Building a Legal Basement Apartment in Ontario: A Contractor's Guide

Hi everybody, welcome to another episode of the CRESI Landlords Series for Ontario-based landlords. Today we’re going to continue our topic about basement apartments, and we’re going to be speaking about it from the construction side of things. Today we’re speaking with a gentleman I’ve known for many years, even before I was in real estate. He’s a general contractor who owns his own business, specializing in kitchens and bathrooms as well.

He’s based out of Mississauga. His name is Mark Noonan, a friend of mine and a contractor the CRESI team uses all the time. How are you doing today, Mark? Welcome.

Kevin, good morning. Thanks for having me — great to see you. Yeah, always good to talk to you.

You’ve been helping me and my clients for years, especially with the guidance and advice that comes from your construction expertise. As I mentioned, we’re going to get into basement apartments today. It’s becoming more and more popular as municipalities look for densification.

They’re looking for more housing opportunities. At the same time, some basement apartments are built for a family member — an in-law suite — but we’re going to talk strictly about the landlord case here: not a family member living downstairs. We’re going to talk about the legal side of this from a construction perspective.

We want to create legal basement apartments. There are multiple reasons for this — the value of your home increases, and down the road, when you go to sell, that legal status matters. There are, of course, plenty of illegal basement apartments out there.

I’m not saying every basement apartment you’ll ever see or live in is going to be legal, but that’s how we’re going to approach things today. We also have to talk generally, because we’re talking to landlords across Ontario, and you have to remember there’s Ontario law and there’s municipal law, and everything has to meet the specific code and specifications for the area you’re working in. Let’s bring in Mark right away and start with the main one we’re talking about: the permit.

How do you get started? You’re going to need a permit to build your legal basement apartment. I’ll let you take it from there. Kevin, that’s exactly right.

A project like this is a pretty serious undertaking. We’re taking our most prized asset and turning it into an income property. To do that, we want to make sure we’re covered. I know you’ve got other people coming in to talk about their areas of it, but on the construction side, it’s critical that we have a good relationship with the city or municipality wherever the property is located.

We have to have permits. We need to go through their guidance and guidelines and build to the proper standards. That’s not only for tenant safety — it’s for the safety of the homeowner as well.

We want to make sure you’re protected. So the first step is to find out what the municipal guidelines are — each municipality is a little different. To get your permit, you need to submit certified drawings.

Those drawings need to include everything the city is looking for in the space being renovated, and they need to comply with the bylaws and building code. So you’ll want to start with an architect or a design firm — there are a few out there that specialize strictly in basement design and know all the particulars. They’re very efficient and effective.

They can design a great space and, on the first shot, cover all the bases with respect to permit requirements and bylaws. Those drawings then get submitted to the municipality, and there’s a waiting period while they review and approve them.

Sometimes they get sent back to you for modification, you make the adjustments, and resubmit. Once you get your permits, you’re good to go, and you build to the content of those permits.

But the good thing is that once you’ve got the permits, you’ve got a baseline — the scope of the project is clearly defined, which means anyone can understand it. At that point, you can put the project out for bids to two or three contractors based on research and recommendations.

They’ll all have the exact same drawings, so you’re comparing quotes apples-to-apples, which is really the right way to go about any project. You’re not necessarily going to pick the cheapest price — through the process of meeting each contractor, going through the drawings, and listening to their thoughts, perspectives, and solutions, you’ll get a better spectrum of ideas.

By doing that with two or three different people, you’ll come up with some new ideas, but you’ll also find out who you’re most comfortable with. At the end of the day, it’s the contractor you’re most comfortable with that you want to move forward with. Any relationship where you’re taking on a project like this — having that back and forth, that comfort level, the ability to communicate, and confidence that the job will get done — is definitely important. So we have heating, ventilation, plumbing, right?

You’re also looking at different types of exits, fire code safety, and other things we have to look at. Let’s start with the plumbing aspects in the basement apartment. How does all that work? I imagine a lot of it’s roughed in already, hopefully, if we’re lucky.

What if we have to create this from scratch in an older home? How do we start with the plumbing? There are a couple of things there, Kevin. Some new homes can’t have basement apartments right away.

Some municipalities want the house to be five years old. A lot of people buy a new home and have the builder rough in plumbing in the basement pre-construction — don’t waste your money on that. It costs a significant amount, and it’s never in the right location.

When you go to do your final build, it has to be dug up and relocated anyway. So just buy the empty space and leave it as is. When you’re ready to do this project, your designer will help you position your plumbing.

We want to position the kitchen, bathroom, and laundry room locations to keep costs down. We don’t want to run pipes and plumbing and venting halfway across the basement unnecessarily. We want to design with common sense and logic for economy, so we design those spaces close to our stacks and drain points.

The requirements for a basement apartment are a full bathroom, which includes either a tub and/or shower, a sink and vanity with faucet, and a toilet — you can’t have anything less than that in a complete bathroom. The kitchen also needs a sink with a faucet, mandatory, all vented, drained, and supplied. And for laundry, tenants need access either to independent or shared laundry in the space. We always discuss laundry with our tenants when we’re looking at properties that will become income properties, because if you can figure out how to give the property laundry up and laundry down so there’s no shared situation, it’s always best.

When you get stuck with size and other parameters, sometimes it’s not worth adding a secondary laundry room, and you just figure out a schedule — Mondays, Wednesdays, Fridays for one tenant, other days for the other — so tenants aren’t bumping into one another. You also have to figure out how utilities get separated in a shared laundry situation.

Some units still have no laundry at all and tenants have to go offsite, which has different rental implications. A lot of people these days don’t want to go offsite for laundry with a basement apartment.

It’s a bylaw requirement — you have to have laundry on site, either shared or independent. That’s something I didn’t know. There we go — always learning when we do these episodes.

I actually learn all the time talking to our experts, too. I always say you only know what you know, and you don’t know what you don’t know — that’s why it’s important to build your team around the best professionals, especially when doing something like this. Thanks, Mark.

Just on that note, Kevin, there’s an easier way to handle laundry nowadays. Conventionally, a laundry room is roughed in with 220-volt for the dryer and venting, and whenever you vent outside a basement, you’re usually drilling through block or foundation, which can be expensive.

But nowadays, appliances offer an all-in-one washer-dryer machine. LG and a few other companies make some beautiful equipment where everything’s done in one machine. It takes longer to run a cycle, but there’s no venting required.

It’s a 115-volt plug-in, and you just need a typical inch-and-a-half drain to exhaust the water. They’re very simple to rough in and install, don’t take up much space, and can even be incorporated into a kitchen. So there are some cost-effective solutions nowadays.

I’ve seen the two-in-ones becoming more popular. My wife knows more about the laundry machines in our house than I do, but I know how to work ours. Okay, so that’s a great little tip. The big one we come across a lot is exits, fire safety, and things like that. How do we make sure fireproofing drywall is put in between the two units?

Whether the units are up and down or side by side — with a basement apartment, it’s up and down that we’re separating. Let’s talk about exits and fire safety. Every basement apartment needs its own independent exit from the property to the exterior.

That can be like a side entrance on a side-split or back-split, where there’s a couple of stairs going up and the rest going down to the basement. That space is perfect — it can be used as the independent entry/exit point for the tenant’s space.

The door at the top can be locked if needed so we can enter their space, and they can use it as an emergency exit. But if you don’t have that, you’re not allowed to have a rental unit where the tenant walks through the homeowner’s common space and down the stairs into the apartment.

That’s not allowed. So you need another form of exterior entry, and it can’t be at the side or front of the house within 2 meters of any property line.

That can add a bit of cost to a renovation, because you have to dig down, form it, cement it, and drain it — there’s a lot that goes into it. That could be $15,000 or $20,000 added to the cost of the renovation, but it might be necessary.

And then the question is whether you need a roof over it and whether it has to be weatherproofed — that comes up during design, and your designer will place the right access points on the drawing. Once you’re in the space with access through that independent stairwell, you also need egress.

You’ll need a certain size window in the bedrooms and in the common area. In the bedroom, it has to be a minimum of 5% of the overall floor space, unobstructed.

You need a window that opens into a window well large enough for someone to crawl out of, stand up, and get away from the home in an emergency. In the shared common area, whatever that might be, you’ll need enough glass to represent 2.5% of the overall square footage — so for 1,000 square feet, you’d need about 25 square feet of window in that space to bring in light, with egress at 5% in each bedroom. Each bedroom must have its own egress window, sized so someone my size — 6’3” and 280 pounds — can get out, as well as grandma being able to get out and climb the ladder.

We were talking earlier about permits and different types of inspections that come along the way. Do you want to talk about that process?

Absolutely, Kevin. When you pull a building permit, there are multiple aspects to it. You’re likely going to have a framing inspection, an insulation inspection, and an electrical inspection, which your electrician will take care of as part of your overall building permit — he’ll pull an electrical permit as part of it and get that inspection done.

You’ll also need an HVAC inspection, whatever you’re doing to accommodate the new venting and so on. Then you’ll have a final inspection, the last one.

When everything’s wrapped up, the building department comes back and signs off on the permit. That closes your permit, you’ll get your occupancy permit after that, and you’re good to go. It’s a fairly straightforward process nowadays.

Every municipality has a website — you log on, type in what you need, and get feedback on when they’re coming. They show up, they’re in and out, and if there are no deficiencies, it’s a fairly quick process.

It’s efficient, there’s not much waiting these days once things are in process, though you can wait a while to get the original permit. Heating and electrical in the basement — we touched on shared utilities earlier. In a perfect world, we can separately meter these units, which helps classify them more as a duplex, but there are definitely basement situations with shared utilities. If we’re looking at heating and electrical down there, how do we set that up for efficiency, since the basement is naturally a bit colder?

That’s a good question. Most conventional homes have an HVAC system with a typically propane- or natural-gas-fired furnace that heats the entire space. Trying to create zones with dampers and motor controls to isolate spaces is hard on the equipment, and the equipment isn’t really set up for that. So we’ve got to work with what we have, and bringing in second furnaces and second hot water tanks is very cost-prohibitive.

What the bylaw typically requires is guaranteeing that the basement space stays at a minimum of 22 degrees Celsius, about 72 degrees Fahrenheit. We want that space to be comfortable, knowing the basement will naturally run a bit colder — it has to be kept at 72 degrees.

Because basements are colder, achieving that temperature might mean upstairs is set to 75, which can feel too hot and uncomfortable. The best way around that, Kevin, is really good insulation — do a great job insulating the space during construction, with a full insulation draw on the perimeter walls.

Insulate the floor with some kind of decoupling membrane, like a dry-core product, with insulation on top. Use a flooring material with insulative properties. And insulate the space between the basement and upstairs, too — that serves two benefits.

Not only do you get the insulation value, you get sound reduction as well. If you insulate properly, vapor barrier properly, enclose the space, and stop drafts, it’s a lot easier to maintain that temperature, with more balance between upstairs and downstairs. Two different families or tenants are always going to have different levels of comfort, right?

Even in my own household, my wife wants it warmer than I do — maybe because I have more insulation personally than she does. That balance between up and down is something we try to manage with different tricks so tenants aren’t battling over it. We’ve had a couple of properties where we installed a device we can monitor from our phones with today’s technology.

That way we’re the ones adjusting it, and it’s in a locked case inside the upper unit, so we’re monitoring the control and the tenants aren’t fighting back and forth. We try to keep that balanced — that’s one of the problems you run into when dealing with multi-family.

properties, whether you’re upstairs and renting downstairs, or renting the whole property out to two different tenants as an offsite landlord. There are always compromises in shared space, on so many levels. That’s one of the things that always has to line up in multifamily — the tenants have to be able to get along and enjoy each other’s space, because battling amongst one another can cause a lot of problems. We’ve covered a lot here today about the different types of construction for basement apartments. Is there anything else you wanted to hit on?

There are a couple of quick, interesting points, Kevin. One thing to bear in mind is ceiling height — we need certain clearances in basements. People forget about this. Some of our older, shorter basements won’t accommodate a tenant space.

You need a minimum of 6 feet 10.75 inches over more than 75% of the area for that to be licensed and compliant. You cannot go below 6 feet 4.75 inches where there are bulkheads and things like that — you need that much clearance underneath those areas. Fire and safety.

We require fire-rated drywall and fire-rated doors, with a low burn time — 20 minutes on doors and 30 minutes for the space.

Again, that ties back to insulation and drywall — we use fire-rated products to slow any burn time down and give people time to escape safely. Tied into that, we need smoke alarms wired into the entire house. All the smoke alarms need to be hardwired.

and daisy-chained together — if the alarm upstairs goes off, the one downstairs goes off too, and everybody leaves the property. Carbon monoxide detectors need to be in the bedrooms, because downstairs we’ve often got the natural gas line coming in, and we want to make sure that space is covered.

It’s a good idea to have one in the utility room, but you definitely need one in each and every bedroom — that’s an important point. We also want to make sure that before you get into all this, Kevin, we’ve checked our zoning to make sure it allows for this.

Some homes also fall within floodplain areas now, clearly defined given some of the weather events over the last few years. You will not get a basement apartment approved in a floodplain area — it’s not going to happen.

Another thing on plumbing we need to touch on is that we need a backflow-preventing system on the main drains coming into the house, so there’s no sewer backup. That has to be installed, and it’s a requirement in almost every municipality now. That can cost anywhere from $1,000 to $4,000, depending on the situation.

The unit also has to be registered — you don’t just get a permit, you must register it as tenanted space as part of the paperwork. The house must be at least five years old to apply for this.

The rental unit also must be smaller than the main house — you cannot build a bigger rental space downstairs than the homeowner space available upstairs, even if the basement is physically bigger. Parking is another thing to think about.

You need at least one assigned parking spot — that’s very critical. A fire inspection is also a good idea, so you can be cleared on that. And any tenant that comes in should be given proof of legality on the unit.

You want to show them, when they sign their lease, that you went through all the building requirements and have the right permits, so they’re confident and there are no issues down the road if something arises and they want to challenge anything — you’ve already got yourself covered on that. Those are just some of the things to keep in mind.

These are fun and exciting projects, Kevin. We’ve got a need for housing these days, and people with empty basements who aren’t using them have a great income opportunity.

It’s getting exciting, and we have a lot more requests these days because we’re doing more of it, and it’s a great path — turning your property into a rental property so someone else helps pay your mortgage. These are exciting times for us. Agreed. There’s also supplementing income through different grants that are available, and we can get into that.

Make sure you’re doing this in the most financially beneficial way for yourself — we’re going to get into finances with somebody else about pulling different monies out and paying down your mortgage in a different way on another episode. But Mark, thank you so much for joining us today for your wisdom, knowledge, and expertise. I look forward to when we talk again.

Thanks so much for doing this, Kevin — as always, it’s been a lot of fun. We’ll see you soon.

Bye for now. Please remember, while we are professionals, this podcast is for informational and entertainment purposes only. The advice shared may not apply to your unique situation. Always seek personalized advice from a qualified professional before making any investment decisions.

Hey everybody, thanks so much for joining us this week. I hope you enjoyed the episode. If you’re finding it informative and useful, make sure to like, subscribe, share with a friend so that we can keep getting the information out there to Ontario landlords, and keep on joining us. We’ll see you next time.