Can you rent out an unapproved granny flat?

G’day.

Im located in Canberra and looking to purchase a new home with the possibility of us living in the main residence while renting out the lower level rumpus/storage area that was previously converted into a 2 bedroom granny flat. The conversation to a granny flat was done without building approval and I am trying to work out what implications this has on insurance and renting. I have got conflicting advice from two real estate agents and am trying to do my due diligence before proceeding. Appreciate if anyone can share previous experience or point me to where I can find a definitive answer.

key points:
- no internal access to lower level granny flat
- building report notes the 2 bedrooms “have not been approved as habitable spaces”; installation of kitchen and creation of bathroom/laundry are unapproved.
- spoken to a building certifier company and it looks like retrospective approval will be at least 6+mo and ballpark $10k min.
- no plans/design work/electrical and plumbing certification available for the granny flat construction but at a glance the bathroom does not meet minimum ceiling height so approval is going to be unlikely without significant work.

One agent claims you don’t need building approval to rent out the flat (sounds suss to me). Other one claims not having approval as a habitable space is concerning but hasnt yet outright said no.

If the answer is that legally renting out is not possible without relevant building approvals as I suspect, then would we still be able to cover the granny flat with homeowners insurance and are there implications if we use it privately, eg, for guest quarters or immediate family members to live in?

Will the installation of internal stairs and access to the lower level flat potentially change anything re approvals/insurance?

thanks.

 

Insurance won’t cover you for anything. Building code and approvals exist for a reason. Let’s say non-compliant wiring caused a fire in the basement with your tenant living in it, you will find yourself in a lot of trouble.

It comes down to how much risk you are willing to take.

 

oh dear I suspected this.

in this case are there any considerations I need to bear in mind if we just keep the flat for private use by visiting friends/family?

 

There could be moisture, drainage, mould issues down the road. Any unapproved modifications without approval (including earthworks, retaining walls) will cause issues in the future.

 

I have IP with an unapproved granny flat. Insurance was high because two unrelated people were living in the property.

Construction was not compliant with BCA. Ceiling height was also low, no fire separation between two properties etc

Misuse of water as I was paying the water bill. Issue with electricity. NBN can only provide a 0ne connection.

Not worth pursuing.

 

Thank you.

I guess if we do pursue this purchase we will look at whether there is the possibility to convert the unapproved granny flat into an approvable one (by removing non-compliant bathroom and putting a new ensuite in the 2nd bedroom). Or knock through the ceiling and install stairs to the main residence to make it a fully 6bedroom house for resale value further down the track. Either way it it would cost a fair chunk and not generate a return any time soon.

 

A bathroom, kitchen, laundry & hallway are not habitable rooms so only require a minimum FCL of 2100mm (not 2400mm).

You made no mention of smoke alarms, separate services & meters.

NBN will provide a secondary box as you can have 2 different carriers providing services to the house - you just have to pay.

 

Thanks. Good point. Will add smoke alarm and meters to the list of things to check with agent. As well as bathroom ceiling height. But it’s looking less and less likely that retrospective approval will be possible. Too many unknowns and question marks.

seriously why would people go to the expense and trouble of converting a granny flat but not do it properly?! Apparently the previous owner who did the conversion was a builder too so really should’ve known what he was doing.

 

To catch the unwary into paying much more than the cost to rectify.