'Granny' quarters pose legal questions

STARTING OUT

October 09, 1994|By Dian Hymer

What is a "granny" unit?

It's not uncommon to find a real estate ad that lists an "in-law" or "granny" unit, "live-in" or "au pair" quarters. Although the meaning of these terms will vary depending on the situation, they all refer to an area in a house that's set up in such a fashion that it can be occupied by someone other than a member of the immediate family. The space could have its own kitchen, although this won't always be the case.

In a neighborhood that's zoned for single-family residences, a second kitchen in a house, regardless of how skimpy it is, may be in violation of the city building code. If this is the case, it may be illegal for someone other than an immediate family member to occupy the unit.

How serious a violation could it be to rent out an "illegal" unit in your house? Isn't it done all the time?

In some communities, second units are common and there's a tacit acceptance of their existence even though technically they're illegal. The problem can arise if a neighbor complains.

Let's say you buy a house with an "in-law" unit. Your intention is to rent the unit out to generate income to help offset the cost of owning your home. In fact, you're counting on this income.

You have no trouble finding a tenant because the house is in a desirable neighborhood. But parking is restricted. When the tenant's car becomes a fixture on the street, the neighbors start to complain.

Then the tenant has a few parties, which aggravates the parking situation and creates a noise nuisance. Your neighbors come unglued and report you to the city zoning department. A city inspector arrives at your doorstep, unannounced, and issues a citation requiring you to remove the second kitchen.

FIRST-TIME TIP: It's always a good idea to investigate the legality of an "in-law" or "granny unit." It may be legal to have an "in-law" unit with a second kitchen in a house located in a $H single-family residential neighborhood if that unit is occupied by one of your actual in-laws.

When a property is promoted as having a second unit, find out precisely what the seller means by this. If the seller is currently renting the unit, find out if this is being done legally. If the seller is advertising that he receives income from an illegal rental unit, he may be guilty of misrepresentation.

Find out if the "live-in" quarters, or "granny" unit, was added or converted with the necessary building permits. Often the construction of these units is a bootleg operation. If so, the work may be substandard and not up to current building code requirements.

Your lender's appraiser may deduct value from the "in-law" unit if the work wasn't done with the required permits. This could cause a house to appraise for less than the purchase price. So be sure to include a provision in your purchase contract that states that the sale is contingent on the property appraising for the purchase price.

THE CLOSING: An "in-law" or "au pair" unit may be a feature you want in a home because you have frequent house guests. But if your interest involves having nonfamily members occupy the space, particularly if you're collecting rent, be sure to investigate the potential ramifications carefully before buying the property. Also be aware that there are tax ramifications when you treat part of your house as rental property. Check with a tax adviser.

Dian Hymer's column is syndicated through Inman New Features. Send questions and comments care of Inman News Features, 5335 College Ave., No. 25, Oakland, Calif., 94618.

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