Unpermitted Dwellings

[Scarface]

Hi all,
What problems can I face in buying a property with an unpermitted flat attached to it or if possible what do I need to do to get it permitted. How does the Insurance company react to it and how will the council react.

Thanks
Avinesh

[Julian]

Worst case is you could be made to demolish it. Better to talk to a builder and to the council before you proceed.
Julian

[tisme]

hi
what about a PPR that has a flat attached that is suppose to be only for dependant family members....would i be better to rent this to a "boarder" rather than as a separate flat?

[Dean@Massiveaction]

As I am currently embroiled in a war with an Auckland council over this very thing can I give you the benefit of my experience.

Firstly ~ Councils are not proactive. They don't have detectives driving around looking for unpermitted dwellings so IN THEORY you can buy something illegal and rent it out.
HOWEVER if the council does get a complaint about the property, and it could just be a noise complaint, then the trouble begins.
If the property meets the zoning requirements to be made legal then there's generally no problem. You simply ahve to go through the appropriate consents and get the property made legal. However whree the property can't comply you end up having to rip out the illegal bits.
I bought a property that had an abatement notice against it that the vendor had hidden from me and the council hadn't gotten notified on the LIM so I'm in the process of fighting the imposed removal of 2 kitchens from a property. Every 90 days you get fined $750 and eventually you end up in court with fines of many thousands of dollars.

So my advice is, if you know going in that the property is illegal in any way then do the following
1. Talk to council prior to purchase and establish, can this be made legal, and if so what will it cost. If not WALK AWAY
2. Advise vendor that property is not legal and make your offer subject to vendor obtaining code compliance for the property. In my experience often vendors will do this if they know they have a sale. Alternatively show them the costs from council to get compliance and deduct that from your offer. If they won't come to the party WALK AWAY

It is NEVER worth owning an illegal property. The recent law changes actually make it technically illegal for a property to be sold without code compliance so some leverage on the vendor will often be successful.
It is VERY DIFFICULT to onsell an illegal property so why take the risk. And my recent council experience is such that I can tell you it's just not worth it. In my case I had a dishonest vendor so I'm fixing someone else's mess, but don't bring it on yourself.

PS SAme applies to the second question of specific use permits. If it's technically a sleepout then that's what you can legally rent it out as!!

[whitt]

Dean Is on the money with his statements.
I have looked into several properties only to decline due to the illegal conversions.
Yes rental yeilds can be good but the downside is insurance could be a issue if an incident occured. Eg fire from the kitchen.

Another point to note is if you are dealing with West Auckland, they will not issue compliance retrospectively ( after the work has been done) and they are firm on this. So you need to pull it apart or down then reapply for consents before works commences.

Just make sure you check the property files carefully and be prepared to walk away if needed. It is often the stuff that is not shown on the property file which is of interest to you. You need to know what is on the property and match them up to the file. Eg Garages, extensions, kitchens etc..

[Julian]

In some areas you can have a garden shed up to 10 square metres unpermitted. I remember building one such garden shed of 9.9 metres. It had all the luxury features your plants and garden tools might like, such as being fully insulated and lined, with power, phone and television jacks, alluminium joinery and modern stainless light fittings. Yes I am sure the "plants" still sleep very soundly is such a comfortable garden shed.
Julian

[Scarface]

How is a sleepout different from a flat technically?

[Dean@Massiveaction]

Hi Scarface. As far as council is concerned it's A: is there a food preparation area, if yes it's a flat and B: can you prove people are only sleeping there as opposed to using it as a living area

[Kathie]

I work by four very simple rules:

1. Assume the vendor is not telling you everything
2. Assume the agent is not telling you everything
3. Assume the LIM and Title don't show you everything
4. If it looks/sounds too good to be true, it probably is.

While I would hesitate to label all vendors and agents as innate liars, I certainly work on the theory that this is the case.

Case in point (pay attention if you are considering purchasing a certain property currently for sale in Monarch Ave, Hillcrest) - my husband and I were shown a property that was two units in a single dwelling. Yield was fantastic; it was recently and beautifully renovated top and bottom; vendor was considering all offers as he wanted to sell it quickly and quietly for 'unspecified' reason (implication of marital etc problems).

We asked the agent what the legal status was and was told that it was all permitted etc.

Within a couple of hours we had a deal on the table and accepted - subject to usual clauses (valuation, building inspection, LIM). The agent tried to suggest we didn't need a LIM as he had copies of all the building plans and council approvals but we smiled and stated that we thought we'd rather get one anyway.

The valuation came in on the dot.

The building inspection highlighted a couple of minor issues but we fulfilled that clause without murmer.

The LIM and title were both marvellously clear.

Two days before we were due to go unconditional I went down to the council to sight their records. My usual procedure is to check that the building plans held by the council correspond to what I saw (eg same structures, footprint etc). I also like to talk to a planning officer about the zoning and any council plans for road widening, additional drainage etc etc.

Everything was peachy clean with the records that I looked up. The building plans were identical to what the agent had given me, the permits were all in place. It looked fabulous. So I trotted off to meet the planner and he took one look at it and told me that there weren't enough carparks! I said "pardon?" And he explained that you need two carparks per dwelling and this had only two for a double dwelling, and from the look of teh plans tehre was no room to put more. Then he added, "And you shouldn't have two units on a crossleased site!"

Anyway, to cut a long story short - the council had incorrectly permitted the addition of a second kitchen into the lower level of a house. This was then converted (by use of a lockable door on the internal staircase) into two units. HOWEVER, the entire structure was not legal, in that you could not legally rent it out as two units since there was no fire-proofing between the lower and upper levels, there were not enough car parks, and it was on a cross-leased site. The lack of fire-proofing meant that it was not a legal home&income and could potentially void our insurance. The presence of a kitchen, even though it was permited, meant that it was not a legal home&granny.

I went away a bit dazed and the next morning phoned the council with a long list of questions, particularly for the person who had issued the code of compliance for the additional kitchen.

After much humming and hawing, he revealed to me that there was an encumberance on the title (which did not show up on the LIM or the title) that meant that it could only be legally used as a home & granny. This was known to the vendor!

Needless to say we walked away, almost a thousand dollars poorer but much wiser and without the huge risk that such a property would have exposed us to.

Now we are embroiled in another similar situation! Sometimes doing your homework well can be very frustrating!!!

[Glenn]

Yes these buildings are all over the place.
I almost purchased a property with a basement non building consented flat once. The council suggested they were not too interested. My lawyer suggested I discuss the issue with the insurance company and they said that just because they might accept the premiums they would not pay out if there was a fire. Yeh great investment so we walked.

In another case for a property we were managing the council hound dog got onto the case. He demanded the owner actually demolish the dwelling. We had our share of problems getting rid of the tenant.

It seems to me that the councils have a variable approach to these cases.

I have heard of new owners taking the old owners to court over issues like this years after they have sold.
The fences have moved and the policeman is now the market not the council.

[Dean@Massiveaction]

Problem with taking previous owners to court is that they have to have owned the property in an entity that has some value. The guy who did us had a dodgy lawyer and they had the property in a trust without any value in it. I lost about 70 grand but you just have to smile as you bend over in many of these cases.
To bring us back to the original post NEVER BUY AN ILLEGAL PROPERTY!!

[fudosan]

Hi Kathie

Thanks for the very detailed account of your scary experience. We came across a similar property 2 or 3 years ago where the downstair unit was separated from the one above only by an internal staricase with a locked door. Fortunately we did not proceed because of unattractive yield.

I sense from what you said that it is very important to talk to a planning officer at the council.

After much humming and hawing, he revealed to me that there was an encumberance on the title (which did not show up on the LIM or the title) that meant that it could only be legally used as a home & granny. This was known to the vendor!

Can you explain what "encumberance" is? I know encumbrance but "encumberance" is a new word to me.

[whitt]

Any body have an idea on what the cost to convert a currently legal upstairs / downstairs house. Into a legal home and income. council and fire rating costs etc..

[Glenn]

You can actually do this so in a lots of cases.
You do not actually get a building consent and code compliance.
What you get is a building certifiers report and this goes onto the council file. Also often one gets a fire engineers report. In a couple of cases I have seen they install fire detecting and warning devises up and down.
I have also seen plenty of fire line jib used here and there.
The fire engineers report does not need to be mega bucks.
The problems I have come across related to things done behind walls that the certifier cold not get at to confirm like damp proofing.
As I recall the fire engineers report for the place I was looking at was going to be something like $500. I never went ahead with it because when I looked at the plans I discovered they had taken out one support foundation pole and dug down around the others so they were not fully buried.

[Kathie]

Can you explain what "encumberance" is? I know encumbrance but "encumberance" is a new word to me.

An "encumberance" is what you get when you are typing something too fast with an over-tired toddler in the background when you should be putting the toddler to bed and then paying bills.

Naturally you want to avoid these whenever possible as the fall-out can be quite devastating!

BTW - the experience wasn't so much scary as just blimmin irritating! As I said to my husband later - if I wanted to waste $1300 I would book us flights to Queenstown for a weekend. Still, it is much better to drop $1,300 and walk away than it is to be up for huge compliance costs, development levy contributions, council fines, and possible declined insurance claims!

Anyway, we are back in the middle of it again with another property that looks magnificent, has sailed through all the preliminary due diligance, and is now turning totally pear-shaped on us! Problem is that we want this one for our home so it is much harder to walk away from!