Warning to investors in Canada’s ‘hottest’ investor market
HomeNews by Jennifer Paterson17 Mar 2015
A city councillor in the country’s hottest market is spearheading a move to crack down on the illegal conversion of secondary suites – something that could affect 90 per cent of investors.
A city councillor in Hamilton, Ont. is aiming to board up illegal secondary suites, a measure bound to impact investors who depend on that rental income to cash flow.
Councilor Matthew Green has filed a motion that would see the municipality allowed to amend a policy around the conversions of single-family houses so as “not to continue to reward those property owners”.
The request asks the provincial government, through the Minister of Municipal Affairs and Housing, to amend its planning act to prohibit applications to renovate a property, such as the conversion of a secondary suite, if construction on the property has already begun.
“There are many in our community who have serious concerns regarding improper conversions of single-family housing to duplexes by property owners who do not apply for, or have approval to, by our City’s planning department in advance of construction,” wrote Councilor Green.
“What we’ve seen in these instances are ‘investors’ who purchase in our neighbourhoods and begin conversions from single-family to multi-unit apartments with three, four or five units intended.
“When they are caught by our bylaw staff, they simple apply for the approval through our committee of adjustment or, if necessary, to the Ontario Municipal Board.”
In Hamilton, it is a classic strategy for investors to start renovations on a secondary suite and then apply for permits. In fact, Erwin Szeto, an investor and local sales representative with Rock Star Real Estate, estimates that 90 or 95 per cent of Hamilton apartments, such as duplexes, triplexes and four-plexes, are not conforming to building code.
But the approval of a basement suite, which is done through the Committee of Adjustments, could take a number of months, so many investors and property owners take the risk.
However, the fine for non-conforming additions starts at $1,000 – a significant amount in a rental market that ranges from $400 to $1,100 a month.
The proposed motion was put forward in a planning committee meeting at the beginning of March. Green asked the provincial government to administer Municipal Affairs and Housing “to amend its planning act to prohibit application for minor variances on any other planning approvals to permit the second-unit conversion if an owner undertakes, or has undertaken, actual conversion before first seeking such planning applications.”
Szeto adds: “That’s very nasty to us investors since the city is so difficult to deal with for permits as anyone will tell you.”
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