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QLD Highset....liability for illegal build work

Discussion in 'Legal Issues' started by Honeydew, 22nd Jul, 2015.

  1. Honeydew

    Honeydew Well-Known Member

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    Hi All,

    I hear that it is quite common in QLD that people turn the bottom part of a highset home into an extra living space or even dual occupancy with bedrooms & extra bathroom etc and most of the time without legal height ....

    I found a great deal over the weekend, fully renovated highset house on top, the bottom beautifully converted into 2 bedrooms, rumpus, study and a dated looking bathroom. Very close to if not at legal height.

    Anyway, I signed the contract of sales, then next day called up the local Logan council to enquire about approval and they say none was recorded but this type of build work is very common in the area. Although illegal if not council approved it is up to the owner to get it certified and council won't be proactive about making people pull down unapproved work. I looked into making it compliance with council requirements but they say people have to engage private certifiers for advise on what would make it right then council will issue a building occupancy certificate but council cannot advise on what needs to be done. I was also told this could be a very long and costly process likely exceeding over $10k, not including any potential pull down and re-build if I want to make it fully compliant.

    The extra build work was properly done by tradespeople so it looks great and would make a great +ve cashflow rental however I am concerned about insurance coverage in the event a disaster happens and tenants sue for damage etc. The bottom home looks solid, beautiful and safe to live in. The nicest I have seen of this product in the area but since it has not yet been certified would this make any insurance claim void ?

    I am considering pulling out of the purchase but not sure if I'm overthinking it as this type of work is so common in the area. I've randomly checked a few houses for sale with the same build work done and they all seem to have not been certified either. Would insurance cover public liability and replacement cost for illegal build work in this case ? There are numerous homes like this in much worse condition up on the market for rent. However it freaks me out whenever there's any possibility of loosing an insurance claim.

    Has anyone encountered this before ?
     
    Last edited: 22nd Jul, 2015
  2. Subodh Shirodkar

    Subodh Shirodkar Well-Known Member

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    Hi
    Generally you would rent out the whole house to one tenant. That tenant can then sublet the house underneath.

    Seek advice of a local Real Estate agent.

    Hope that helps.
     
  3. jaybean

    jaybean Well-Known Member

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    Also you might be confusing an illegal build with advertising it illegally.

    It's illegal to advertise it for sale or for rent as a bedroom, however it doesn't mean it's illegal for that room to exist. It could be a hobby room, storage room, just not a bedroom. As you said, there are plenty of these in QLD, they are incredibly common.
     
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  4. Honeydew

    Honeydew Well-Known Member

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    Yes, I plan to rent out the whole house to one set of tenant only.

     
  5. Honeydew

    Honeydew Well-Known Member

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    Hi Jaybean,

    Yes they are verryyy common and I don't plan to advertise the extra rooms downstairs as bedrooms however it's the issue of them having been created in the first place without council permit & being certified.
    My main worry is if it's not council certified/illegal build then could this enable insurance company to reject my claims if any unfortunate incidents occur.

     
  6. jaybean

    jaybean Well-Known Member

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    If it's just a room, I honestly can't see why there would be a need for council approval (happy to be corrected).

    If it's a toilet or bathroom however yeah I could see issues with that. In fact the last place I bought, there was a toilet illegally installed downstairs and they didn't want any trouble during the sale, so they just preemptively tore it out before they even put it on the market.
     
  7. Honeydew

    Honeydew Well-Known Member

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    yes I think so too... I'm not too worried about having council approval or not but it's more the insurance side of things....say if there is a fire, wouldn't want my claim to get rejected as it was an illegal build etc...

    This place has the bottom space beautifully converted into 2 rooms, study & rumpus. Also has a dated bathroom & toilet.

     
  8. mcarthur

    mcarthur Well-Known Member

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    I just had a similar buy - sold as a 5 bedroom, but built as a 3 bed flat over a 2 bed flat (separate kitchens, bathrooms, no internal stairs). Height under is not 2.4m. Slab isn't 150mm above ground level. No firewall between top/bottom.
    But, council (finally!) agreed that the house was built this way to the code *as it then was*, so it's ok to keep using it as it was built - 2 flats - and doesn't have to be brought to modern code. That determination is supposed to (legal?) keep the insurance issues at bay.
    Yield of renting out as a 3 bed/2 bath/2 kitchen + lots of utility would go nowhere near renting out as 3 bed flat and 2 bed flat.
    I should say I'm impressed with council on getting something definitive from them in the DD timeframe! My solicitor was gobsmacked I got anywhere with them :).
     
  9. Perp

    Perp Well-Known Member

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    I can understand them being OK with it from a building perspective, but I'm a bit surprised regarding the planning issue... are you sure they said it's OK to rent the two flats to different tenants? (Which is a different matter from keeping it as two separate flats that are occupied by one extended family.)
     
  10. mcarthur

    mcarthur Well-Known Member

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    Interesting point! I hadn't considered that way of looking at it.
    My issue was more with the building/insurance.

    The flats are separately metered electrically and always have been. For many years, rates were based on the two being separately rented. This was let lapse some years ago when the bottom rental ceased. It was this cessation that triggered the "can it be separately rented like it was originally built for AND used in that way for years".
    Council's written answer has convinced my solicitor it's ok - he's communicated that they'd have a real problem in court if they tried to rescind things.

    But... the land use is still "single unit dwelling". Sigh.

    From reading the council's communications and talking with their building, town planning and rates departments, they don't care about the separate tenant rental as long as they get their rates money: "who" rents they don't care about, nor whether it's the same top as bottom.
     
  11. willair

    willair Well-Known Member Premium Member

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    Maybe look at this from another angle,when sometime in the future when you go to sell as most investors do at some stage in their investing life,what happens if the people intending to buy find out that this is not legal? and just walk away from every contract,if this is in Brisbane I would read every word twice within your insurance contract because from my understanding firewalls must be in place
    or once the ### hits the high speed fan you are the only one holding the can..
     
  12. Greyghost

    Greyghost Well-Known Member

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    I have a 5-6 br place in SE Bris.
    It is a 6br place but owner opened a wall up in the master to make 2nd br a sitting room, clothes room type deal.
    It is legal height and has been converted downstairs...
    Issue came when bank valued it for finance..
    They said it is now only 2 br upstairs and as downstairs has not been council approved they do not count as brs. So had to value it compared to other 2br in the area sold.
    Luckily we had extra cash so it was a only small hurdle
    We do not have it signed off by council, I will explore it in the future, but the issue is that not many will want to sign off on the work of an unknown other tradesmen. Unknown materials used etc. That is the issue...

    I never intended to rent mine out separately anyway. Everyone needs to go under the same lease.
     
  13. mcarthur

    mcarthur Well-Known Member

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    Hi greyghost, that sounds a nasty situation. It shows how reasonably often this stuff can happen.

    My solicitor says that in my case council's letter acknowledges that the property is two separate flats with bedrooms, kitchens, bathrooms. Doesn't matter that they don't meet current code - they are "bedrooms", etc. and can be used as such.
    It does show how important it is to get things in writing - without the council letters and solicitors agreement, I wouldn't have gone through.
     
  14. mcarthur

    mcarthur Well-Known Member

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    Good points! My response will be - here is the legal opinion I have, the agreement of council, and the last 10 years of rental receipts :). So in all ways an investor would need to know - like I did - the situation is legal.

    For the insurance, you're right - I'll do some checking! I did check with legals before doing insurance (what is the place to be insured as - single house? Duplex up/down? Flats with no body corp?) but I'll do more questions...
     
  15. Perp

    Perp Well-Known Member

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    Is there more to it than that? I don't see anything in there that says the two flats *can be let independently*. @RPI - thoughts?
     
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  16. mcarthur

    mcarthur Well-Known Member

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    True, nothing with those words... @RPI? Any others?

    I'll get a legal opinion from the solicitor too.

    Now you've got me a little worried :confused::(
     
  17. RPI

    RPI Property Lawyer, Town Planner Business Member

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    If the use was in existence prior to City Plan 2000 then it could be that it is classified as an existing lawful use. If you are happy to PM the scan of the letter from Council I will answer back through here (sans identifying info)
     
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  18. mcarthur

    mcarthur Well-Known Member

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    Thanks @RPI - private conversation started with details (couldn't find a way to PM!).
     
  19. Honeydew

    Honeydew Well-Known Member

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    thanks everyone for your replies. Interesting to hear the similar stories. I pulled out of the contract today because off the illegal build work and risk of not being covered by insurance. Wouldn't be able to sleep at night due to fear if crap hits the fan. The agent got all upset and called me a gazillion names :eek::confused::rolleyes:
     
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  20. RPI

    RPI Property Lawyer, Town Planner Business Member

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    McArthur's property is outstanding.

    The clear amount of time of continuing lawful use prior to City Plan 2000 means not only can the continue to rent out that way, they could demolish it and build a brand new duplex without a DA.

    Well done
     
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