The basics of converting an SRO to a multifamily occupancy

Investors commonly aim to modify their dwellings to increase profitability and value. But it's not just a case of knocking down a few walls.

Property owners commonly want to modify dwellings they manage for a variety of reasons. Sometimes they are attempting to generate more income from the property, and sometimes they are making general upgrades for better appeal to potential renters. This is a regular occurrence during spring.

Owners who are experienced in the process understand they must make necessary changes according to New York housing laws, but many who are new to the transition do not realize the code requirements can be very different when the change is made. The best way to ensure that all changes are up to code is consulting with an experienced New York real estate lawyer.

What is an SRO?

SRO stands for Single Room Occupancy and generally applies when a person rents a single room within a building.

Typically there's one shared bathroom and kitchen per floor although each room may have a small kitchenette or bathroom facility.

The New York City Housing Preservation & Development (HPD) department classifies SRO in the following three categories:

• A “class A multiple dwelling” used in whole or part as a “rooming house” or “furnished room house,” or for “single room occupancy” pursuant to section 248 of the New York state multiple dwelling law;

• A “class A multiple dwelling” containing “rooming units”; or

• A “class B multiple dwelling.”

Converting an SRO to a multifamily

If your residential building is indeed an SRO, you must apply for and receive a Certification of No Harassment (CONH) before applying to the Department of Buildings (DOB) for a permit to change the use or occupancy of a building or to demolish a building. The CONH process is designed to ensure that you or the prior owner did not harass the occupants into leaving the building.

Design expense

Once you have the CONH, you will need to file a job which usually involves alterations to the floor design and making the necessary plans to do so. This can generate significant costs.

In general making the apartments legal as per building code and multiple dwelling law regulations involves removing walls, doors, kitchenettes, adding bathrooms, new kitchens and new walls. If there are no fire sprinklers, you will be required to add them according to code and may even have to install a fire alarm.

What is more expensive is having to change a floor plan to meet New York residential code after a project has already begun. Knowing what is required beforehand means the construction team and property owner can account for what must be included in the restructuring.

Both New York state and New York City legislatures have established a strict code for multiple dwelling properties, and they are serious about enforcement. Knowing what to expect is always cost effective.

Permits and licensing

Another concern for property owners who are upgrading holdings is having proper business licenses and building permits before the project begins. While some aspects of remodeling a housing structure do not necessarily require a permit, many other construction projects are covered by a permit authority.

These can be very costly problems when the city code inspectors come calling and find no building permits for a property upgrade.