A couple looking to sell their $3m+ family home have been horrified to discover the impact the lack of a Code Compliance Certificate (CCC) could have on their sale – it has essentially reduced the value of their property to a little more than the value of the land.
Their problem isn’t new, but listing agent Drew Miller of Ray White Mairangi Bay says he’s seeing a surge in the number of baby boomers in places like Auckland’s North Shore who plan to downsize , and unconsented renovations could significantly reduce their net worth.
“In this particular case, the owners rebuilt the house around three decades ago, but did not get council consent – they had relied on a building company to manage the whole thing. They must now sort through and fix the problem before they can move to a retirement village.
Miller says that in cases like this, where sellers can’t get CCC, potential buyers only see the value of the land, which can be devastating for the seller.
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“Many people start the registration process only to later discover significant consent deficiencies that often require thousands of dollars in legal fees to resolve, not to mention the construction costs of repairs to bring the home up to standard. .”
Miller says that over time consent standards have gotten higher and higher, and baby boomers are surprised to find buyers want to see a retrospective CCC to demonstrate sustainability under the new building code.
Craig Lowe of Lowe & Co in Wellington says his agency is also finding owners in this situation, although it’s not a high percentage.
“We have a client who is going through this right now,” he says. “This is often work that was done a long time ago. Maybe a final inspection was not done, or a final administrative act, so they never had the certificate in hand, but everything up to that date was checked off.
“A lot of times they’ve just forgotten about it, then two decades pass and they find they haven’t [the paperwork].
“The main stumbling block is usually technical approval, and the existence of a document to show compliance was taken care of at the time.”
Both officers say stress can be avoided or minimised, if you get there early, by ordering a LIM report on your property from your local council as well as a builder’s report. “If you ignore it and come to market, then it’s too late,” says Miller. “If you’re looking to sell in the next six to 12 months, it makes sense to speak to an agent to check you have all your ducks in a row, so you’re set.”
“The MFR can be a lifeline for people looking to sell their home. By comparing what the council knows about your home with what you know about your renovations, you can quickly get an idea of potential gaps in consent.
Work completed before 1992 was not subject to a building permit process, but sellers can order a third-party “safe and sanitary” report.
“Nothing kills a deal more than a surprise”
Lowe agrees that it is prudent to do research before going to market. “You have to go through the discovery process, so you know in advance what a builder will find when a buyer does their due diligence.
“Nothing kills a deal more than a surprise halfway through the process – when the buyer finds out the property isn’t what they thought they were buying, and it’s not what the seller thought it was. he was selling.
“It can be difficult for a landlord to get a construction report, so it’s better to get it early than having it drop on you three days before a tender closes.”
Lowe says the solution to non-consented labor may be a decision to disclose the problem, or you may wish to address it yourself. Alternatively, you can get quotes to fix the problem and sell the property with the quotes in hand, so buyers can consider them from day one.
“Basically, there should be full transparency from seller, agent and buyer.”
The Real Estate Authority – which is the driving regulator – has clear guidelines on the obligations of the licensee. It states that a permit holder must notify potential buyers of any known issues with the property they are selling. This includes physical defects, for example if the property is a leaky building.
However, this may also include questions such as whether the renovations undertaken have received appropriate municipal permits or certificates of compliance.
“A property file and/or LIM from the territorial authority is the most reliable method of ensuring that all construction work on the property has been consented to.”
Certificate of acceptance
Miller says that if there are consent issues, sometimes you’ll be able to sign up without making major repairs. “If the issues are minor, disclosure might be all the local council needs to know, and you’ll be good to go. The council could possibly give a certificate of acceptance (COA).
“A COA is a step down from a CCC – just like a ‘safe and sanitary’ report is a step down from a COA – and both tend to attract attention. They usually scare off first-time buyers. COA and ‘safe and sanitary’ reports can make it harder to get insurance for your home, and while banks can lend on a COA, they don’t always feel comfortable doing so.”
Miller says there are people, often former home inspectors, who specialize in this area who can advise homeowners on the best course of action.