Unapproved renovations can cause all kinds of issues when you’re selling a property. While in theory every home or building in New South Wales – in Australia – has been approved by Council, of course it’s not like that in real life.
So what do you need to be aware of when you’re selling a property and there are, or might be, unapproved renovations?
What are the most common unapproved renovations?
There are three really common kinds of unapproved renovations which we see. Property owners may not even have been aware that approval was required when they did the work. Those areas are:
- Patios and decking
Depending on your council, a certain number of square metres of decking can be added without approval, but if you go beyond that, approval is required.
- Granny flats
If you’re building a granny flat from scratch, you probably know you’ll need approval – but what about converting an existing building?
We had one example where the house had a pool room, which had been approved when the house was built, but the vendor had installed a kitchen, put in a stove and made the room into a granny flat. The difference here is that a pool room is not a ‘habitable’ room. It’s designed as a place to hang out or entertain guests, not as a place to live. So the approval didn’t extend to the way it was being used.
In this case, our vendor was able to remove the stove and make the room compliant, but it’s an excellent example of how people think they have approval when they don’t.
- Converted garages
Garages are also not habitable rooms. They can be an issue due to ventilation. When someone turns a garage into a bedroom or office, it may not fit ventilation standards. There may also be issues with windows and light. Approval is always required from council for such conversion.
Is there a time limit on unapproved renovations?
If you have an illegal structure on your property, time does not matter.
You may find some people say that if it’s more than 7 years old, it doesn’t matter, but that’s incorrect. Those people are getting confused with the rules around occupation certificates for new builds, which is an entirely different thing.
Your illegal structure may have been there for 12 years, or 30 years. It’s still illegal and needs to be disclosed if you are selling the property.
Also, it makes no difference whether you did the works or the previous owner did – if they’re illegal, they’re illegal. If you know about them, you need to disclose them.
How do you find out whether previous renovations to your property are approved?
As a vendor, you may be selling a property which you bought ‘as is’, so you don’t know about any approval issues. You have the option to ask Council. We can do it on your behalf, if you want to do it. You have an obligation to disclose of any unapproved works, and your contract can correctly reflect the property.
On the other hand, potential purchasers can check Council records too. That’s one more reason to be honest in your disclosures.
We had one instance where we acted for the vendor, who had not disclosed any issues to us. A couple of weeks before settlement, the purchaser started asking all kinds of questions. We were puzzled as it was unusually late for those questions – and some of them were very specific. Then settlement was delayed. When we pressed our client, it turned out that the purchaser had done due diligence by getting information from Council. There was a development application, but no certificate of occupancy. Plus, the purchaser had walked through the property and could see that what was built didn’t match the plans lodged with Council.
In the end, the sale went through. But the purchaser negotiated a reduction in purchase price, and also required a certificate of occupancy. That meant a lot of cost for the vendor, our client. They had to get a surveyor out to redo plans. They had to get an engineer to sign off on the construction. They had to do some landscaping work around the deck. All as a result of not disclosing the true situation.
What should you do if you’re selling a property which may have unapproved renovations?
The single most important thing for any vendor to know is this – you have an obligation to disclose anything you know about the property. We always include this in the contract. That means you can sell ‘as is’, and any purchaser who signs the contract cannot rescind.
We understand there may also be things you don’t know.
Very often, when people buy, they’re looking at living in a home. They’re not concerned about Council approval if they like the home. We see that from the other side, when we’re advising buyers – we’re often more cautious about renovations than they are. Other times, people make changes to a property so they can live the way they want to. They enjoy a value in the home because of that. But when it comes to time to sell, it’s less about living there and more about the legal position.
So how should you handle the things you don’t know?
We insert blanket clauses which state that you don’t know, and that the property is being sold ‘as is’.
We had a recent example where the sun room was constructed by a previous owner of the property. When the current owners bought, they didn’t obtain any information from council as to whether this sun room would require council approval. So we added a blanket clause saying that the vendor doesn’t know about Council approval but is selling ‘as is’. Once a clause like that – tailored for your situation – is in the contract, you as the vendor are protected. Any purchaser who signs can’t change their mind later.
In short, when you’re selling, disclose everything to your conveyancer. Selling a property is stressful enough already – you don’t want unpleasant surprises between exchange and settlement. It’s our job to make that process smooth, and having all the information means we can advise you and create a watertight contract.