Today, as prices continue to rise, many potential homeowners seriously contemplate the viability of buying a home which offers an in-law suite (basement apartment).

The obvious advantage is that a homeowner can help subsidize their mortgage payment by the rents received by their tenant. If is quite enticing when you realize $800 in rent will cover approximately $135,000 of mortgage costs.

What are the disadvantages?

First and foremost is the whole tenant issue. If you don't carefully screen your applicants, you can find yourself with a tenant that either isn't paying their rent or, perhaps worse yet, isn't maintaining the property in a good state of repair. The risks of this happening can be reduced significantly by doing the proper research from the onset which include - credit checks, employment verification and reference inquiries. Therefore, it is important to be diligent from the onset when seeking a tenant.

But even with these checks, a bad tenant can still sneak through. If a tenant does cause unanticipated problems, the Ontario Housing Tribunal is a excellent administering body well equipped to deal with all landlord and tenant issues in a timely fashion. It was established for the specific purpose of resolving disputes between landlords and tenants and to also provide information to the consumer about the Tenant Protection Act.

Another significant issue to investigate before purchasing a home that offers a basement apartment is whether the apartment has been legalized (registered) with the city. In many instances, basement apartments do not conform to the city’s requirements. As a realtor, if I am selling a home which has a secondary (basement) apartment, I take it upon myself to accurately represent its legal status. If I am working with a client to buy a home that has a basement apartment, I again work diligently to determine its status. If it is not a legal basement apartment, it is imperative the buyer knows this and accepts the risks/consequences of such a purchase.

What steps are required to legalize a basement apartment?

A brief history of government philosophy on basement apartments would be helpful.

In 1994, the NDP announced that they would legalize basement apartments provided they meet fire code regulations. Coincidentally, that same year, there were several fatal fires that occurred in basement apartments. This reinforced the need to take measures to ensure all basements were safe to occupy. In 1995, the NDP was no longer in power and the Conservative party was opposed to legalizing basement apartments. However, they grand-fathered the previous NDP legislation. So the magical date for legalizing basement apartments was Nov. 16, 1995. This meant that if you did not have a secondary unit in place by this date, it would never qualify to be a legal basement apartment.

To legalize a basement apartment, two departments— the local fire department and hydro department— would both have to give clearance certificates validating the unit’s safety. Once this was obtained the unit could be registered with the city.

Anyone interested in creating or legalizing an existing basement apartment should become familiar with parts 9 or 11 of Ontario's building code, the fire code, electrical code, the zoning bylaw and property standards bylaw.