What is a Secondary Suite and How Does it Affect Closing Costs?

What is a Secondary Suite?

A secondary suite is a self-contained living space within a primary residence, such as a basement apartment, in-law suite, or carriage house. These suites typically feature their own entrance, kitchen, bathroom, and living area, making them separate dwelling units. Secondary suites are popular for their potential to generate rental income and provide housing flexibility.

How Does a Secondary Suite Affect Closing Costs?

Closing costs are the various fees and expenses incurred during the real estate transaction’s closing or settlement. When buying or selling a property with a secondary suite, these costs can be higher due to the added complexity of the transaction. Here are some ways in which a secondary suite can increase closing costs:

1. Additional Legal Fees: The presence of a secondary suite often requires extra legal work by the real estate lawyer. This may include investigating permits, ensuring compliance with zoning and safety regulations, reviewing existing leases, and preparing assignments of leases. Lenders may also require the registration of additional security on the title when the property is rented, leading to increased legal fees.
2. Tenant Adjustments: If the property has tenants that the buyer will be assuming, there may be additional adjustments at closing for rent paid and damage deposits. This can add complexity and additional costs to the transaction.
3. Inspection and Appraisal Fees: Properties with secondary suites may require more detailed inspections and appraisals to assess the condition and legality of the suite. These additional inspections can lead to higher fees.
4. Increased Property Value: The potential rental income from a secondary suite can lead to a higher property value, which may result in increased property taxes and consequently higher closing costs.

While secondary suites can offer significant benefits such as additional living space and rental income, they can also lead to increased closing costs due to the additional legal, inspection, and appraisal work required. It’s important for buyers and sellers to be aware of these potential costs and to work with experienced professionals to navigate the complexities involved.

Erin Crocker

Hi! I’m Erin Crocker. I’m a real estate lawyer with over 10 years of experience in Alberta and British Columbia real estate law. I love technology and efficiency. I’m on a mission to create a modern, digital closing experience for buyers and sellers through technology, transparency and sharing knowledge.