Introduction

Starting building projects without the right approvals in New South Wales can cause big legal and money troubles for property owners. Ignoring the Design and Building Practitioners Act 2020 (NSW) doesn’t just break planning rules. It might also mean facing large fines and even having to tear down buildings that weren’t approved. Imagine spending heaps of cash on a dream project, only to see it knocked down. Knowing this beforehand can save a lot of stress. Getting things done the right way from the beginning keeps you out of hot water. So, don’t play with fire; getting approvals first makes all the difference. Getting things sorted can keep your peace of mind intact and ensure all efforts don’t go to waste. Keep reading to find out how to steer clear of these headaches.

Additionally, illegal building works can complicate property transactions, affecting both the sale and purchase processes by introducing potential liabilities and devaluing the property. Understanding these consequences is crucial for property owners to ensure compliance and protect their investments.

Understanding Unapproved Building Works

Definition and Examples of Unapproved Building Works

Unauthorised building works refer to any construction, alterations, or renovations conducted without obtaining the necessary approvals from local councils or certifying authorities. Examples of illegal building works include:

• Patios and Decks: Adding a patio or deck without council approval can lead to fines or orders to demolish the structure.
• Sheds and Carports: Erecting sheds or carports without the required permits is considered unauthorised.
• Structural Alterations: Modifying the structure of a building, such as removing walls or adding extensions, without approval violates building regulations.
• Retaining Walls and Fences: Building retaining walls or fences without the necessary permissions can result in legal consequences.

Carrying out these works without approval breaches planning laws and poses safety risks, potentially leading to serious financial and legal repercussions for property owners.

Exempt Development and When Approvals Are Not Required

Exempt development encompasses certain types of building works that do not require planning or construction approvals from local councils, provided they meet specific conditions. Common examples include:

• Minor Renovations: Small-scale changes such as window repairs or internal room modifications.
• Garden Sheds and Fences: Construction of sheds, fences, or other low-impact structures that comply with council regulations.
• Decks and Carports: Building decks or carports that fall within size and location guidelines set by local councils.
• House Painting: Exterior painting of a property typically does not require approval.

While these works are exempt from needing formal approval, they must still adhere to the Building Code of Australia (BCA) and state policies like the State Environmental Planning Policy (Exempt and Complying Development Codes) 2008. It is essential to verify with the local council before commencing any exempt development to ensure compliance and avoid inadvertently violating planning laws.

Legal Consequences under the Environmental Planning and Assessment Act 1979 (NSW) (EPA)

Penalties for Unauthorised Development

Engaging in unauthorised development can result in significant penalties under the Environmental Planning and Assessment Act 1979 (NSW) (EPA). The tiered penalty system categorises offences based on their severity, with each tier imposing different fines and daily penalties for ongoing violations.

• Tier 1 Penalties:
  • Corporations: Up to 5 million and 50,000 for each day the offence continues.
  • Individuals: Up to 1 million and 10,000 for each day the offence continues.
• Tier 2 Penalties:
  • Corporations: Up to 2 million and 20,000 for each day the offence continues.
  • Individuals: Up to 500,000 and 5,000 for each day the offence continues.
• Tier 3 Penalties:
  • Corporations: Up to 1 million and 10,000 for each day the offence continues.
  • Individuals: Up to 250,000 and 2,500 for each day the offence continues.

Additionally, under Section 9.57(5) of the EPA, proceedings for an offence must be commenced within two years of the offence or upon becoming aware of it.

Council Enforcement Actions and Orders

Local councils possess the authority to enforce compliance with the EPA through various orders aimed at rectifying unauthorised developments. These enforcement actions are governed by Sections 9.34 and Schedule 5 of the EPA.

• Stop Work Order: Directs the property owner to immediately cease all construction activities that are in violation of the EPA.
• Demolish Works Order: Requires the removal or demolition of the unauthorised structure to restore the property to its original condition.
• Repair Order: Mandates that specific repairs or structural alterations be made to ensure the building complies with approved standards.
• Restore Works Order: Instructs the property owner to restore the premises to the condition it was in before the unlawful building works.

These orders are enforceable measures that councils can implement to ensure compliance and mitigate the impact of unauthorised developments.

Insurance Implications of Illegal Building Works

Unauthorised building works can significantly impact insurance coverage for property owners. Insurance policies often exclude coverage for illegal changes to a property, leaving owners without protection in the event of damage or liability claims.

Exclusions in Strata Insurance Policies

Strata insurance policies typically exclude coverage for unauthorised building works. This means that:

• Lack of Coverage for Illegal Changes: Insurance providers will not cover the costs associated with replacing or repairing unauthorised structures.
• Exclusions Apply to Both Owners and the Owners Corporation: Both individual property owners and the owners corporation are excluded from coverage for illegal works.
• Disclosure Requirements: If illegal works are present, they must be disclosed during insurance renewal. Insurers may require remedial steps to manage coverage.

Financial Risks and Liability

Property owners with unauthorised building works face significant financial risks and potential liabilities, including:

• Public Liability Claims: Owners may be held liable for injuries or damages caused by illegal structures, and insurance will not cover these liabilities.
• Costs of Rectification: Owners might need to pay out of pocket for the removal or regularisation of illegal works.
• Increased Insurance Premiums or Denials: Insurance companies may impose higher premiums or refuse coverage altogether if unauthorised works are discovered.
• Legal Actions: Failure to disclose illegal works can lead to legal actions from insurers, further increasing financial burdens.

Understanding the insurance implications of unauthorised building works is crucial for property owners in NSW. Ensuring compliance with local council approvals and strata legislations can help mitigate these risks and maintain adequate insurance coverage.

Contractual Consequences of Non-Compliance

Failure to obtain necessary approvals for building works can significantly impact contractual agreements between principals and contractors.

Termination of Contracts and Damage Recovery

In standard form contracts for building works, the principal (property owner or owners corporation) is obligated to secure all relevant planning approvals. Failure to obtain these approvals entitles the contractor to terminate the contract and seek damages. This means that contractors can recover costs incurred due to the principal’s lack of compliance, potentially leading to significant financial liabilities.

Regularising Works with Building Information Certificates (BIC)

To mitigate the impact of unauthorised works, principals may seek to regularise the works by obtaining a Building Information Certificate (BIC) from the local council. The process involves submitting an application demonstrating that the unauthorised development meets applicable planning objectives and controls. This typically requires providing certificates from contractors or subcontractors certifying the compliance of the works. However, if approvals were not obtained initially and the necessary certifications are unavailable, obtaining a BIC becomes challenging. In such cases, the local council may issue orders requiring the removal or demolition of the unauthorised works, further complicating the contractual relationship.

Enforcement under the Design and Building Practitioners Act 2020 (NSW)

Stop Work Orders and Remedial Actions

Under the Design and Building Practitioners Act 2020 (NSW) (DBPA), authorities have the power to issue Stop Work Orders to immediately halt any ongoing construction activities that violate the Act. These orders are typically issued when there is a significant risk of harm to the public, potential occupiers, or the property itself.

Additionally, the DBPA allows for Remedial Actions to be mandated to rectify non-compliance issues. These actions may include:

• Demolition of Unauthorised Structures: Removing any illegal constructions to restore the property to its original state.
• Structural Alterations: Requiring changes to existing structures to meet compliance standards.
• Repair Orders: Mandating specific repairs to ensure the building meets safety and regulatory requirements.

These measures ensure that building practices adhere to the established legal and safety standards, thereby protecting both property owners and the community at large.

Investigations and Audits of Practitioners

The DBPA empowers the Secretary of Fair Trading to conduct Investigations and Audits of design and building practitioners to ensure ongoing compliance with the Act. These audits are comprehensive and can be initiated irrespective of whether a complaint has been filed.

Key aspects of these investigations include:

• Access to Property: Practitioners may be required to grant access to their projects for inspection purposes to verify compliance.
• Review of Documentation: Auditors will examine relevant documentation, including building certificates and compliance reports, to assess adherence to legal standards.
• Enforcement Actions: If non-compliance is detected, authorities can impose penalties, mandate corrective actions, or even revoke licenses to prevent further violations.

These audits play a crucial role in maintaining the integrity of the building industry by ensuring that all practitioners operate within the legal framework established by the DBPA.

By-law Enforcement in Strata Schemes

Unauthorised building works within strata schemes can breach the by-laws established by the owners corporation, leading to legal actions and enforcement measures.

Notices to Comply and Penalty Proceedings

Under the Strata Schemes Management Act 2015 (NSW)(SSMA), the owners corporation can issue a Notice to Comply to property owners who have breached by-laws. This notice requires the offending party to rectify the breach within a specified timeframe.

If the property owner fails to comply with the notice, the owners corporation can initiate Penalty Proceedings through the NSW Civil and Administrative Tribunal (NCAT). These proceedings may result in fines or orders mandating the removal of unauthorised works.

Penalties for Non-Compliance

Failure to address a Notice to Comply can lead to:

• Monetary Fines: Property owners may incur fines if they do not rectify the breach within the stipulated period.
• Court Orders: The council may seek court orders to enforce compliance, which can include mandatory demolition of unauthorised structures.

Mediation and Tribunal Orders

To resolve breaches of by-laws, mediation and tribunal orders are often employed as effective tools. Mediation involves a neutral third party facilitating discussions between the owners corporation and the offending property owner to reach a mutually acceptable solution.

If mediation fails, the matter can be escalated to the NCAT, where a Tribunal Order can be issued. These orders may mandate the removal of unauthorised structures or the correction of the breach.

Benefits of Mediation

• Cost-Effective: Mediation is generally less expensive than formal tribunal proceedings.
• Time-Efficient: Resolutions can often be reached more quickly through mediation.
• Preserves Relationships: Facilitating a cooperative discussion helps maintain good relationships within the strata community.

By understanding the enforcement options available, property owners and the owners corporation can effectively manage and address breaches of by-laws, ensuring compliance and maintaining the integrity of the strata scheme.

Impact on Property Transactions and Values

Challenges for Property Buyers

Unapproved building works can create significant obstacles for property buyers in NSW. When buyers encounter unauthorised structures during due diligence, they may face:

• Financial Losses: Purchasers might have to forfeit deposits or renegotiate contract terms if illegal structures are discovered.
• Legal Liabilities: Buyers may inherit the responsibility for rectifying unauthorised works, leading to unexpected costs.
• Property Devaluation: Illegal building works can reduce a property’s market value, making it harder to secure financing or attract offers.

These challenges emphasise the importance of thorough property inspections and obtaining necessary approvals before finalising a purchase.

Examples/Illustrations on Property Transactions

Several examples illustrate how unauthorised building works impact property sales:

1. Kitchen Removal Order: An individual selling his house was forced to remove an unapproved kitchen after the buyer, during due diligence, discovered the lack of council approval. This led to additional costs and delays in the sale process.
2. Unapproved Air Conditioning: An apartment owner installed ducted air conditioning without owners corporation approval. Upon selling, the new owner was required to remove the unauthorised work, incurring significant expenses.
3. Demolition Order: A homeowner built a deck over a sewer main without approval. The council issued a demolition order, resulting in costly and time-sensitive compliance measures.
4. Uncertified Staircase: A property with an uncertified staircase led to the buyer withdrawing from the sale after inspections revealed non-compliance, causing the seller to bear rectification costs.
5. Boundary Encroachment: A survey revealed property encroachment from an unauthorised structure. The sale was abandoned, and the seller faced boundary adjustment costs.
6. Jetty Fine Print: An individual purchased a property with a jetty that required timely repairs as per license transfer requirements. Failure to comply led to forfeiting $50K during resale negotiations.

These examples highlight the financial and legal ramifications of unauthorised building works, underscoring the necessity for compliance in property transactions.

Conclusion

Undertaking building work without the necessary approvals can lead to severe legal and financial consequences for property owners in NSW. Non-compliance with the DBPA and the EPA can result in substantial fines, demolition orders, and increased liabilities, including insurance exclusions and contractual disputes. Additionally, unauthorised building works can complicate property transactions, potentially devaluing the property and causing delays or cancellations in sales processes.

Contact our experienced legal team today to navigate the complexities of building regulations, secure the necessary permits, and address any existing unauthorised works. Protect your property and avoid costly repercussions by leveraging our specialised knowledge and proven solutions.

Frequently Asked Questions