Unapproved developments

We saw a duplex in Sydney, NSW at the weekend where the owner did some “home improvements“:

1. converted parts of the garage to an office (which was pretty obvious)

2. extended the family room by converting a verandah (which was not obvious and we only noticed after seeing old photos of the property).

Both modifications are not mentioned in the contract. I checked with the agent if they got any development approvals (none listed on council website). The contract doesn’t list any unapproved developments / modifications.

Questions:
1. Would the vendor be obliged to include unapproved developments in the contract?

2. What are implications of buying a property with unapproved developments/ modifications. Both do not impact any neighbours or others.

 

The buyer of unapproved works can be fined and ordered to remove it by council. Title insurance wont apply in this case. You know or suspect its unapproved before you have contracted. Could also void insurance if a claim is made.

Low ball offer for the expected costs to meet compliance is typical. Agent knows that. The office in the garage may be OK if its merely like a study and not a place of business and meeting area with staff etc

 

Title Insurance generally provides coverage for undisclosed building works undertaken without council approval.

FirstTitle-Brochure-NSW-QLD-(Aug-2022).pdf
Residential Purchaser Policy | Stewart Title Australia (stewartau.com)

 

With conditions. If you know or reasonably believe the works are unapproved the claim is not paid. They usually check wth the conveyancers etc. Insurance always has catches.
Title insurance needs to be acquired "blind" to any issues of concern.

Its much like building insurance as bushfire smoke appears in the trees behind ahouse. Or a hailstorm is approaching

 

There are always catches however in my experience I have found that Title Insurance can be extremely useful. As with any insurance, the true test is when you make a claim. That said, there are insurers that will provide Known-risk coverage.
Known Risk Coverage | Stewart Title Australia (stewartau.com)

 

Depends on when the alternations were done.
Rules change over the years.

 

Problem is negotiating on price cant consider these issues and also be covered by insurance.

The explanation is A ‘known risk’ is any matter which may be adverse to the purchaser’s interest and ownership of the property which is disclosed in the contract for sale or discovered during the course of the conveyancing transaction. Not those known earlier in the making of the contract.

Known risk cover is not available in relation to:

• Unapproved or non-compliant swimming pools and spas (including safety barriers)
• Unapproved or non-compliant granny flats/dual occupancies or unapproved structures which are known to have building code defects, structural defects or poor workmanship
• Unapproved or non-compliant retaining walls
• Any unapproved building work where the Local Authority has been notified of the unapproved building works or is otherwise aware of the existence of the unapproved building works
• Any encroachments upon the property which is to be insured or encroachments on adjoining property where the owners of the adjoin property are aware of the existence of the encroachments

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That seems a comprehensive list of things that may not be covered.

If risks are discovered in the transaction, we encourage you to contact our Underwriting Department on 1800 300 440 to determine whether Stewart Title can help you settle your transaction with peace of mind.

So it can be like pre-existing medical.
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Its often wise to discuss title insurance with a solicitor.

 

My PPOR has a shed about 1.8 X 3.4 metres on a concrete slab over an easement, a pipe. The easement is about 2 metres from and parallel to the back fence. Some neighbours also have sheds in similar positions over the easement and/or pipe. I bought the property knowing about the shed being over the easement.

It seems that a shed such as this does not need a permit, and that it should not have been built over the easement. Judging from the very big vine behind and to both sides of the shed I guess that the shed had been there for a decade or longer.

When buying I decided against insurance to cover the cost of removing the shed should this be ordered by the local council, water authority or the like. I cannot recall the reasons for not taking out insurance.

The Stewart link says:
"The decision to cover known risks is made by Stewart Title on a case-by-case basis. Where cover is provided, there is no additional premium ... Known risk cover is not available in relation to: ...
Any unapproved building work where the Local Authority has been notified of the unapproved building works or is otherwise aware of the existence of the unapproved building works".

So Stewart says that they will decide if the cover is taken out. Put another way, if the risk to Stewart is small then they will take out cover, in which case my my funds are best retained. If there's a higher risk for Stewart then they will not cover me.

While the local council has probably not been advised about the shed they have access to aerial pictures. Stewart may argue that the council was aware of the shed being over the easement.

The cost of the policy is around the cost to demolish the shed and slab, and that may have been why I did not take out the policy.