ImmoMulti — a direct buyer of income properties on the North Shore — regularly sees plex buildings where a unit was added without a permit: a basement turned into a rental, a fourplex where zoning allows only a triplex, an attic converted into a dwelling. On paper, the building generates more income. But at sale, that illegal or non-conforming unit can sink the buyer's financing, alarm the insurer and expose you to a municipal order. This guide, written for the owner-seller, explains the real risks, the crucial difference between "derogatory" and "illegal", and your three options: regularize, invoke acquired rights or sell with full disclosure.
Non-conforming, derogatory or illegal: what's the difference?
"Derogatory" is not synonymous with "illegal" (MAMH). A derogatory use existed legally before a new by-law and may be maintained through acquired rights. An illegal unit was created without a permit or in breach of zoning: it is unprotected, and the city may require its removal.
Confusing these terms is costly for plex sellers. According to Québec's Ministry of Municipal Affairs and Housing (MAMH), a derogatory building or use does not comply with the current zoning by-law but was compliant when it was carried out. It is that time gap that can open the door to acquired rights.
An illegal unit, by contrast, was never compliant: a basement dwelling added without a building permit, a multi-unit building with more units than zoning allows, or a conversion done without any declaration. The legal point is clear: no acquired right arises from construction or use carried out illegally, even if the municipality tolerated the situation for a long time.
Sources: Ministère des Affaires municipales et de l'Habitation — "Zoning by-laws and acquired rights" and Québec.ca — "Zoning by-laws and acquired rights".
Do acquired rights actually protect my extra unit?
This is the first question every owner of a plex with one more unit than expected asks. The answer depends entirely on how the unit came to exist.
According to the MAMH, a building protected by acquired rights keeps those rights even if it is leased or sold to another owner. Good news for a seller — with one condition: the rights must genuinely exist. The protection applies only to legally existing rights. A unit added without a permit creates no right to transfer.
Second trap: the burden of proof always falls on the person claiming an acquired right. It is not up to the city to prove your fourplex is illegal — it is up to you to prove it was compliant and occupied as such before the by-law changed. Without the original permit, older assessment rolls, historical leases or dated photos, that proof is fragile.
"No acquired right can arise from construction, the use of land or a building, or a subdivision carried out illegally."
— Ministère des Affaires municipales et de l'Habitation, urban-planning decision guide
What are the concrete risks when I sell a non-conforming plex?
Three risks dominate: refusal or conditioning of the buyer's financing and insurance, a municipal order to comply or close the unit, and a price reduction — or even a hidden-defect claim if the non-conformity is not disclosed.
1. Financing and insurance. A buyer's lender requires insurance on the income property and assesses the number of units. If the actual unit count exceeds zoning, or the certificate of location notes a derogation, the insurer may decline coverage or the lender may pull financing. A promise to purchase conditional on financing then collapses — and the sale with it.
2. Municipal order. The city may require compliance, impose fines and, in some cases, order the unit closed. If a dwelling is separately declared unfit for habitation by the Administrative Housing Tribunal, the landlord can no longer re-rent it and an evacuation notice may follow — a direct loss of income.
3. Price and liability. An informed buyer factors the cost of regularization and the regulatory risk into the offer: the price drops. And a concealed non-conformity can ground a claim against you.
Caution — silence can backfire
A known but undisclosed non-conformity can be raised by the buyer as a hidden (latent) defect for three years from its discovery. Transparency from the promise to purchase onward is your best legal protection.
Sources: Administrative Housing Tribunal (TAL) — "Unsanitary conditions" and Éducaloi — "Hidden defects in a building".
Option 1 — Regularize the unit before selling
Regularizing means making the unit legal in the municipality's eyes. This path maximizes your plex's value but takes time and money.
In practice, regularization runs through a retroactive permit application, then code-compliance work (egress, ceiling height, soundproofing, alarm systems, ventilation). If zoning outright prohibits the unit count, you must aim for a by-law amendment or minor variance — the outcome of which depends on the municipal council and is never guaranteed.
Often overlooked: renovating a rental dwelling generally requires a contractor holding a Régie du bâtiment du Québec (RBQ) licence, on top of the municipal permit. The fact that a job does not require an RBQ licence does not exempt it from the city's permit. And a declaration of work must be sent to the RBQ, no later than the 20th day of the month following the start of the work, where it applies.
When regularization is worth it
- Zoning already allows the actual number of units;
- Code-compliance work is modest and quantifiable;
- You have time before listing;
- The value difference justifies the investment.
Source: Régie du bâtiment du Québec — "Declaration of work".
Option 2 — Document and invoke acquired rights
If the unit existed legally before a by-law change, it may be protected by acquired rights. Your job as seller is then to build the evidence, since the burden is on you.
Gather the original building or conversion permit, successive assessment rolls showing the unit count, old leases, tax accounts, dated photos and, if possible, a municipal certificate of conformity. A municipal-law professional can then confirm whether the acquired rights actually hold.
This option avoids construction but leaves some uncertainty: a poorly documented acquired right can be challenged by the city on a change of use, a major renovation or an insurance claim. Disclose it clearly to the buyer, with supporting documents.
| Situation | Likely status | What it changes at sale |
|---|---|---|
| Unit compliant when created, before a new by-law | Protected derogatory (acquired rights, if proven) | Sellable; document proof to reassure lender and insurer |
| Basement finished without a permit | Illegal — no acquired right | Regularize or sell "as is" with disclosure |
| More units than zoning allows | Non-conforming; acquired right to prove or absent | Financing-refusal risk; adjusted price |
| Permit issued illegally by the city | No acquired right (MAMH) | Treat as an illegal unit |
Source: Ministère des Affaires municipales et de l'Habitation — acquired rights in urban planning.
Option 3 — Sell with full disclosure, as is
You can sell a plex with a non-conforming unit without regularizing it, provided you disclose everything. According to Éducaloi, what the seller honestly declares can no longer be raised as a hidden defect. Disclosure protects you and lets the buyer adjust the offer and financing with full knowledge.
Every seller of a residential property must complete a seller's declaration and disclose what they know about the building's condition, including a unit added without a permit. It is both a duty and a shield: what is declared can no longer ground a hidden-defect claim.
Selling "as is" on the traditional market remains possible, but a retail buyer will often hit a wall with their lender or insurer. That is why many owners of income properties on the North Shore choose a direct buyer like ImmoMulti: we buy the building in its real condition, non-conforming unit included, without depending on a third party's financing or imposing a regularization timeline.
Sources: Éducaloi — "Steps to take in case of a hidden defect" and OACIQ / Protégez-Vous — "Seller's disclosure obligations". Consult a notary or lawyer for your specific situation.
Informational content only. Does not constitute legal or tax advice. Zoning, acquired-rights rules and code requirements vary by municipality. Consult a municipal-law professional, notary or building-permit officer for advice specific to your property.