Legal Considerations
If you want to renovate your home into an owner-occupied dwelling, you can't just go ahead and do it. There are a number of legal issues to be aware of before you begin.
Zoning and Building Codes
It's absolutely necessary for you to start at city hall. You need to go to the zoning department to find out if the zoning in your neighborhood permits multifamily use. If not, you have to apply for a zoning variance. In some communities, a variance will not be granted and you simply will not be allowed to have a tenant in a single-family zone.
City hall also can tell you what local building codes apply to owner-occupied buildings. Some communities have very stringent building and housing codes that tell landlords exactly what they can and can't do and how to do it. Others take a softer approach. They may have a few requirements that you have to meet.
Find out what your community stipulates in the building code. Does the code establish minimum square footage? Will you need a building permit if you make extensive renovations? Will the work be inspected, and if so, at what stages? Do you have to register your rental property or pay an annual licensing fee? Be sure you get all the details before spending time and money on big plans for renovation.
When you visit the building department, introduce yourself to the building inspector and explain what you want to do. In addition to knowing the building codes, he probably can give you a few tips about doing the project.
Is Your Property Eligible for Tax Credits?
While you're at city hall, ask the building inspector if your property is eligible for tax credits. Older cities receive pass-through or block grants for major capital work such as eliminating lead paint from homes, substantially rehabbing a derelict property in a historical district or Renaissance zone, and making homes more energy efficient. The money — usually federal funds — is given to communities to develop health or housing programs that benefit the community and meet specific federal, state, or local goals. You can also research available tax credits by going to your city's website.
Fair Housing Laws
The federal government has set up fair housing laws to protect tenants. Many states and communities have defined and enforce their own fair housing regulations, which are often more stringent than the federal regulations. (See Chapter 5.)
However, as the owner of an owner-occupied dwelling you do not have to follow the fair housing laws. If you don't want to rent to someone in a protected category, that's your choice. You also can have a smoke-free apartment. But you still may want to check with the state and visit city hall, the county, or your township or village offices before you start to advertise. Find out what they have to say about advertising for and finding a tenant.
Be aware that the terms “rental agreement” and “lease” are not synonymous. Although they both spell out rental terms between a landlord and a tenant, they have some important differences. You'll learn what these differences are in Chapter 15.
Your Right to Enter
Once your tenant signs the lease or rental agreement and moves in, the apartment belongs to him. Even though you retain a separate key, you have no right to enter without the tenant's permission. Whether you want to make repairs, do routine maintenance, or show the apartment to prospective tenants because yours is moving out, you have to clear it with your current tenant in advance. It's a good idea, therefore, to include a phrase in your lease or rental agreement that the landlord has the right to enter — after giving notice — for routine maintenance and repairs and when there is an emergency.
Abandoned Property
When tenants are evicted, they often leave things behind. Find out what your community's code says about abandoned property. You need to know what you can do about possessions left behind and exactly how much time you have to give tenants to collect their belongings before you throw anything out. These rules will vary in each community.
