Nanny-suites, In-Law-Suites, and Legal Suites

We sold a few suited homes over the last few weeks, so this is timely. We see this advertising all the time, Nanny-suite, In-Law-Suite, and Legal Suite, and most people I work with believe these terms represent the same thing. A home with a second home or a suite built into it for the sake of deriving income from a renter or renters, therefore increasing the property’s overall value. This is true, but only in part. What is the difference, and why does this matter? In my mind, there isn’t any difference between a nanny suite and an in-law suite (no offense in-laws), but for our purposes, they are the same. They are unpermitted suites that are not recognized by a municipality if the accident or incident may not be recognized by insurance and could leave an owner open to criminal proceedings. Let’s say I want to purchase a renovated bungalow in X Neighbourhood, and it is marketed as having a nanny suite; I budget to rent the two-bedroom “suite” in the basement for $1,200/month. I purchase the home, attract renters, and they sign a twelve-month lease. A month or two after my renters have moved in, I start to receive complaints of all the traffic to and from my home, or I get a noise complaint. The police and or bylaw investigate, and it is discovered I have an unpermitted suite. I then may be required to remove my tenants from the property, break my lease, be out rent money, and am now legally responsible for breaking the lease with the tenant.
Don’t get me wrong; there are a lot of unpermitted suites in our market. I would say most I view don’t have permits. My interest is not in ethical debates or could have—just dialogue. If I am purchasing a home for income, I want someone to have this conversation with me.
Regarding incidents, insurance, and criminal charges. I am about as much of a legal expert as I am an insurance expert. If I intend to rent out any suite, I will want to contact my insurance company and be above board with what I aim to accomplish. I would ask a lot of questions and try to understand best what I may or may not be responsible for in the case of an incident. Different insurers are likely to view this differently, so it is wise to shop around, likewise in the case of legal protection. I am wise to ask questions now rather than after purchase or, worse yet, an incident. A good real estate lawyer should be able to answer these questions as part of your home purchase.

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