Unauthorised work

Mike decided it was finally time to purchase his first investment property. He had spent the last couple of years saving for a deposit. He looked at a number of properties however each property was being sold at auction which meant Mike had to complete his due diligence each time before attending the auctions. Mike sent the property documents through to his solicitor to review before each auction. 

After attending a number of unsuccessful auctions, Mike finally found a property that would be perfect. The location was great; it was close to the local shops and in an excellent school zoning which would appeal to tenants. Mike received a call from the agent after the open home to say that the vendor had decided to accept a pre-auction offer and that the auction date had been brought forward. Mike wanted to move quickly on this property as he didn’t want to miss out.  Mike could see no issues in the auction documents and decided not to send them to his solicitor because the time was short. 

Mike was very surprised and pleased when he was the successful bidder at the auction. He had the agents send the agreement to his solicitor for processing.

The following day Mike received a call from his solicitor about a clause in the auction agreement.  The clause stated that the purchaser had been made aware that the vendor had built a large deck on the property which did not have a building consent or code compliance certificate.  The clause further states that the purchaser would have no claim/remedies against the vendor under the vendor warranties.  

Mike had overlooked this clause when he was looking at the document, but he vaguely recalled the auctioneer mentioning something about it before the auction started.  The deck was 4 metres off the ground, but the house was perfect for what Mike wanted, and he believed that he had made a good choice.  He was not overly concerned about the lack of consent and said that he would deal with the deck issue just before he sold the property in a few years.

Five years later Mike decided it was time to sell the property and listed the property with a local agent.  The agent recommended for the property to be sold by negotiation. After a couple of weeks of open homes, Mike had received an offer for the property subject to finance, building report and LIM report. The purchaser’s LIM report disclosed the lack of consent for the deck, and the builder inspector noted numerous issues with the deck. The builder inspector was concerned that the deck had not been constructed in accordance with the building code and was causing damage to the house.

Unfortunately, this meant that Mike would have to reconsider his price expectations given the issues that the unauthorised work.



By: , Property Law with Rachel Lee, Davenports Harbour Lawyers

Issue 90 August 2018