Author Topic: House Sold to me with Possible Illegal Tenant/Illegal Unit in Massachusetts  (Read 1207 times)

joer1212

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My brother and I recently purchased 3 rental properties in Massachusetts from an old man who was desperate to dump them and move to Florida. These properties are on the same block. Two of them are right next to each other. The other is across the street. They were sold to us as as "8 families" (one 2-family, and the others 3 families each).

Recently, I started wondering about one of the 3-family houses, which has a tenant on the top floor (the attic)*. So, I called the town adjuster to confirm whether this house is a legal 2-family, or 3-family. The adjuster told me it's on their records as a 2-family.

So, I hung up and called the real estate agent who sold us the property. She told me "I don't know what to tell you", and assumed a defensive tone of voice. Finally, she claimed that she gave us a "certificate of occupancy". I told her that I'll check my papers and get back to her, if necessary.

I looked through all the papers that she gave us, as well as the ones that were mailed to us after the closing, but there was no certificate of occupancy, nor any mention of the number of units each property has.

So, now I'm suspecting that we may have been misled into thinking we purchased 8 legal units, when, in fact, there are only 7.

What should we do at this point?

Can a house be sold with an illegal tenant in an illegal apartment?

I'm asking you guys here for advice first before I go further with this and call the attorney who handled our paperwork. I don't want to sound like an uninformed ass.
I know that this should have been clarified before we purchased these properties, but I trusted that my brother knew what he was doing, as he has more real estate experience than I have.



* All 3 tenants have separate electric accounts in this property. I pay electric for the attic (illegal?) tenant and the second floor tenant. The first floor tenant pays his own electric. The second floor tenant also receives Section 8.
« Last Edit: January 20, 2021, 08:36:50 PM by joer1212 »

draco44

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Re: House Sold to me with Possible Illegal Tenant/Illegal Unit
« Reply #1 on: January 20, 2021, 06:00:05 PM »
Oof. That's a hard spot to be in. I hope you got a good enough deal on the properties that it will be worth it even if you ultimately only have 7 units and no recourse.

I'm no expert in this area of law but have one small suggestion: since disclosure laws are so location specific and you were willing to say in your post that you are in MA, you might consider updating the title of your post to reference MA in order to have a better chance of getting the state-specific advice you'd need. I know lead paint and septic systems have to be disclosed in MA real estate deals, but I'm not sure what if anything else.

Good luck!

joer1212

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Re: House Sold to me with Possible Illegal Tenant/Illegal Unit
« Reply #2 on: January 20, 2021, 08:37:05 PM »
Oof. That's a hard spot to be in. I hope you got a good enough deal on the properties that it will be worth it even if you ultimately only have 7 units and no recourse.

I'm no expert in this area of law but have one small suggestion: since disclosure laws are so location specific and you were willing to say in your post that you are in MA, you might consider updating the title of your post to reference MA in order to have a better chance of getting the state-specific advice you'd need. I know lead paint and septic systems have to be disclosed in MA real estate deals, but I'm not sure what if anything else.

Good luck!
Done. Thanks!

Archipelago

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Does the unit have 2 forms of egress? Is the property serviced by public water & sewer? Are there 2 parking spots per unit, including the extra unit (at least 6 spaces in total)?

joer1212

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Does the unit have 2 forms of egress? Is the property serviced by public water & sewer? Are there 2 parking spots per unit, including the extra unit (at least 6 spaces in total)?
The property in question is serviced by public water and sewer. It also has a driveway, with some space in front of the house for maybe a couple of cars. But, there's a 5-car mini parking lot in a separate space adjacent to this house and the 2-family house, all of which we own. There are 2 entrances in the front, and 3 in the back (one for each floor) via long, wooden stairs.

former player

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Not an expert in Massachusetts, but I think you have two issues to resolve.

The first is whether you are going to pursue the issue with the seller or the seller's agent.  Unless they clearly lied and you clearly couldn't have found out otherwise by doing due diligence I think this is unlikely to be worth it.

The second is whether the second floor tenant is in danger from a property that is not safe.  If so, you need to work out whether the second floor can be made safe and whether it is worth it to you to do so, and whether the tenant can stay in place while the work is being planned and undertaken.

If you can't make the seconcd floor safe as a separate unit you may be able to incorporate it within the first floor unit, hopefully at a higher rent.

Jon Bon

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This is a hard one.

Often in RE its an "ask me no questions and ill tell you no lies situation" Some folks might not want to know about the lead paint or the knob and tube wiring because if they know, they have to disclose. So he had an illegal suite in the house. Maybe wink wink nudge nudge you look the other way for an extra $1000 a month? Not saying this is legal or even ethical, but I can kind of see how this sort of things happens.

Is all this not public record on the auditors website? Also if the owner has fled the state does that make it much harder to collect from him? No idea on that, im sure its easier if he is in state.

 All RE is local so you need to find a specialist to ask your questions too. RE agent looks like they dropped the ball IMO. "I don't know what to tell you" Should have been "My insurance carrier is xyz and my agents name is Joe Smith"

I would probably ask a professional about how to approach this. I absolutely would not be disclosing any of this to local government/authorities before I had a plan in place. Something you should have to be sure to have is egress in case of fire. A $50 fire ladder might be a good investment for the short term.

PMJL34

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OP,

You've received great advice.

Take a deep breathe. You will be okay.

It's hard to tell, but it sounds like the attic has the minimum requirements (egress, serviced water/electric, parking, etc.) to become a legal unit. In that case, it will cost you some permit fees, headaches at the permit office, but you will most likely be able to be approved by the city (grandfathered in). The ceiling height is also a concern, but hopefully it's a tall attic.

As former players stated, another option is to combine the 2nd floor and attic unit into one larger unit and charge more rent.

Unless this was a very expensive transaction, I would not waste time/money/effort going after the seller. This is really on you, your brother, and the realtor. Imo, not great, but not the end of the world. Lesson learned and life goes on.

Best of luck!

Malcat

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Just to be clear, it's your lawyer who missed this, right?

Archipelago

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One of the first things on due diligence is to look up a property with the assessor which will disclose the property details on public record. If the property is being rented as a 3-unit but zoned as a 2 family, it's not the end of the world. FWIW, the RE agents, attorney and the OP him/herself all missed it. One of the very first things to do for anyone involved in a RE deal is to pull up the property card to find out some basic information on the property. You can retrieve the property card in 30 seconds online or a quick call to the assessor's office.

At any rate, trying to turn this into a finger pointing game isn't going to do much good.

I have rentals in New England and the reason I asked those specific questions is because those are the questions that come up with my local AHJ. In my area if you have all of those things, you stand a much better chance to keep the property in its current use vs. a place that has multiple units hooked up to a septic system, running a bunch of juice all off 1 electrical panel, cramming cars in a driveway that's too small, 1 egress out of an accessory unit, etc. You get the picture. Chances are you'll be fine.

joer1212

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Just to be clear, it's your lawyer who missed this, right?
We're going to get in touch with him tomorrow to find out what the deal is.

joer1212

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One of the first things on due diligence is to look up a property with the assessor which will disclose the property details on public record. If the property is being rented as a 3-unit but zoned as a 2 family, it's not the end of the world. FWIW, the RE agents, attorney and the OP him/herself all missed it. One of the very first things to do for anyone involved in a RE deal is to pull up the property card to find out some basic information on the property. You can retrieve the property card in 30 seconds online or a quick call to the assessor's office.
Good advice. Thanks.

joer1212

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OP,

You've received great advice.

Take a deep breathe. You will be okay.

It's hard to tell, but it sounds like the attic has the minimum requirements (egress, serviced water/electric, parking, etc.) to become a legal unit. In that case, it will cost you some permit fees, headaches at the permit office, but you will most likely be able to be approved by the city (grandfathered in). The ceiling height is also a concern, but hopefully it's a tall attic.

As former players stated, another option is to combine the 2nd floor and attic unit into one larger unit and charge more rent.

Unless this was a very expensive transaction, I would not waste time/money/effort going after the seller. This is really on you, your brother, and the realtor. Imo, not great, but not the end of the world. Lesson learned and life goes on.

Best of luck!
I think the attic's ceiling is quite low. That's what I'm worried about.

joer1212

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Is all this not public record on the auditors website?
I went on the auditor's website, but it's not showing me this information.

joer1212

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Not an expert in Massachusetts, but I think you have two issues to resolve.

The first is whether you are going to pursue the issue with the seller or the seller's agent.  Unless they clearly lied and you clearly couldn't have found out otherwise by doing due diligence I think this is unlikely to be worth it.

The second is whether the second floor tenant is in danger from a property that is not safe.  If so, you need to work out whether the second floor can be made safe and whether it is worth it to you to do so, and whether the tenant can stay in place while the work is being planned and undertaken.

If you can't make the seconcd floor safe as a separate unit you may be able to incorporate it within the first floor unit, hopefully at a higher rent.
The second floor is fine. It's the third floor (the attic) that I'm concerned about.

former player

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Not an expert in Massachusetts, but I think you have two issues to resolve.

The first is whether you are going to pursue the issue with the seller or the seller's agent.  Unless they clearly lied and you clearly couldn't have found out otherwise by doing due diligence I think this is unlikely to be worth it.

The second is whether the second floor tenant is in danger from a property that is not safe.  If so, you need to work out whether the second floor can be made safe and whether it is worth it to you to do so, and whether the tenant can stay in place while the work is being planned and undertaken.

If you can't make the seconcd floor safe as a separate unit you may be able to incorporate it within the first floor unit, hopefully at a higher rent.
The second floor is fine. It's the third floor (the attic) that I'm concerned about.
Sorry, translation error.  I'm British, and we count differently here. Your third is my second - we have ground and only then first.

mozar

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Sorry you're going through this. I also live in a high regulation state. I think you need to get in there and measure the ceiling. In my state the ceiling has to be at least 7 feet high for at least 50% of the ceiling. If it is the case in your state that the ceiling is too low, there are options to make the ceiling higher depending on your budget.