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Non-Conforming Property

by Mel Metts

QUESTION: What are the potential negatives of a non-conforming multi-unit property?

ANSWER: Nearly all multi-residential property becomes non-conforming, eventually. Municipalities keep changing their requirements for lot size, setbacks, etc. Even if it conforms now, it may become non-conforming before you sell.

If the property becomes more than 50% damaged, it has to be rebuilt to the new zoning requirements. Thus, what is a 5-unit right now may be limited to a 3-unit standard if it has to be rebuilt.

The downside, of course, is that it can no longer be a 5-unit, generating 5 rents. Chances are, though; that the new 3-unit property will be worth more than the old 5-unit was, because it's new construction, more bedrooms, etc.

My own philosophy is that, like lead-based paint, legal non-conforming is a fact of life that we can't do anything about - just deal with it if or when it becomes an issue.