Help please: buying property with illegal dwelling

[Ninnie]

Hello everyone,

Very new to the forum (first post), but given it's such a wealth of information, I thought people might be able to help out with a problem.

My wife and I are considering buying a gorgeous rural property on about 4 acres in Victoria. It has a lovely period house as the primary house, but it also has another unapproved (not on the title and the real estate agent has admitted it's not legal) 16 year old two-storey bungalow, completely out of sight from the main house.

This secondary bungalow is quite habitable and sophisticated: it's hooked up to electricity via the main house, uses rain water, has a bathroom (although toilet is outside), beautiful garden, kitchen and wood heater.

The vendors currently rent both houses out; the older house legitimately (as seen in Section 32) and the unapproved one on a very informal basis with a long term tenant.

A couple of questions:

1. If council somehow find out about the unapproved house (I can only assume they don't know about it), can they order it be demolished?

2. What are the legal implications for us if we keep the tenant in the unapproved house (negative gearing, insurance, liability, etc)?

Can anyone help?

Cheers.

 

[moyjos]

go ask council what is needed to make all this legal ...... Then offer the asking price less what council says plus a (at least 10% contingency buffer)


Or. RUN .... Run fast...run far.

 

[Terry_w]

1. yes
2. large and many

 

[Ideo]

If it was a shed or even a granny flat it wouldn't be the end of the world.

As it stands run. Run faster than you have before.

 

[vaughan]

1. If council somehow find out about the unapproved house (I can only assume they don't know about it), can they order it be demolished?

Yes. You get to buy the house and then pay for its demolition.

At this stage I'd be doing my sums on the property with vacant possession -- no tenants. Then hire a suitable professional (town planner or private certifier?) to assess the building and work out what needs to be done to get it approved.

Else, run away.

 

[Ninnie]

Yes. You get to buy the house and then pay for its demolition.

At this stage I'd be doing my sums on the property with vacant possession -- no tenants. Then hire a suitable professional (town planner or private certifier?) to assess the building and work out what needs to be done to get it approved.

Else, run away.

Cheers everyone for the replies. I thought the two houses on the one property may have been too good to be true....

The location of the unapproved house, however, is so nice with the setting and gardens, we'd even consider knocking it down and, perhaps, installing a caravan there for personal use, while renting out the legit property. (I assume a caravan on your own property is legal...?)

If so, what would we do? Negotiate a lower price with vendor (to reflect demolition costs)? Then kick out the long term tenant and dob ourselves into the council, then knock it down?

It's such a nice property...and the main period house is something special.

 

[Ninnie]

go ask council what is needed to make all this legal ...... Then offer the asking price less what council says plus a (at least 10% contingency buffer)


Or. RUN .... Run fast...run far.

What is the best approach with council? Either they don't know, or they've turned a blind eye!

Inquire honestly and specifically, dobbing the vendors (and our selves, potentially) in? Can this 2nd dwelling in question ever be made legal?

or

Ask (assuming, hypothetically, we buy it) the long term tenant to vacate the unapproved house ASAP, so we can use it personally but not gain financially from the dodgy set up - hence no prosecution, etc? Then wait to see if council ever notices it, plead ignorance and abide by their ruling if they do (even if it means demolition)?

 

[moyjos]

What is the best approach with council? Either they don't know, or they've turned a blind eye!

Inquire honestly and specifically, dobbing the vendors (and our selves, potentially) in? Can this 2nd dwelling in question ever be made legal?
[FONT]

Yep do that . Get the CORRECT advise not "hypothetical" "maybe" answers.

An IP is a business not a gamble. Get the correct information upfront.

 

[vaughan]

Ask (assuming, hypothetically, we buy it) the long term tenant to vacate the unapproved house ASAP, so we can use it personally but not gain financially from the dodgy set up - hence no prosecution, etc?

You are missing the point that council can/will order the second house demolished if there is no way to make it comply (it's likely that council will work with you to keep it if possible). It's very *existence* is the problem, not what it's being used for.

Having it rented out is a huge complication: say the council orders it demolished, do you then have to rent another house for the tenant to live in for the duration of their lease?

This is like driving without a license: it's all good until something goes wrong. or you get caught.

 

[Ninnie]

You are missing the point that council can/will order the second house demolished if there is no way to make it comply (it's likely that council will work with you to keep it if possible). It's very *existence* is the problem, not what it's being used for.

Having it rented out is a huge complication: say the council orders it demolished, do you then have to rent another house for the tenant to live in for the duration of their lease?

This is like driving without a license: it's all good until something goes wrong. or you get caught.

I hear what you are saying, Vaughan. Driving without a license is a good analogy.

Regarding the tenant (who seems very nice and aware of the situation) in the secondary unapproved dwelling, the current arrangement they have is very, very informal. They are, let us say, quite "alternative" and "tree loving". Not sure they even have a formal lease (which is probably something to be wary of)

We'll contact the council and be transparent. See what they suggest.

Cheers, again, for the reply.

 

[Terry_w]

What if there is a fire and the tenant dies?

And the fire was caused by something related to the structure not complying with fire regulations...

Could you be both sued and charged with manslaughter?

 

[vaughan]

Regarding the tenant (who seems very nice and aware of the situation) in the secondary unapproved dwelling, the current arrangement they have is very, very informal. They are, let us say, quite "alternative" and "tree loving". Not sure they even have a formal lease (which is probably something to be wary of)

It sounds as though you also need to read-up on the tenancy laws in your state, before you get into becoming a landlord.

Here in NSW (and I'm sure other states are similar) the Act states that even if there is no formal agreement or a signed lease, if the situation LOOKS like a residential tenancy then it IS a rental tenancy and all the standard legislation applies. Most of this legislation exists to protect the helpless tenant from predatory landlords. So, for instance, to get them out you'll need to give them 90 days notice. If they ignore the notice them you need to take them to tribunal (another couple of weeks) and get an order that will take another couple of weeks to enforce, etc. It could be the best part of a YEAR before you get them out.

Because there would be no property condition report done on entry, the tenants could leave the property any way they please and there's nothing you can do about recovering costs for cleaning and damage. Besides, there would have been no bond collected. And if the landlord DID collect a bond but failed to lodge it with the rent board people then they have broken the law.

See how much of a mess this gets?

 

[Ninnie]

What if there is a fire and the tenant dies?

And the fire was caused by something related to the structure not complying with fire regulations...

Could you be both sued and charged with manslaughter?

What happens if there is a fire in the primary house (approved dwelling) on the property and the tenant dies? It, also, might not be fire regulation compliant because it is an old, period house. Built well before regulations were introduced.

 

[wylie]

What happens if there is a fire in the primary house (approved dwelling) on the property and the tenant dies? It, also, might not be fire regulation compliant because it is an old, period house. Built well before regulations were introduced.

Your insurance would cover the "legal" house. You would have not been able to get insurance if you had answered the questions truthfully and the insurer accepted the risk. Just because a house is old and would not pass the current idea of "code" doesn't mean it cannot be insured.

The questions asked when you took out the insurance are key here. There was a story in the paper last weekend about a high end vehicle that was written off when it plunged into a river, which was insured, being refused insurance because the owner forgot to mention several fines and other traffic infringements. His insurer has wiped him.

The illegal house is quite a different matter to the house that is known to be on the block.

 

[Ninnie]

Your insurance would cover the "legal" house. You would have not been able to get insurance if you had answered the questions truthfully and the insurer accepted the risk. Just because a house is old and would not pass the current idea of "code" doesn't mean it cannot be insured.

The questions asked when you took out the insurance are key here. There was a story in the paper last weekend about a high end vehicle that was written off when it plunged into a river, which was insured, being refused insurance because the owner forgot to mention several fines and other traffic infringements. His insurer has wiped him.

The illegal house is quite a different matter to the house that is known to be on the block.

Fair enough.

Cheers for that, Wylie