Thousands of home sellers are being tripped up at the last minute by unapproved building work, costing them money, time and lowering home values.
An expert panel revealed the scale of the nationwide problem in a talk in Northwest Nelson that is costing home owners millions every year.
They included Hunt Building Consultants director Grant Hunt, Tasman District Council (TDC) building consents coordinator Phil Beck, Property Action direction and valuer Kim Bowie and property lawyer Jon Tidswell.
Ray White Golden Bay owner Billy Kerrisk said consent and permit issues were nothing new, but as real estate became more risk averse, sales were being seriously affected.
“There are huge risks involved of you on-selling a property that you has had building work done that you didn’t get a permit, consent or, in the case of consents, was not signed off,” she said.
New Zealand residential building consents reached their highest annual total in more than a decade.
For the 2016 year ended, 29,097 building consents were issued. Of those, 11,688 were residential homes and 1,788 were alterations and additions – also record highs.
he high cost of damage
Hunt Building Consultants’ director Grant Hunt said one client in Queenstown had paid $2.7 million to repair DIY windows they had put in.
“The water had got in and leaked down three storeys, gone all the way down and got into the floor structure at each level. The outside face was where all the kitchen joinery was.” he said.
Another Nelson family payed $50,000 to fix an unauthorised deck extension.
“A few years later we get a phone call – new owners aren’t happy,” he said. “We were pretty concerned when we got there that didn’t comply with the requirements of the [building] code, and we asked to do some investigation work.”
They opened up the cladding and found a leaky home.
“The cladding had been cut to put in the top ribbon board on the deck. Water had got in and completely decayed the wall out. Now, that’s not uncommon.
“A qualified builder had done the work, but there was no inspection. If the consent had been all drawn up and council had been involved, there wouldn’t have been an issue.”
House values
Property valuer Kim Bowie said the high risk associated with unknown costs of the illegal building work and what would be required to bring the building up to a legal standard, placed the seller at a significant disadvantage.
“The crux is that the buyer is in the position where they can negotiate the price quite strongly if there’s non-compliant work,” he said.
Code compliance
Another major issue lies with owners not obtaining the final code compliance certificates after they had done their legal building work.
Before 1992, a homeowner had to obtain a “building permit” if they wanted to undertake work.
After July 1992, it changed to a “building consent” whereby afterward the owner needs to apply for a “code compliance certificate,” or more commonly called, getting “sign off.”
“If a house hasn’t had its final sign off, legally that is not good enough.” Kerrisk said. “Council don’t necessarily follow up on it and it’s not up to the builder either – it’s up to the owner, but often they think someone else has done it.”
Who’s liabile?
Building consents coordinator Phil Beck said the council could take enforcement action of a fine up to $20,000 if an owner had undertaken illegal building work.
“Further, undertaking illegal building work may materially affect any existing or new insurances the owner may have.”
Lawyer Jon Tidswell said mortgage agreement clauses state you must get consent before doing any building work.
“If you haven’t got that you’re in breach of your mortgage,” he said. “But if there’s something that may cause a breakdown in your banking relationship… if you don’t have the correct [consent] in place, you are likely uninsured.”
Liability can carry on for years even after the sale and can emerge at any time, he said.
“An example is there’s an illegal fireplace with a gap in the back that caused the house to burn down, so the owner sues the previous owner for not disclosing it. These problems don’t go away, they just get worse and fester,” he said.
Tidswell urged home owners to monitor their builder.
One recent case was a with a Nelson family who hired a registered builder to build their home, but who later went bankrupt.
“Now they come to try and sell the house they find that there wasn’t the right cladding used, the house has become a leaky home, there’s no insurance, and there was no code compliance because the builder didn’t actually get it and neither did [the owners] and he can’t be sued.”
Kerrisk said it was common clients wondered why real estate agents meticulously go through every detail.
“And feel annoyed we are picking holes in their property.”
So what’s the solution?
If an owner had illegal building work they want to remedy, Beck said they may retrospectively apply for a Certificate of Acceptance (COA).
The application must be accompanied by a building report, any certificates, plans and specifications that detail the nature and extent of the building works to demonstrate compliance with the Building Code.
“The COA process, upon receipt of the application, can take up to 20 days to complete, but this timeframe may be placed on hold if council has to ask for some additional further information.”
The cost is available on the council’s website.
“If some additional building works are required to be undertaken, then the owners may be required to apply for a new, and separate, building consent.”
Tidswell’s advice if you’re a buyer is to do your homework on the property, order a Land Information Memorandum (LIM) report and check council files and have a building inspector check the property prior to purchase.
“Be willing to fix the issues that come up, and be honest with the buyer,” he said. “It’s just best to bite the bullet and you can’t hide your head in the sand from these issues. If you do, you’re going to end up regretting you didn’t fix it earlier.”
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