Today we’re diving into a super important topic if you’re buying a home with a suite—especially if you're planning to use that suite's rental income to help qualify for your mortgage.
When it comes to secondary suites, not all are created equal. And as of a recent policy update from AIC and CNAREA, it just got harder to use income from illegal suites when qualifying for a mortgage.
Legal suites are the gold standard. They're built with permits, meet all building codes, and are fully compliant with zoning bylaws. Think: fire separation, proper egress, and municipal approval. Mortgage lenders love these—no issues using rental income here.
If the suite is legal, that income (and added value) is considered when applying for a mortgage, and can allow the buyer to qualify for a larger mortgage. The suite really is a mortgage helper!
🚨 Be aware a rental market report from an appraiser can cost you ~$300. If there is an existing tenant you are planning to inherit/assume, gather all the tenancy agreements and records of rent payments.
Legal non-conforming suites were built legally under old rules, but don’t meet today’s zoning. They’re 'grandfathered in'—you can still use them, but they must meet basic safety standards. These used to be okay for lenders too… but recently both Appraisal Associations in Canada (AIC and CNAREA) have now outright and clearly stated that no appraiser will be allowed to provide market rent for non-conforming suites with little exception. Lenders, brokers real estate agents and borrowers please be prepared. If a borrower is intending on borrowing with contributions from a suite, either by additional income or even the value of the suite itself, it must in almost all cases, be a presently legal use.
🔔 Buyer Tip: is is the suite is only non-conforming because of zoning / municipal bylaws? If so, talk to your lender and appraiser about the BC Homes for People plan in which the province is legalizing secondary suites in all communities across BC! You may be able to get an exception or get the appraiser to use an extraordinary assumption to generate a market rent report.
Find the Victoria Secondary Suite Guidelines
Illegal suites? That’s where we hit a wall. These suites were built without permits, or altered without approval. They don’t meet building code or zoning requirements. And recently, appraisers have been prohibited from writing market rent letters for them
⚠️ Risks include revoke your occupancy permit, remove your hydro meter, place a notation on the title. Lots of bad things can happen if the bylaw officer comes. Avoid this by mitigating complaints and providing off-street parking.
🔔 Buyer Tip: What would it take to get that suite licensed and compliant with all municpal bylaws and the BC building code? It may just be missing a few items, and might present great value-add opportunity. Sometimes, an illegal suite can be renovated to become a legal suite.
Those with non-conforming suites should check if the municpality is on the target list for zoning reform.
Part of the Small-Scale Multi Unit Housing program - SSMUH is to permit secondary suites / additonal dwelling units on exisitng homes. and typically also permit 3-6 units on single family lots in most bc communities.
The province is making progress on overiding the rules of restrictive municpalites, like Oak Bay, and allow by right 1 secondary suite and/or 1-laneway home.
The original target was for by June 30th 2024 that all municpalities update their OCP and bylaws to reflect the changes.
Download the provincal guide on having a home with a suite.
Contact Dustin Miller at 8X Real Estate to be setup on a list of homes in your price range with suites anywhere in Greater Victoria, whether the be legal, non-conforming, or illegal.
Dustin Miller is the managing broker of 8X Real Estate. When he's not on the road, he is on his computer looking at real estate. You can often find Dustin at his office enjoying a bowl of won-ton soup.
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