Unapproved structures are a prevalent issue for Australian homeowners, buyers, and insurance professionals. Whether it is a backyard shed, a garage, or a home extension built without council or planning approval, these additions can create a web of complications – especially regarding insurance coverage and claims. If you are a homeowner with an unapproved addition, a prospective buyer, or an insurance professional, understanding the risks and your responsibilities is essential. In this guide, we will break down what an insurance unapproved structure is, why it matters, and how to protect yourself and your clients.
What is an Unapproved Structure?
An unapproved structure refers to any building, extension, or modification on a property that has not received the required approval from the local council or planning authority. Examples include:
- Sheds or garages built without a permit
- Home extensions or sunrooms added without council sign-off
- Pergolas, decks, or patios constructed without proper documentation
- Renovations that do not comply with building codes
- Swimming pools or spas lacking compliance certificates
An unapproved structure may also be referred to as an ‘illegal structure.’ Illegal structures carry significant legal and financial risks, including potential fines, rectification orders, and insurance complications.
In most parts of Australia, local regulations require structural changes or additions to be approved by your local council before work begins. This requirement is governed by the relevant act or legal framework, such as the Building Act or Planning Act, which ensures the structure is safe, compliant, and records are up to date. If you are unsure whether a part of your property is approved, check your property’s compliance report, contact your local council’s building department, or look for approved plans on record.
Insurance and Unapproved Structures: What is at Stake?
Insurers often view unapproved structures as higher risk because there is no guarantee theyou’y meet safety or building standards. Here is what can happen:
- Exclusions and Limitations: Some insurance policies explicitly exclude coverage for structures lacking council approval. If damage occurs, your insurer might refuse to cover repair or rebuilding costs.
- Risk Assessment: Insurance companies assess the risk profile of your property. Unapproved structures can lead to higher premiums or restricted coverage.
- Claim Outcomes: If you lodge a claim for an unapproved structure, it could be denied altogether, or you might receive only a limited payout.
- Disclosure: Homeowners are commonly required to disclose any unapproved structures when applying for or renewing insurance. Failing to do so could affect your policy or result in denied claims.
Why Getting Approval Matters
Council approval is not just administrative – it protects property owners and future buyers. When a structure is approved, you may receive certification or documentation from your local council confirming it is safe and legal to occupy. The consequences of ignoring this can be serious:
- Legal Action and Fines: Councils can issue rectification orders requiring you to alter, remove, or legalise unapproved structures. Failure to comply may result in fines or legal action.
- Financial Risks: The costs of bringing a non-compliant building up to code can be significant and are usually borne by the current owner.
- Impact on Resale: Unapproved structures can reduce a property’s value and may complicate or delay sales. Buyers might demand a lower price or insist that issues be rectified before settlement. The presence of an unapproved or illegal structure can impact the sale and selling process, requiring sellers to disclose these issues. A well-drafted contract can help manage legal risks, and buyers may try to negotiate with sellers for rectification or compensation.
Obtaining the necessary certification or approval is crucial to ensure compliance with the relevant act and to facilitate property transactions.
Common Scenarios and Real-World Examples
- Claim Denied: A homeowner builds a granny flat without council approval. When a storm causes major damage, the insurer denies the claim because the structure was unapproved.
- Buyer Inherits Risk: A buyer purchases a property with an unapproved garage. Months later, the council issues a compliance order, and the new owner must pay for rectification.
- Statistics and Industry Data: While there are reports of claims for unapproved structures being disputed or denied, the exact figures can vary and should be checked with your insurer or industry sources for the latest data.
What To Do If You Have an Unapproved Structure
If you suspect or know there is an unapproved structure on your property, here is how to take control:
- Identify Unapproved Structures:
– Review your property’s compliance report, often available in your Building and Pest Report.
– Contact your local council to verify if all structures have approval.
- Disclosure: Inform your insurer about any unapproved structures. Full disclosure is critical to avoid issues at claim time.
- Complete Required Forms: Complete a form, such as a Request for Quote or Certification Assessment form, as part of the process to legalise the structure. Ensure you complete all required documentation for council and insurance purposes.
- Retroactive Approval: Many councils offer a process for legalising existing, unapproved structures. This typically involves inspections, submitting building plans, and sometimes making modifications to meet code. The process and associated fees and cost can vary by council and is not considered completed until all inspections and required modifications are finalised.
- Upgrade or Remove: In some cases, it may be more practical to upgrade the structure to meet code or remove it entirely.
How to Rectify Your Insurance Coverage
Once you have identified an unapproved structure, you will need to review your insurance:
- Contact Your Insurer: Arrange a policy review to discuss coverage for all structures on your property.
- Documentation: Gather council documents, building plans, compliance certificates, and any correspondence related to approval or rectification.
- Amending Coverage: If retroactive approval is granted, provide evidence to your insurer to amend your policy.
- Timeline and Costs: The process can take several weeks or longer, depending on the complexity. Premiums may increase if the structure poses additional risk.
Tips for Prospective Insurance Buyers
If you are buying a property or renewing your insurance, protect yourself with these steps. For more information and insights, check out our insurance blog.
- Ask the Right Questions: Request compliance reports and check if all structures have council approval.
- Approval for New Additions: Before building, always obtain the proper permits and approvals.
- Read the Product Disclosure Statement: The Product Disclosure Statement outlines exclusions and coverage conditions. Review it carefully, as some PDS documents may specify exclusions for unapproved structures.
- Work with Professionals: Insurance agents and brokers can assist you in understanding policy details and navigating potential issues.
Prospective buyers should be aware of the risks associated with illegal or unapproved structures. Obtaining proper certification or approval can help mitigate hesitation and facilitate a smoother transaction.
Guidance for Insurance Professionals and Agents
For insurance professionals, helping clients navigate the risks of insurance unapproved structures is critical:
- Advise Thoroughly: Always ask clients about any additions or modifications and request supporting documentation.
- Communicate Risks: Clearly explain exclusions, limitations, and the consequences of non-disclosure.
- Claims Handling: When a claim involves an unapproved structure, review policy wording and gather all evidence before making a determination.
- Stay Informed: Keep up to date with local council regulations and changes in insurer policies to best advise your clients.
Insurance professionals have a responsibility to advise clients on disclosure and compliance requirements and should provide ongoing support throughout the approval and insurance process.
Approved vs Unapproved Structures
| Feature | Approved Structure | Unapproved Structure |
| Council Approval | Yes | No |
| Insurance Coverage | Typically included in standard policies | Often excluded or requires additional coverage |
| Legal Compliance | Meets local building codes and regulations | May violate zoning laws or building codes |
| Claim Processing | Generally straightforward and accepted by insurers | May face delays or denials due to non-compliance |
| Premium Rates | Standard rates based on property value and risk | May incur higher premiums or require specialised policies |
| Property Value Impact | Maintains or enhances property value | Potentially lowers property value due to legal risks |
| Resale Potential | Easier to sell with proper documentation | May complicate sale or require costly rectifications |
For more information on key insurance terminology, see our Glossary of Insurance Terms.
| Feature | Approved Structure | Unapproved Structure |
| Claim Success Rate | High-claims are typically processed smoothly and accepted | Low-claims may be denied or disputed due to non-compliance |
| Legal Compliance | Fully compliant with local building codes and regulations | May violate zoning laws or building codes, risking fines or demolition orders |
| Impact on Property Value | Neutral or positive—maintains or enhances value | Negative—may lower value due to legal risks and potential demolition |
Real-Life Examples: When Unapproved Structures Lead to Claims Disputes
Consider a real-life case study from New South Wales: a property owner purchased a house with an unapproved garage, unaware that the seller had not disclosed its lack of council approval. When the garage was damaged and the owner filed an insurance claim, the insurer denied coverage due to the absence of council approval. The property owner was left to cover the repair costs out of pocket, highlighting the financial consequences and potential risks of unapproved structures. This situation underscores the importance of due diligence for buyers—thoroughly checking council records, seeking professional advice, and ensuring all structures are approved before finalising a purchase. By learning from such cases, buyers can better protect themselves from unexpected costs and claims disputes, making the property purchase process smoother and more secure.
Key Takeaways
- Unapproved structures pose significant risks for insurance coverage and claims.
- Always check for council approval and disclose all structures to your insurer.
- Rectifying unapproved structures early can save you money and stress at claim time.
- Insurance professionals play a crucial role in guiding clients through compliance and disclosure.
- Stay proactive: Regularly review your property and insurance coverage to ensure compliance and peace of mind.