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Unconsented Works Dilemma

Many properties have unconsented work - Hamish Anderson discusses whether it’s better to remedy or sell ‘as is’?

By: Hamish Anderson

1 January 2020

I’m often asked to sell properties that have had unconsented work done. In fact, I estimate maybe one in four properties on the market right now have unconsented work of some kind, ranging from minor through to significant unconsented changes. One thing’s for sure, big or small, it will be problematic and costly when it comes time to sell.

Unconsented works can include a garage converted into a sleepout; the installation of a second bathroom; or removal of that load-bearing wall – to name a few. All of these require council sign-off, even if the work was done to a high standard by qualified professionals.

Most of us are aware of our disclosure obligations as sellers. Our obligations include disclosing unconsented works to potential buyers. A diligent agent who intends to stay in the business will ensure they have the “unconsented work” discussion with sellers well before marketing begins. Not only are repercussions of non-disclosure severe for agents, but also owners have an obligation much the same, either to disclose unconsented works to their agent or to buyers directly when selling privately.

Simply put there is no avoiding it, or sweeping it under the carpet.

Rectify Or Not?

We know buyers must be informed of any unconsented works, so then the question really becomes: “Should owners attempt to rectify unconsented issues before listing?”

‘A property with unconsented work will be instantly disregarded by half of your potential buyers’

From my experience, I would say they should do everything they can, because in most cases having unconsented work will cost a seller dearly.

Usually the outcome is a considerably lower sale price and longer time on market compared to its consented equivalent. Well that might be obvious, but let’s consider exactly why that’s the case.

Firstly, a property with unconsented work will be instantly disregarded by half of your potential buyers. As soon as they find out about the issue, they will quickly move on as their ideal home doesn’t include this unknown risk factor, and good luck convincing them otherwise. In many cases they might have taken advice from their lawyer, mortgage broker or family and friends, and from that point on they have decided clear cut to avoid property of this nature. Well fair enough.

Okay, so we have swiftly and efficiently cut our potential buyers in half. That’s a shame because that multi-offer scenario is now looking even more unlikely. The remaining interested parties now have the obstacle of the bank and lawfully are required to disclose the unconsented works to their financier. The banks typically will flat out decline an application, especially if the buyer is a first home buyer or has little equity. If they don’t decline they may value it and lend against the property less the unconsented item.

For example, if it has a second unconsented bathroom, they may lend against it as if the property only had one bathroom. Therefore, the buyers can’t borrow the maximum against the house you are trying to sell, therefore devaluing the property.

The best advice I could give someone wanting to sell a property with unconsented works is to first find out what’s required to rectify the issues. Applying for code of acceptance (COA) is usually the best option, which is an after-the-fact approval of unconsented works involving a modest application fee (cheaper than the deeply discounted sale you were facing).

If unconsented works can’t be approved, then there are other ways to ease the minds of potential buyers and get lenders on your side. In other cases where the works are non-compliant to the code, sometimes removing or reinstating the work to its former state is your best option.

The Kiwi can-do attitude is alive, strong and proud, but if your goal is to add value and sell sometime in the future, then make sure your next home improvement complies.

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