Unconsented Works…
You attend the open home of a property looks great on Trademe and the agent greets you with: “Hi, thanks for coming, take a pamphlet and oh, we have some disclosures - the property has unconsented works”.
You inspect the works in question and they look fine so no big deal, right….?
Here’s our list of the top four things you need to know before going ‘all-in’ on a property with unconsented works.
1. ‘Unconsented’ means ‘unlawful’
If works or renovations on a property are unconsented, it means that they are unlawful; that is that a building consent or code of compliance certificate was never issued. If the Council becomes aware of the works, they can serve a ‘Notice to Fix’, requiring an owner to comply with the Building Act 2004. Compliance may either require some remedial work to be done or it could involve removing the works altogether and reinstating the property to align with council records.
Depending on the nature of the works you might be fine with this (i.e. if there is a shed or other renovations that you will demolish anyway), but things like additional rooms or sleep outs, bathrooms or even retaining walls can be more major…
2. You cannot go back and get consent
There is no such thing as a retrospective building consent - if works are unconsented the only option for getting the works consented is to remove the works and start from scratch - a huge mess around and unlikely to be something that appeals.
A good halfway house can be to apply for a ‘Certificate of Acceptance’ from the relevant council. This is not quite a building consent but depending on the nature of the works, it can be an ok halfway house – it is essentially the Council confirming that they are aware of the unconsented works and that they are not immediately unhappy about them.
A Certificate of Acceptance is not the same as a Building Consent (nor does it mean that the works are lawful), but it may give some comfort that the Council will not issue a Notice to Fix. The downside to applying for a Certificate of Acceptance is that if declined, the council must issue a Notice to Fix, so we would normally recommend adding a clause into the agreement making it the seller’s responsibility to get a Certificate of Acceptance before settlement.
3. Your bank and insurer will need to know
Spoiler alert – they may not be happy to lend to/insure you as a result.
Banks have strict requirements when it comes to unconsented works, particularly when you have little equity in the property. This is because there is less of a buffer for the bank to know that it will be repaid in full if you ever defaulted on your mortgage. Banks see unconsented works as an additional risk to their security and you will need to be upfront and honest with your lender (or broker) if you are looking to buy a property with unconsented works.
Insurance providers are also often unhappy with unconsented works and their existence could affect your ability to get insurance for the property (and therefore a mortgage). Not disclosing unconsented works to your insurer is also a no-go as it could invalidate your entire policy if you needed to claim in the future…
4. What about when you sell?
The current hype about the property market will not continue forever – what happens if you end selling in a down market.
When the market cools off, buyers will be less willing to take on other peoples’ problems and we expect that having unconsented works would impact your property’s marketability and therefore price. Well advised purchasers may even insist that you get a Certificate of Acceptance (and do any remedial works to get the works accepted), which would be at your cost…
5. What should you do?
Where to from here with unconsented works very much depends on the nature of the works in question i.e. can they be removed?
Where unconsented works have been disclosed, do as much research before buying the property to understand any potential complications with obtaining insurance and therefore finance.
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