What are the legal downsides to going from a two family owner occupied residence, to a three family owner occupied residence in New Jersey?

The background...

Until recently I rented the upstairs two floors of my home to a pair of men who have been simply wonderful neighbors and friends, as well as tenants, for the past ten years.

I've always lived in the finished basement, which is much smaller and easier for me to keep.

Tragically, one of them recently died, and now, simply can not afford the rent all by himself. I just can not bring myself to ask this person to leave. I just can't. He's a very dear and old friend who has to deal with this loss, and asking him to leave is something I just do not want to even consider.

Since he can no longer use both floors, he would like to move into just the second floor so that I can rent the first floor, and thereby charge him half the rent I do now. (He knows I'm having a great deal of trouble getting buy on half the rent, and is trying to help).

This is currently listed as a two family owner occupied residence, and I understand that I'd have to try to get a "variance" to change it into a three family owner occupied residence. (Previous to my purchasing the property, the former owner used to illegally rent it as three separate apartments, each with three separate entrances, three separate kitchens, bathrooms, etc. so physical modifications may be minimal).

What is a "variance" and what would getting one entail?
Will my property taxes actually double, or triple, as I've heard?
Will my homeowner's insurance double, or triple, as I've heard?
Will I have to add a fire escape to the building because fire codes are different for three family owner occupied than two family owner occupied, as I've heard?
Is it true that the rules for evicting any tenants will become much more restrictive if I go from a two family owner occupied to a three family owner occupied? (Could be awful if I rent out the first floor and find out the new tenants don't pay their rent).
Are there other things I should be concerned with that I don't know enough to ask about?

I've heard SO many horror stories that I don't know what to do.

A variance is an official recognition that you are violating some zoning or housing regulation. This happens all the time. Basically you are asking that the home be approved for three families.

To get a variance you have to apply to your local housing department or the county clerk's office. Generally the housing or zoning board then publishes your request for a variance in a local paper with a hearing date. If no one protests the variance is granted at the hearing.

I doubt if your property taxes with double or triple, but they certainly will increase. Part of this may be due to the property being reclassified as commercial rather than residential.

Your homeowners insurance may also have to be changed to commercial insurance. There is really no telling. You can discuss this with your insurance agent.

You need to check with your local building department on the requirements.

There is generally very little difference in the landlord tenant relationship whether the landlord is renting 1 or 100 units. So that shouldn't change.

Thank you so much ScottGem.
This is very helpful.

But now I'm hearing from a neighbor that THE TOWNSHIP will be the one to automatically protest the variance.

According to this neighbor, since parking is such a problem in our town, the city doesn't want to see 3 families in 1 building, unless the property has off the street parking (which my property doesn't, and can't, unless the building is moved back from the street at least 20 feet more than it is now).

I was warned that if I file for a variance, the township will send a building inspector to find reasons to protest the variance.

I'm told they can revoke my C.O. and force me to add a fire escape for the second floor, regardless of whether I continue to rent it.

I'm told that they can tell me that I'm not allowed to live in the basement of my own home, regardless of how it's finished, or how long I've lived there, and that they can force me to move upstairs, into a place much bigger than I want to have to keep.

I'm told that they can require all kinds of expensive work be done if I "stick my head up" by applying for a variance - UNLESS - I have a well connected (and therefore very expensive) local attorney handle the application for the variance, or hire a well connected local architect to make expensive changes to my home so that it will "qualify" for a variance.

I'm being told this by two neighbors on either side of me who are renting illegally right now (something I didn't even know until this afternoon), because "Well EVERYONE would like a variance like that, but all of us know enough not to start that kind of trouble with the township. They'll come after you."

Is that even possible? Or is this more likely some excuse, or "urban myth", that many in town believe, even though it's not at all true, or even something the township COULD legally do?

Yes its definitely possible and defintiely something they can legally do. But it may also be an urban myth. Many towns have to deal with this issue. On the one hand, if they make it difficult for homeowners to legalize "accessory" apartments, they run the risk of driving them underground (like your neighbors). This means they don't get the tax benefits of the extra apartments. On the other hand, if they make it too easy, they may have issues like parking or overloading of services (trash collection, etc.).

So some areas may make it more difficult, others no. Look in your local paper on the day that legal notices are published and you should see residents applying for variances. You can then check if they were granted or not.

You might also consider consulting with a local attorney familiar with the building dept who can tell you how much of what you were told is true and how much is myth.

Thank you so much ScottGem.
I'm going to do exactly that.