Illegal Construction to Cost Homeowners Thousands

Three years ago, 32-year-old Hao Dong purchased a dream home for himself and his family to live in. Featuring a wood fire and ducted heating, the house was advertised ‘a bungalow out the back with a lounge, kitchenette and semi-ensuite’, as well as an ‘oversized garage plus workshop [and] garden shed.’

Last year, it was discovered that most of these structures were illegal. Some of them were built nearly 20 years ago by the property’s previous owner, long before it was auctioned and purchased by Hao Dong in March 2016. However, it is now Hao’s obligation to face the legal issues he has been confronted with. The real estate agency that brokered the deal evades responsibility by the Latin motto ‘caveat emptor’: let the buyer beware. In Victoria, it is expected that prospective homebuyers conduct their own due diligence when purchasing a home.

Whittlesea Council has informed Hao that he is required to apply for and obtain the appropriate permits or have the additional structures behind the house removed. While the Council is working with Hao to ensure his compliance with building regulations, this nevertheless comes at a steep cost for Hao. A building company has quoted Hao $8,500 for assistance in obtaining the necessary permits. This quote is not inclusive of other costs, such as hiring tradesmen. A demolition company has quoted him a further $7,800.

During the final stages of the property purchasing process, Hao hired a conveyancer. However, no indication of illegal structures was found, which is not an uncommon occurrence, according to the Australian Institute of Conveyancers. Jill Ludwell, chief executive of its Victorian branch, emphasises that conveyancers deal with the title, and not the actual property itself. They do not inspect the property before the purchase.

She urges that homebuyers take out title insurance, which ‘protects against illegal or unapproved building works, unpaid rates and encroachment’ (Tran, 2018). Another alternative is to obtain a building report from the local council prior to finalising the purchase, a suggestion backed by the Whittlesea Council.

The regulation surrounding illegal construction of home purchasing varies across states. In New South Wales, buyers have an implied warranty under the Conveyancing Act, which stipulates that there can be ‘no undisclosed matter in relation to structures on the land which would justify any form of demolition order’. Thus in a similar circumstance as Hao’s, if the buyer were to discover the existence of illegal structures, buyers would be able to rescind the contract and reacquire their deposits.

In Queensland, however, buyers have no such implied warranty. Buyers, then, must protect themselves against illegal construction on a prospective property through arranging it themselves within the purchase/sale contract.

Alternatively, buyers may request evidence for approvals for any renovations, alterations or improvements that have been made prior to entering contracts. Municipal building surveyors can also be consulted, as well as obtaining title insurance. (ET)