Keep to the code
Unconsented renovations could cut deeply into your net wealth, so boomers planning to move are advised to do their own due diligence before selling the family home, writes Colleen Hawkes.
Acouple looking to sell their $3 million-plus family home were horrified to discover the impact that a lack of a Code Compliance Certificate (CCC) could have on their sale – it has essentially reduced the worth of their property to little more than the land value.
Their problem is not new, but listing agent Drew Miller of Ray White Mairangi Bay says he is seeing a big increase in the number of baby boomers in places like Auckland’s North Shore planning to downsize, and unconsented renovations could cut deeply into their net wealth.
‘‘In that particular case, the owners rebuilt the house around three decades ago but failed to complete sign-off consent from the council – they had relied on a construction company managing the whole thing. They are now having to sort and fix the problem before they can move on to a retirement village.’’
Miller says that in instances like this, where sellers are unable to get a CCC, prospective buyers only see value in the land, which can be devastating for the vendor.
‘‘Many people begin the listing process only to later discover significant consenting gaps that often require thousands of dollars in legal fees to solve, not to mention the construction costs for repairs to bring the home up to the standard.’’
Miller says the standards for consent have got higher and higher over time, and baby boomers are surprised to discover buyers want to see a retrospective CCC to demonstrate durability under the new building code.
Craig Lowe of Lowe & Co Realty in Wellington says his agency also finds homeowners in this situation, although it is not a high percentage. ‘‘We do have a client going through this at the moment,’’ he says.
‘‘Often it’s about work that was done a long time ago. Perhaps a final inspection wasn’t done, or a final piece of administration, so they never got the certificate in their hand, but everything up to that date was ticked off. Often, they have simply forgotten about it, and then two decades go past, and they find out they don’t have [the paperwork],’’ Lowe says.
‘‘The main stumbling block is usually engineering sign-off and whether a document exists to be able to show compliance was taken care of at the time.’’
Both agents say the stress can be averted or minimised, if you get onto it early, by ordering a
Many, if not most, New Zealand houses are renovated at some point to a greater or lesser extent. The problem is not the renovation but the council sign-off you need when it’s completed.
LIM (Land Information Memorandum) report on your property from your local council and also a builder’s report.
‘‘If you ignore it and hit the market, it’s too late,’’ Miller says. ‘‘If you’re thinking of selling in the next six to 12 months, it makes sense to talk to an agent to check you do have all your ducks in a row, so you are ready.
‘‘The LIM can be a lifesaver for people looking to sell their homes. By comparing what the council knows about your home with what you know about your renovations, you can quickly get an impression of potential gaps in consent.’’
Work completed before 1992 was not subject to a building consent process, but sellers can order a third-party ‘‘safe and sanitary’’ report.
Nothing kills a deal more than a surprise
Lowe agrees it is prudent to do the research before going to market. ‘‘You need to go through the discovery process, so you know in advance what a builder will find when a buyer is doing due diligence,’’ he says.
‘‘Nothing kills a deal more than a surprise halfway though the process – when the buyer finds the property is not what they thought they were buying, and it’s not what the seller thought they were selling.
‘‘It can be confronting for an owner to get a building report, so it’s better to get it early than have it dumped on you three days before a tender closes.’’
Lowe says the solution to unconsented work may be a decision to disclose the problem, or you may wish to rectify it yourself.
Alternatively, you may get quotes to rectify the problem and sell the property with the quotes on hand, so buyers can factor it in from day one.
‘‘Fundamentally, there should be full transparency from the vendor, the agent and the buyer.’’
The Real Estate Authority – which is the conduct regulator – has clear guidelines on a licensee’s obligations.
It says a licensee must tell potential buyers about all known problems with the property they are selling. This includes physical defects, such as if the property is a known leaky building. However, this may also include issues such as whether any renovations have been issued proper council consents or compliance certificates.
‘‘A property file and/or LIM from the territorial authority is the most reliable method of ensuring all building works at the property have been consented to,’’ Lowe says.
‘‘Many people begin the listing process only to later discover significant consenting gaps that often require thousands of dollars in legal fees to solve.’’
DrewMiller
One or two steps down from code compliance
Miller says if there are consent problems, sometimes you’ll be able to list without making major repairs. ‘‘If the issues are small, disclosure could be all the local council needs to know, and you’ll be good to go,’’ he says.
‘‘The council could potentially give a Certificate of Acceptance. A COA is a step down from a CCC – just as a ‘safe and sanitary’ report is a step down from COA – and both tend to attract scrutiny.
‘‘They generally spook firsttime buyers. COAs and ‘safe and sanitary’ reports may make it harder to get insurance for your home, and while banks may lend on a COA, they don’t always feel comfortable doing so.’’
Miller says there are people, often former building inspectors, who specialise in this area and who can advise homeowners on the best course of action.
‘‘You need to go through the discovery process, so you know in advance what a builder will find when a buyer is doing due diligence.’’
Craig Lowe