What You Need to Know About Renting an Illegal Unit

Many landlords rent illegal units despite the potentially adverse consequences of entering into the arrangement.  Here is what you need to know if you have rented or are considering renting out an illegal unit to an actual or prospective tenant. 

What is an Illegal Unit?

An illegal unit can take many forms.  Illegal units can be dwellings that do not have the required Certificate of Occupancy, which is a document that certifies that a residential building complies with all state and local building codes and is safe to live in. An illegal unit is also sometimes referred to as unwarranted, non-conforming, or unpermitted.  There are also other conditions which may make a rental unit illegal, including if the unit has been condemned or is considered uninhabitable.   Units that do not comply with an applicable zoning ordinance are illegal.  So are units that exceed occupancy requirements of a local jurisdiction. 

What are Some Concerns Owners Should Consider Before Renting Out an Illegal Unit?

An owner who rents an illegal unit is exposed to potentially significant liability. There are several issues for an owner to consider prior to renting out an illegal unit.

Specifically, the landlord could incur penalties or fines for violating local zoning requirements for building without permits and for unlawfully renting the unit as a separate residence. Additionally, insurance may not be willing to pay for damages caused by the tenant of the illegal unit or for injuries to the tenant.  If a local municipality determines that a unit is illegal, the rental agreement is then unenforceable in some states. However, this does not mean that the tenant has the right to withhold rent or to remain on the premises. In some jurisdictions, a landlord cannot deduct from the security deposit for unpaid rent if the unit was illegal.

The consequences for an illegal unit may depend on why the unit is illegal. For example, the rental unit may be found to be unfit for human habitation. If this occurs, the unit may be condemned, and the tenant may be required to move. On the other hand, if a rental unit is not in the condition that a landlord is legally obligated to maintain, the tenant may complain to local housing authorities who may take action to require the landlord to upgrade the condition of the unit. If a unit is cited as illegal, it may require the landlord to fix the violations either by bringing the unit up to compliance with the law or to demolish the unit.

Can A Landlord Evict a Tenant from an Illegal Rental Unit?

An owner can evict a tenant from an illegal unit.  However, he or she may be liable for the cost of the eviction plus the expenses associated with relocating the tenant.  A tenant may also be entitled to a reduction in rent if the unit is found to be illegal. A landlord would still be entitled to receive rent for the reasonable use, value, and occupancy of the premises which is due.   

Landlords should think twice before renting an illegal unit given the potential pitfalls associated with the rental.  In many instances the downsides will outweigh the benefits. 

Please contact Lynx Legal at 888-441-2355 or info@lynxlegal.com with any questions regarding the above, or if you need to start a case. Our experienced professionals are standing by to assist in any way we can.