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How Title Insurance can help with Illegal Renovations - Case Study

It’s the letter that nobody wants to receive – a letter from your council saying part of your property was built without permission! It happens more than you might think, and if it does – it can become your problem and your cost to fix. This is when title insurance may prove very helpful.

One of our NSW clients had purchased a beautiful 1930s home as an investment property and rented it out to a tenant. When the tenant flooded the bathroom shortly after moving in, the owner made an application to the local council for a Building Certificate with the suspicion that illegal building work had taken place.

Unfortunately, what came back from the council was a notification that the property’s deck, shed and some internal alterations within the home had been completed by a previous owner without council approval. As it turned out, the flooded bathroom itself was illegally built. Typically, in this situation, an owner might either be required to demolish the unapproved works, or there may be an option to gain retrospective approval if the illegal structure can meet applicable building standards. Either option could cost the property owner time and money – but, in these circumstances, title insurance may lift the burden off the property owner’s shoulders.

Fortunately this owner had taken out First Title insurance to cover a range of property ownership risks such as this, and they contacted us to make a claim. We looked over the purchase file, which contained a Building Certificate that was issued in 1999 and did not indicate unapproved building works at the property.

Next, we engaged a building surveyor and building consultants to inspect the property, who advised that the property would require significant building works in order to obtain a Building Certificate. The owner’s policy covers ‘illegal building work’, and therefore we accepted the claim. The resulting payment was $100,000, which contributed towards the cost of the building surveyor, the building consultants and the building works. As a result, the property owner had the cost of the solution covered up to the policy limit - all because they paid a one-off premium for title insurance when they purchased their property.

What is title insurance? It’s a type of insurance that can cover a range of property ownership risks, which can include illegal building works, fraud or forgery, and incorrectly calculated taxes or rates. Some of these scenarios can occur even if your solicitor or conveyancer has performed due diligence on your behalf. You can get title insurance in Australia before you purchase your property with just one premium to pay, and cover applies for the entire time you own that property. Speak to your Conveyancer if you've already purchased your property. We’ve covered the three things to consider when arranging title insurance to help you get started. It’s easy and affordable to get covered, so get your quote today.