[Gumby]

I came across some info from Leah Coss' blog. She's a mortgage planner in Vancouver. This entry, from Sep 19, 2011, talks about unauthorized/illegal suites, and here's the gist of it:

The only difference between having an authorized and an unauthorized suite is simply that you’re paying higher property taxes. Now, a lot of you are going, ” I’m not going to pay higher property taxes.” Well, you know what? You need to because, as taxpayers, if you don’t pay for them, the rest of us are.

Why the city wants you to pay higher taxes is because you have two separate dwellings, which means two separate families producing twice the amount of garbage. Now the garbage service is having to work twice as hard, and you’re not paying for that. The same with water, things of that nature, that you pay to the city part of your taxes. But, by having two separate dwellings, you need to be paying more. Hopefully, that makes sense to you. In a lot of cases, if the city’s going to come by and do a checkup on your suite, and you don’t want that suite getting ripped out, then, guess what? You’re going to have to pay those higher property taxes.

But for some cities, for example Vancouver, there are somewhat a few more hoops that you’re going to need to jump through. For example, if you’re going to have a separate living dwelling in the basement or as a duplex or something like that, you’re going to need a certain amount of sprinklers in certain places. You’re going to need windows. You’re going to need a separate entrance and different requirements like that. Definitely go to your city and see what other requirements there are there.

But if the city does find out that you have an unauthorized suite, then they can make it so that you have to rip it out. What are they going to do to make you rip it out? The kitchen. [chuckles] Without a kitchen in there, a basement suite is going to be hard to rent out.

To avoid this altogether, or to at least take the steps of finding out what you need to do to make it authorized, just go to your city. Find out what needs to happen. Are there sprinkler requirements, window requirements? How much more of property taxes would you have to pay? Because if they do inspect, you’re going to have to rip it out anyway. If you rely on that income, that could put you into big, big trouble. As well, it’s important to know that not all lenders, such as Scotiabank and such, will lend on homes with unauthorized suites. They don’t want anything to do with them if you’re relying on that money in the basement suite.