The Unapproved Structure Trap: Why Victorian Buyers Must Check Before Signing
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There is a simple rule every Victorian property buyer should remember.
If the property includes a structure that does not appear to match the paperwork, stop and ask questions before signing.
That structure might be a backyard studio, a converted garage, a deck, a pergola, a verandah, a shed, a carport, a retaining wall, a pool barrier, a bungalow or a small second dwelling.
It might look useful.
It might look valuable.
It might even be one of the reasons you are interested in the property.
But if the structure was built without the required permits or approvals, it may not be the bonus you think it is. It may be a problem waiting for you after settlement.
Once settlement happens, the problem may become yours
Buyers often assume that if a structure has been standing for years, it must be approved.
That is not how property works in Victoria.
A structure can exist for a long time without having the correct building permit, planning permit, final inspection certificate or occupancy permit.
The issue may not be obvious during an inspection. The property may present well. The agent may refer to the area as a studio, retreat, home office, bungalow or extra living space. The floorplan may make the structure look like part of the home.
But the real question is not what it looks like.
The real question is whether it was properly approved.
If it was not, the buyer may inherit the problem after settlement. That can mean council compliance issues, rectification costs, insurance questions, finance problems and difficulty selling the property later.
Planning approval and building approval are different
One of the biggest misunderstandings in Victorian property transactions is the difference between planning approval and building approval.
A planning permit generally deals with how land may be used and developed. It considers matters such as zoning, overlays, neighbourhood character, siting and planning controls.
A building permit deals with the actual construction. It considers whether the building work is designed, built and inspected in accordance with the required building standards.
A property may need one, both or neither, depending on the work.
Buyers should never assume that “council approval” means everything is in order. The correct question is more specific:
Was a planning permit required?
Was a building permit required?
Was the required permit issued?
Was the work inspected?
Was a certificate of final inspection or occupancy permit issued?
These questions matter because a planning issue and a building issue are not the same thing.
Small second dwellings are a good example
Small second dwellings, often called granny flats, are a good example of where buyers can get caught.
In Victoria, a small second dwelling may be exempt from needing a planning permit in many cases, provided it meets the relevant requirements, including the 60 square metre limit and the planning scheme requirements that apply to the land.¹
But that does not mean the structure can be built without building approval.
The Victorian Building Authority makes clear that small second homes still need to meet building requirements.²
This is where buyers can be misled by casual statements such as:
“It did not need council approval.”
“That is allowed now.”
“It is under 60 square metres.”
“Everyone is doing them.”
Those comments do not answer the building permit question.
A small second dwelling may not need a planning permit in many cases, but it still needs to be properly built, approved and documented.
Insurance can become a serious problem
Insurance is one of the biggest practical risks.
If a structure was not properly approved, an insurer may take a close interest in that fact if something goes wrong.
For example:
A fire starts in a backyard studio.
A deck collapses.
A converted garage is damaged by water.
A tenant or visitor is injured in an area that was not approved for occupation.
A roof over an outdoor area fails during a storm.
The issue is not that every unapproved structure automatically cancels every policy. The issue is that an unapproved structure gives the insurer something to examine when the buyer needs cover most.
That is a bad time to discover that the paperwork does not support the way the property has been marketed, occupied or used.
The Section 32 may not tell the whole story
In Victoria, a vendor must provide a Section 32 Vendor Statement before the purchaser signs the contract. The Section 32 disclosure requirements are set out in section 32 of the Sale of Land Act 1962 (Vic).³
For residential land, section 32E of the Sale of Land Act 1962 (Vic) requires disclosure of particulars of building permits issued under the Building Act 1993 (Vic) during the preceding seven years.⁴
That is important, but buyers need to understand the limitation.
A Section 32 may disclose permits that were issued.
It may not reveal work where no permit was ever obtained.
That means the absence of a building permit in the Section 32 does not automatically prove that no building work was done. It may simply mean that no permit was issued, or that the issue needs further checking.
This is why the buyer should compare the documents against what they can physically see at the property.
If the home has obvious additions, alterations, conversions, studios, decks, verandahs or other structures, but the Section 32 contains no relevant building permit history, that should prompt questions before the contract is signed.
Owner-builder works are another warning sign
Owner-builder work is another area where buyers need to be careful.
In Victoria, if an owner-builder sells within six years and six months of completing domestic building work, they must provide a defects inspection report that is not more than six months old. Consumer Affairs Victoria also notes that domestic building insurance is required where the value of the owner-builder work is over $16,000.⁵
These obligations are connected to the Building Act 1993 (Vic), including section 137B.
This matters because buyers often see recent renovations and assume they were done by a registered builder.
That may not be the case.
If the vendor carried out or managed the work as an owner-builder, and the property is being sold within the relevant period, the required owner-builder documents should be provided before the buyer signs.
Warning signs include:
Recent renovations with no building permit details.
A new deck, extension, garage or outdoor structure with no supporting paperwork.
A vendor who says they “did the work themselves”.
A structure that appears new, but no inspection report or domestic building insurance is provided.
A contract that treats the property as ordinary, when the physical inspection suggests recent building work has occurred.
This should be checked before signing, not after settlement.
Material facts cannot be brushed aside
Victoria also has material fact disclosure laws.
Consumer Affairs Victoria states that a vendor or agent must not knowingly conceal a material fact from a potential buyer.⁶
A material fact is the sort of fact that may affect whether a buyer decides to purchase the property, or the price they are prepared to pay.
An unapproved structure may be a material fact, depending on the circumstances.
For example, if a converted garage is being presented as a bedroom, but it was never approved for that use, that may be highly relevant to a buyer.
If a backyard bungalow is being promoted as separate accommodation, but there is no approval for it to be used that way, that may be highly relevant.
If a vendor or agent knows that council has raised concerns about a structure, that should not be hidden.
The practical point is simple.
A buyer should not be left to discover after settlement that a major feature of the property cannot lawfully be used in the way it was advertised or understood.
The resale problem
Even if the buyer is prepared to take the risk, the next buyer may not be.
This is where unapproved structures can cause long-term damage.
A buyer may think:
“We will sort it out later.”
“We are not worried about it.”
“It has been there for years.”
“We like the property anyway.”
But when that buyer later becomes the seller, the same issue can come back at them.
Their buyer may ask for permits.
Their buyer’s conveyancer may raise the issue.
Their buyer’s bank may want clarification.
Their buyer’s insurer may ask questions.
Their buyer may reduce their offer or walk away.
A problem ignored at purchase can become a problem at resale.
The finance problem
Banks are also interested in value and risk.
If a property is being valued on the basis that it has an additional bedroom, studio, converted garage or second living area, but that structure is not approved, the bank may not treat it in the same way as the buyer does.
This can affect valuation, loan approval and the buyer’s ability to complete settlement.
The problem can be even worse if the issue is discovered after the contract is unconditional.
At that point, the buyer may still be required to settle, even if the bank is no longer comfortable with the property.
The council compliance problem
Council or the relevant building authority may require unlawful or non-compliant building work to be addressed.
That can mean:
Providing engineering reports.
Applying for retrospective approval where available.
Opening up works for inspection.
Undertaking rectification works.
Removing the structure.
Dealing with building notices or building orders.
Paying for further inspections, reports and professional input.
In some cases, the structure may not be capable of being approved at all.
It may be too close to a boundary.
It may be built over an easement.
It may fail fire separation requirements.
It may breach siting requirements.
It may not meet minimum construction standards.
It may have been built in a way that makes retrospective approval difficult or impossible.
That is why buyers should not treat this as a minor paperwork issue.
What buyers should check before signing
Before signing a contract for a Victorian property, buyers should ask:
Does the property contain any additions, alterations or separate structures?
Does the Section 32 disclose building permits for those works?
Does the property include a converted garage, studio, bungalow, enclosed outdoor area, deck, pergola, verandah, shed, carport, retaining wall, pool barrier or second dwelling?
Was a planning permit required?
Was a building permit required?
Was a building permit issued?
Was there a certificate of final inspection or occupancy permit?
Was any work done by the vendor as an owner-builder?
If owner-builder work was done, has the required defects inspection report been provided?
If domestic building insurance is required, has evidence of that insurance been provided?
Is the structure being marketed as a bedroom, living area, studio, accommodation or rental space?
Would the buyer’s insurer accept the structure as part of the insured property?
Would a future buyer accept the structure as properly approved?
These are practical questions, not academic ones.
They go directly to value, risk, insurability and resale.
What should be done before signing
If there is any doubt about an added structure, the issue should be raised before the contract is signed.
Depending on the circumstances, the buyer may need to:
Ask the vendor for permits and final inspection documents.
Obtain a building information certificate from council.
Ask specific questions about owner-builder work.
Make the contract conditional on satisfactory building, pest and permit enquiries.
Require the vendor to rectify the issue before settlement.
Renegotiate the price.
Walk away.
The worst option is to sign first and ask later.
Once the contract is unconditional, the buyer’s position becomes much harder.
Final word
A structure can add real value to a property, but only if it is properly approved and properly documented.
A studio, deck, converted garage, pergola, bungalow or small second dwelling may look attractive during an inspection.
But if the paperwork does not support what is physically there, the buyer needs to slow down.
In Victorian property transactions, the question is not simply:
“Do I like it?”
The better question is:
“Can I prove it is approved, insurable and able to be sold again without becoming someone else’s problem?”
That question should be asked before signing, not after settlement.
Victorian Property Settlements reviews contracts and Section 32 Vendor Statements for Victorian buyers before they sign.
Contract review requests can be submitted here:
https://www.victorianpropertysettlements.com.au/contract-review-request
Victorian Property Settlements – Trusted for over 25 years by Victorian buyers and sellers.
Visit: www.victorianpropertysettlements.com.au
Footnotes
Planning Victoria, small second homes guidance, including the 60 square metre requirement and planning scheme requirements.
Victorian Building Authority, small second homes consumer guidance.
Consumer Affairs Victoria, conveyancing and contracts for sellers, explaining that the Section 32 statement contains information required by section 32 of the Sale of Land Act 1962 (Vic).
LPLC, council building information certificates and Section 32 statements, explaining section 32E of the Sale of Land Act 1962 (Vic) and disclosure of building permits issued in the preceding seven years.
Consumer Affairs Victoria, owner-builder obligations when selling within six years and six months, including defects inspection report and domestic building insurance requirements.
Consumer Affairs Victoria, material fact disclosure when selling property.