As I've mentioned once or twice before, I'm in the process of buying my first multi-family property to start my real estate investment portfolio. I had hoped to have a post saying I bought a house! but alas, it is not meant to be yet.
As part of the offer I made to the seller, I specified the duplex had to have a valid rental certificate before I signed any binding paperwork.
In hindsight, I'm so incredibly grateful I did!
Last Friday, I called up the town's building inspection office and talked to a very nice guy named Tom about the process of getting a rental cert. He told me all I had to do was fill out the application, give them $80, and then schedule an appointment for him to come out and inspect the property. Sounds so easy, right?
Nope. Unfortunately, I thought to myself “Wow this house buying thing is going really smoothly!” and jinxed myself terribly.
Instead of an email containing the inspection application form, I got an email saying there was a small problem and could I please call Samantha at the zoning office for more information. When they ask you to talk to the zoning lady, it's never a good thing.
So I give Samantha a call. To her credit, she was very nice and you could tell she felt bad about the information she was about to tell me.
The duplex I'm attempting to buy was built in 1971, next to two almost identical duplexes. See the chart below for a visualization.
Sometime between when it was built and today, they rezoned the neighborhood to single family. Since the duplex was built as a duplex before it got rezoned, it gets grandfathered in. All my problems are solved, yay!
The duplex only gets grandfathered in if they have records proving continuous occupation. The way they prove continuous occupation is through the rental certificates.
Samantha the zoning lady told me apologetically the last time this duplex was inspected for a rental certification was 1993.
THAT'S ALMOST MY ENTIRE LIFE.
Yep. 23 years it's gone without a rental certification. I have no idea what was going on with the property from '93 to 2010, although my guess is they didn't renew the certification and just continued to rent it out illegally. Tsk tsk tsk.
The current owner took possession in 2010 as a place for her and her adult daughter to live in. So, she didn't need a rental inspection or certification, and to make matters worse she wrote the building inspection office a letter in 2014 stating she had no intention whatsoever of renting the place out in the future and no, she didn't need an inspection.
Effectively, this cancelled out the grandfathered status of the property. Great.
I take a stiff shot of strong alcohol, get my $1k of earnest money back, null the deal and continue my house search.
Just kidding! I'm not giving up on this place that easily. I feel as though both the seller and I got a fair deal, so we're exploring other options before backing out of the deal.
The seller's agent took over the process of dealing with the zoning office, since she's going to have to get it resolved with or without me in the picture if she wants to be able to get rid of this place any time soon. Since both my realtor and the seller's agent work together in the same office, things are a bit smoother than they might otherwise be.
They've engaged their office's legal counsel to see what our options are, which is pretty handy to have hanging around. Otherwise, I'd have to find a lawyer of my own and I wouldn't have the foggiest idea of who to contact. Not to mention, lawyers tend to be on the pricey side, so I'm glad I don't have to shell out the money for a consultation. The legal counsel has engaged the community development director to see if they have any ideas or can point us in the right direction.
All of this leaves me in a state very similar to limbo. We were supposed to be starting the 10 day inspection period yesterday, so who knows when that's going to start now. I imagine it will start when/if we get this rental certificate zoning thing figured out.
I'll be sure to keep updating as I hear more! Wish me luck!
EDIT: The deal officially died. See my update here.