Legal Advice for Discovery of Unconsented Work 5 Years Later

[Jiji]

My partner bought a rental property 5 years ago, two flats (upstairs and downstairs) with the understanding it was fully legal. It was bought through an agent, subject to LIM. We put the house on the market last month, 2 weeks into the sale process a prospective buyer discovered the downstairs work has no building consent (resource consent yes), we are shocked (still) and angry, the house went to auction this week, it was passed in, we are now several thousand dollars down as a result, unable to tenant the downstairs flat and who knows how much we are going to have to throw at it from here.

We must now get a COA, which is first priority. My guess is there is a lot of work to do to make it compliant particularly around fire proofing etc.

Can someone please advise when we should talk to a lawyer and the process we should take from a compensation perspective? We are having trouble even getting the former lawyer who did the purchase to give us the original S&P agreement. My partner would never have purchased the property knowing it wasn't consented, his trust in the previous agent and lawyer has come back to bite him in the backside, or perhaps the previous owner has not disclosed.

If this is someones area of expertise and in in the Auckland area, we'd be keen to talk.

Thanks

[Damap]

You didn't check when you bought it it will be tough luck sorry to say. You are almost certainly wasting your time trying to blame previous owner. You bought it like that. The laws have changed since then but when you bought it just bad luck. A cursory glance at a LIM or even the title would have shown you it wasn't legal.

[Jiji]

Thanks Damap, but isn't that the lawyers job? and isn't there a warranty made by the vendor in the S&P unless crossed out?

[Damap]

Lawyers job = no. If you said specifically to the lawyer: "This is a home and income or multiple tenancy" then the lawyer could have told you it wasn't legal but unless asked that question he would have no way of knowing. I am saying all this without seeing any paperwork. But it's like this. If you buy a house and the lawyer checks the title and there are no encumbrances then he will say the title is good and the LIM looks ok. (Assuming he looked at the LIM).

But if that same property was converted into 3 flats but the S and P still only shows one address, the lawyer has no way of knowing it is a conversion unless you tell him. He just checks the title. He doesn't visit the property to check whether the actual property matches the paperwork. That is, if anybody's responsibility, yours.

You would have to check the paperwork on purchase. 5 years ago there is no warranty from a seller unless that is specifically written in as a clause. You could sell anything and I think 5 years ago there was no legal requirement to disclose anything much. That has all come in since.
I have been caught once myself, cost me over 70K to fix hence my comments.
It is your problem I am afraid unless there is some specific language in the S and P and assuming the seller can be found and has assets and you have the several hundred grand it (could) cost to get it into court.

[Damap]

Assuming it was edition 7 of the NZ S&P I have just read one and IF and only IF the seller had the work done after they owned the property, then they have breached the vendors warranty. If it was already there and if they knew that is your bad luck.
Also because the language in that part says the vendor warrants it actually means nothing. All it gives you is the right to sue. You would need very deep pockets which may be worth it if your losses are big enough. But you need to find out if the seller has any money first. And if the work was done by the previous owner then forget it.

[lissie]

Sorry did you not read the LIM at the time? Or the title? Noticing it was not 2 flats is not a minor issue. It's always your responsibility to be fully informed when parting with several hundred thousand dollars.

[Jiji]

Thanks very much for your help Damap, much appreciated.

[John the builder]

did the previous owner establish the tenancy? If so they may have not complied with warranty clause in the S&P that you had at the time??

within 6 years you may be able to go after them When was the work done?

CoA might cover plumbing consents but your problem will be in fire and sound separation if you want separate and exclisive tenancies?? Which you may have thought you had?

If you can demsotrate shared tenancy you might be able to rent the lower but not as separate and exclusive

[John the builder]

If it had resource consent but not building consent perhaps the work was pre 1993?

[Ivan McIntosh]

It is tough to tell what "isn't" there, when looking at a LIM. If someone got a building consent but not a CCC, then that will be on the LIM. But if they never applied for a building consent in the first place, there won't be anything on the LIM at all unless somehow it came to Council's attention. It needs you or a building inspection to note that work has been done, and then the lawyer/you can look at the LIM to see if the relevant consents are there. In other words, it is visiting the property that is the crucial element. If no one mentioned new work to your lawyer, then there is no way they could know...except that it might be nice if the lawyers had asked you whether there looked to have been any work as a trigger. Hindsight, however.

The vendor's real estate agent might be a better target, particularly if the vendor supplied a LIM as is often the case with auctions for example. But if the vendor didn't provide a LIM, and the owner assured the agent all consents were obtained or the agent just didn't notice the work (which would likely be their claim), it may tough to establish that they owed you some duty to investigate and disclose. It is worth a discussion with a lawyer, however. I don't mean to be too discouraging....some agents may remember the circumstances and be up front about it. Or they may have supplied the LIM or otherwise seen a LIM which, if the work is obvious, might establish some cause of action. This kind of post is naturally not full and comprehensive legal advice.

[PTILoveYou]

There is a lot of detail that is in the property file, but not in the LIM, so always check property file first!

"My partner bought a rental property 5 years ago, two flats (upstairs and downstairs) with the understanding it was fully legal."

Unless you have an email or written or recording evidence, it will be very hard to pin the agent on this.

[mrsaneperson]

These situations abound right across NZ in their multitudes. I would contact the original owner and find out when he did the work.

Is there a chance that somehow the BC has gone missing from councils file - especially in the light that you say there is a resource consent?