Officer was very aggressive in person and on the phone, we commenced to use email for correspondence.  The Officer rarely replied once he realized that with his written commentary we were able to refute his arguments


We stopped taking the officer’s calls, remaining in contact only with email.


We rebutted each of his findings citing the HRM by design grandfathering clauses and pointing out his errors regarding locked doors and the Laundry - citing legislation in each case.


We acquired the Affidavit of Use from a previous owner and arranged to meet with the Officer to deliver it.


At our Face-to Face meeting at the Bayers Road office, we brought a witness and informed the Officer we would (and did) record the meeting.


Finding:   Laundry was Legal

                 Building was Legal Use (not a boarding house as it sat)

                 Rental of Parking Space was Legal

                 Two apartments at the property were Legal

                 Any Six Rooms could be used as Bedrooms

                 Building Configuration was Legal

                 Tenant Leases were Legal

                A New Zoning Confirmation Letter was Issued stating legal use was as a two bedroom apartment building and not a four bedroom apartment building.  (Aforementioned estoppel situation has not been tested as the conversion to four units from two would actually decrease the rental income.


The Officer did state that in his opinion that the building, at the time of his inspection was a Rooming House and that it was just luck that a fine wasn’t levied.

 

Dealing with Bylaw Enforcement...

When the municipality uses your money against you

So, you just got a letter...

Now What?

Lessons for Buyers
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  1. 1.   Don’t presume the By Law Enforcement people know the Legislation or are even correct in what they assert - they are people with personal opinions just like you.

  2. 2.   Let the Inspecting Officer believe they are correct - they talk a lot more that way when they feel they are in control; this outpouring of opinion and assertions give you starting points to refute their arguments later on.

  3. 3.   Don’t become aggressive at any time; be highly dispassionate and keep a face of detachment.

  4. 4.   Use questions from a point of “educate and enlighten me” as opposed to “why are you doing this, why are you picking on me and you don’t know what you are talking about”

  5. 5.   Use neutral questioning at first and slowly firm up your position boxing the Officer in to a commitment.

  6. 6.   After the first meeting, get everything in writing.

  7. 7.   Review the Zoning Confirmation Letter for multi units BEFORE YOU BUY.

  8. 8.   Read and become knowledgeable wi the “Halifax By Design” document BEFORE YOU BUY.

  9. 9.   Read and become familiar with the By Laws surrounding Rooming, Boarding and Lodging Houses BEFORE YOU BUY.    By-Law M-100

  10. 10.   Read and become familiar with the Municipalities Act BEFORE YOU BUY.

  11. 11.    If ANY house, Semi Detached, Triplex, or Townhouse has MORE than FIVE BEDROOMS in it, or what may be construed as five bedrooms, IT IS “ILLEGAL USE” IN THE HRM unless, you can PROVE that there were more than five bedrooms IN USE prior to September of 2005 when the By Law came into force. 


To Reitterate - if you want a six (or more) bedroom house which did not exist prior to September 2005 or have said bedrooms in use prior to September 2005 and it is not ZONED already as a Boarding / Rooming House - the Property cannot have the additional bedrooms or you are one phone call away from being fined by the City of Halifax. SO, IN HALIFAX, YOU CANNOT BUILD A BRAND NEW 6+ BEDROOM HOME.