Buyer Beware - The Risks Of Illegal Building Works

Illegal building is a common risk for property buyers, but most aren’t aware that their new home may just come with a disastrous DIY job. It is reported that as many as 30% of buildings in Australia have some form of illegal building, and as a buyer, it’s important to arm yourself with the knowledge of the risks that illegal building works pose.

What is illegal building?

As a standard rule, before most building work can commence owners must obtain building approval from their council. Once the work is complete, council or private certifiers must check the work has been completed properly and issue a final certificate.

Building works, including additions or alterations to a property without building approvals or final certification are illegal. These can include extensions, removing load bearing walls, constructing decks, garages, granny flats, pergolas and the like.

Why is it a problem?

Unapproved alterations are illegal because they can be dangerous. For example, the removal of a load bearing wall can cause a sagging roof, or a poorly built deck could collapse and cause serious injury.

If damage or injury is caused by illegal building works then the owner is legally liable and they are unlikely to be covered by their insurance. Councils can also order property owners to have illegal building works rectified by way of retrospective approvals and even to have illegal structures demolished, adding extra cost to a property. It also affects the marketability of the property when sold.

Does a seller need to disclose unapproved building work to a buyer?

Generally, there is no legal obligation for a seller to do so. The old adage of ‘Buyer Beware’ still very much applies with illegal building works - once the contract is signed the buyer inherits these problems.

The buyer usually has no right to terminate a contract if they discover that there are illegal building works on the property. However, the buyer may have some recourse if the council issued a work order or notice relating to the illegal building work before the contract was entered into, and this wasn’t disclosed to the buyer.

What can buyers do?

The first thing to do is to engage an independent building inspector to inspect the property. They should be able to identify what additions or alterations have been done, but are not qualified to advise whether they have been approved.

You should then inspect the council records or instruct your conveyancing lawyer to order copies of these records (if available) to see if those additions or alterations have been approved and certified.

Not all councils keep complete and accurate records though, so this may not always be suitable. A growing trend in Australia is for buyers to take out title insurance which may cover the risks of unapproved building works.

If you need to enter into a contract quickly, you should first obtain legal advice and include a special condition giving you a right to terminate the contract or renegotiate if the results of the council records aren’t satisfactory.

Richie Muir is Legal Director at lawlab, a specialist legal services provider for property transactions large and small across Australia.

Disclaimer: This information is general in nature only and does not constitute legal advice. lawlab accepts no liability for the content of this information. You should obtain legal advice specific to you individual circumstances.

Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by lawlab Pty Ltd are members of the scheme.

Original article: http://www.apimagazine.com.au/property-investment/buyer-beware-the-risks-of-illegal-building-works