Z is for Zoning

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. paint_madison

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!

False.

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.

What’s Next

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.

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4 thoughts on “Z is for Zoning

  1. Sounds like you are doing your due dili­gence. Our first home pur­chase almost turned into a night­mare for rea­sons out of our con­trol. Just roll with it. You’ll be glad when it’s over!

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