My client was buying his first multifamily building: a 33 suiter, CMHC insured. The lender always uses their own lawyer, and they wanted the development and building permit for a 33-suite building.
We pulled the permits, and guess what? The permits were for a 32-suite building, not 33. The previous owner had, without getting permits, taken part of a mechanical room and part of a two-bedroom suite and turned it into suite number 33, a bachelor unit.
The lender wanted permits for this suite, which would be tough to get. If my client couldn't get those permits, the lender would chop the already approved financing by the amount related to the 33rd suite. It could be a big chunk of money.
Another client was looking at a 17 suiter where the listing said one suite was "non-conforming." Folks, remember that non-conforming in this context means 'illegal.' Again, unless permits could be obtained for suite number 17, the lender would likely only finance based on the 16 permitted suites.
As part of the buyer's diligence, pull those permits when writing an offer on a multifamily building. Be especially careful when the building has an odd number of suites. Symmetrical buildings often have an even number of suites; odd numbers could mean an illegal suite has been added.
Ensure all the suites are properly permitted, or the buyer's financing will be severely impacted.
Protect yourself.
Cheers,
Barry
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