The Hidden Legal Risks of Buying a Home with a 'Bonus Room'

Across Long Island and throughout New York, it's common to see homes listed with a "bonus room"—a finished basement, enclosed porch, attic conversion, or even a garage turned into a den. These spaces often look like a great perk, offering extra room without a noticeable jump in price. But beneath the surface, they can come with unexpected legal issues that disrupt the closing process or become costly problems later on.

What Is a 'Bonus Room'?

A "bonus room" usually refers to a part of the home that's been renovated or repurposed but isn’t officially counted in the home’s square footage. These areas are often used as home offices, playrooms, or guest bedrooms. The catch? Some of them were finished without permits or don't comply with current building codes.

At first, that extra space may seem like a great deal. But if it wasn’t legally approved, it might not have a valid Certificate of Occupancy (CO). That document is what tells the municipality a space is safe, up to code, and legally allowed to be used as intended.

Why Certificates of Occupancy Matter

A Certificate of Occupancy is issued by the local building department and confirms that the structure—or part of it—meets zoning laws and building safety standards. It also specifies how each room is permitted to be used, whether that’s as a bedroom, living space, or storage.

If a bonus room doesn’t have a CO, it means the municipality never officially signed off on it. That can create serious roadblocks during a sale. Lenders may withhold financing, title companies might flag it, and municipalities could require the space to be brought into compliance before anything moves forward.

Risks to Buyers

Delays or Denials at Closing

An unpermitted space can bring the closing process to a halt. If the issue surfaces during a pre-sale inspection or when title records are reviewed, the sale may be delayed—or even fall apart entirely—until the problem is resolved.

Surprise Costs After Moving In

If buyers don’t catch the issue before closing, they might inherit the responsibility. That can mean filing retroactive permits, hiring architects, doing construction to bring the space up to code, or even removing and redoing the work completely. It’s often an expensive surprise.

Resale Problems Down the Road

Even if the room doesn’t cause trouble during your purchase, it may come back to bite when it’s time to sell. Future buyers or their lenders may be less willing to move forward without a valid CO, leading to last-minute complications.

How to Protect Yourself

Ask Early and Clearly

When you're touring homes, ask if all finished areas are permitted and have valid COs. If the seller or agent can't confirm, get answers from the local building department before going under contract.

Match the CO to the House

Look at the home’s layout and compare it to the CO. If a basement, attic, or other finished area isn’t listed, that’s worth investigating. Your attorney can help spot discrepancies and advise on your options.

Don’t Be Afraid to Negotiate

If an issue comes up, it doesn’t have to kill the deal. Buyers can ask the seller to fix it before closing, negotiate a credit to cover the costs, or in some cases, agree to a temporary Use & Occupancy Agreement to let the sale proceed while work is completed.

Make Sure Your Bonus Room Is a Bonus

There’s nothing wrong with loving the idea of a little extra space. But when it comes to real estate, more room should never mean more risk. Taking the time to check the legal status of every part of the home helps avoid surprises and protects your investment.

For help reviewing Certificates of Occupancy or resolving permit issues before closing, contact Taub & Bogaty at (516) 531-2500 or use the contact form at https://www.realestatelawny.com/contact. A room is only a bonus if it checks out legally, too.