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  • Basement conversion

    Hi guys

    I'm thinking of converting an existing "rumpus room + laundry" in my basement to a standalone studio with a small kitchenette and bathroom. Should be pretty easy as all the plumbing, electrical installations and external access is already there and no structural work needs to be done. Pretty much put the kitchenette in a corner, add a toilet (yeah I know, that should probably be consented) and replace tub with a shower (same waste pipe, same water supply - common sense says that doesn't need a consent).

    I discussed the project with a builder and he reckons that as long as there is no separate watermeter and power meter and no oven in the kitchenette the room will simply count as a bedroom with ensuite and the tenants won't really be tenants but flatmates. Is that correct?

    Also heard somewhere that rent collected from flatmates doesn't necessarily be declared as income to IRD - does anyone know if that's true?

    Will use registered plumber and sparky to do the minor alterations but obviously I want to stay away from the council's bureaucrats as much as I can.

    I admit I'm not really sure what's my question - I guess I'm trying to find the fine line between "unconsented but ok" and "totally illegal and calling for trouble".

    Any feedback on this? Has anyone done a similar conversion?

    Thanks!

  • #2
    This exact question comes up here once a fortnight or so. And there have ben lengthy disucssions on it. So do a search on this forum for the answers.
    Squadly dinky do!

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    • #3
      As Davo has said, the conversion question is a common one, and outside my field of expertise. The forum search function is there for a reason.

      As for the rent from flatmates question, flatmate income absolutely 100% needs to be declared to the IRD. Google to IR264, guide to rental income.

      The misunderstanding comes from the ability to use a "standard cost" treatment for Boarders (not flatmates, but the distinction can be very hard to make) which means that if they pay you less than $X per week (it was $247, but I think it is now $250) the IRD deems your cost to be at or above your income, so doesn't need you to declare it.

      Do be careful on the distinction though; the IRD doesn't say much about the difference between flatmates and boarders; it is subsequently up to the taxpayer (or not-taxpayer, as the case may be) whether they are comfortable with the risk, and feel they could justify it should the IRD come knocking.

      On a totally different issue, if you have a tenancy agreement (note this doesn't necessarily need to be in the usual strict written form; as with any contract this can be verbal-only, it is just harder to prove) they are tenants. If you don't, a flatmate situation removes many of the protections (for both parties) provided by the Residential Tenancies Act.
      AAT Accounting Services - Property Specialist - [email protected]
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      • #4
        Originally posted by Curious View Post
        Hi guys

        I'm thinking of converting an existing "rumpus room + laundry" in my basement to a standalone studio with a small kitchenette and bathroom.
        It's not economic to make it standalone. Make a semi-self contained room with ensuit and give them access to kitchen etc as a flatshare and you will get your best return. It just depends if you happy sharing your home.

        I've did a full standalone conversion 10 years ago and it had about a 6 year payback. Cost would have doubled at least since then and the rents have not moved very much at all. I rented it for $250/week when it was first built, get between $280-$300/week currently. Pay back would be closer to 10 years now, at best.

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        • #5
          Get a builder to have a look and discuss some basement renovation options. This guy has done lots of them.
          http://www.beaconconstruction.co.nz/...nt-renovation/
          My Profile

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          • #6
            it isnt the stove that triggers the issues its the sink and dishwashing facility

            There are two seperate issues the district plan that has rules about creating residential dwellings and the building act that requires consents for some building work and 'change of use' . Change of use is now defined as something requiring greater code requirements such seperate households so the key is to not create exclsive households but allows for self contained spaces such as granny flats.

            planners apply the definition of residential unit that applies to ditstrict plan in your area and this seems to say to them that every sink is another unit.

            make sure that any agreement recognizes that the occupiers are still part of the same household and do not have rights over other occupants but there is joint occupance and a single household,

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            • #7
              Get a consent and do it properly. You would struggle to get a reputable builder to put his name to unconsented works so you would end up settling for a claytons builder and heavens knows what the job might end up like.
              What about insurance? How would you fudge that with them?

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              • #8
                Originally posted by Meehole View Post

                Get a consent and do it properly.

                What about insurance? How would you fudge that with them?
                I agree totally with the above comments.

                I have said it before on this site and I will say it again. DO NOT DO ANYTHING ILLEGAL.


                People who offer advice on how to do it illegally and get away with it, are being totally irresponsible and you would be very foolish to take their advice.

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                • #9
                  Aston; who is giving advice on how to do it "illegally"??

                  The trouble with going for consent is that the councils interpret the law to their own policy. They are often the ones acting outside the law.
                  I agree with above ....get consultant and yes preferably get consent but be careful what requirements may be imposed and be very clear on what you need consent for.

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                  • #10
                    It's insurance I'd be most worried about, not the council. If an insurance company can find any excuse not to pay out, they will decline your claim. What would they make of your "flatmate"?

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                    • #11
                      what clause can an insurance company invoke?

                      Ok perhaps if a fire was caused by a faulty installed stove or fire place but no one is suggesting dodgey installations. But there has to be a causal link between faulty work and the claim?

                      There may be a clause about unlawful building work? which is why we need to be very clear on the considerable lawful work that can be done without consent (but it still has to comply with the code requirements)

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                      • #12
                        Not full disclosure.

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                        • #13
                          then disclose

                          what is the problem?

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                          • #14
                            Disclose what? That they are flatmates? What if the insurance company calls them tenants? Disclose that they're tenants? Then the insurance company may decide that it's an illegal conversion without fire proofing etc. Look, I think Chch has proved, not that it was in any doubt beforehand, that if an insurance company can find a way out then they will.

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                            • #15
                              Originally posted by Leftette View Post
                              Disclose what? That they are flatmates? What if the insurance company calls them tenants? Disclose that they're tenants? Then the insurance company may decide that it's an illegal conversion without fire proofing etc. Look, I think Chch has proved, not that it was in any doubt beforehand, that if an insurance company can find a way out then they will.
                              Then lets be quite clear that having flatmates is not creating a separate household and therefore fire separation is not required. As I said at the start of this there are two issues RMA and building Act but the building act allows for self contained spaces as long as you are not creating separate exclusive households.

                              Even town planing rules usually allow for 2 (or more) boarders in the same household. (and the RMA cdosent care about fire and sound seperation?

                              What is difference between flatamtes, boarders and tenants?

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