Flipping a house with unapproved building works: the risk, the cost, the fix

A house with unapproved building works is one of the most common surprises in flipping, and one of the easiest to underprice. The deal looks great: an extra bedroom, an enclosed verandah, a studio out the back, a carport, a bigger footprint than the title history suggests. Then you find out none of it was ever approved, and the problem is now yours. It is rarely a reason to walk, but it is always a reason to slow down, because unapproved work can be a cheap tidy-up or a five-figure liability, and you cannot tell which from the listing photos. Here is how I treat it on a flip.

This is general information, not legal, planning or financial advice. Building approvals, certification and the rules for fixing unapproved work differ in every state and get reformed regularly, so confirm the position for your specific property with the relevant council, a registered building surveyor or certifier, and your conveyancer before you sign anything.

Why unapproved building works turn up on flips

The houses that flip well are the ones a long-term owner has quietly changed over the years. Somewhere along the way a lot of them picked up work that never saw a council or a certifier: a carport, a pergola turned patio, a garage converted to a room, a verandah closed in, a granny flat or studio built in the backyard, a deck, a retaining wall, a bathroom added where there wasn't one. Some of it was a weekend job; some was a builder who skipped the paperwork. Either way, approval attaches to the building, not the person who built it, so the liability transfers to you the day you settle.

That is the trap. The extra space often reads as value, which is exactly why these homes can look like a bargain. But unapproved space is not the same as approved space. It may have to be certified, altered or removed before you can safely rely on it in your end value, and a buyer's solicitor or valuer at resale can discount or ignore it. The margin you thought you were buying can be sitting inside a structure the council could order you to pull down.

How to spot it before you buy

You find unapproved work by comparing what is standing against what was ever approved, and that is a records job, not a walk-through.

• Pull the council's building records. Ask your solicitor or conveyancer to order the property's approval history from the council (and in some states a title and planning search). What you want is every approval and final certificate on file, so you can match them against what is physically there.
• Read the contract disclosures. In Victoria the vendor's Section 32 statement must disclose building permits issued in the last seven years, which means a bungalow or extension built longer ago, or with no permit at all, can sit outside that window and never show up. Treat a gap as a question, not a clean bill.
• Don't expect your inspection to cover it. A building and pest inspection tells you whether a structure is sound, not whether it was approved. A deck can be perfectly built and completely unapproved. Those are two different checks, and only one of them is in the inspector's job.
• Look for the tell-tales. A room that doesn't appear on the council's plans, an addition with a different roofline or slab, a "studio" with its own bathroom, meter or kitchenette, a title that lists fewer rooms than you counted. A swimming pool is one of the most common unapproved structures of all, with its own pool-barrier compliance trap stacked on top. Any of these is a cue to confirm the paperwork before you bank the space.

Unapproved work is really a due-diligence item, so it belongs on the same list as title, planning and finance. If you run a proper property due diligence checklist before you exchange, this is one of the boxes on it.

What the three states actually do about it

The principle is the same everywhere, which is that the council can require you to make unapproved work compliant and, in the worst case, order its removal. The path to fixing it differs by state. FlipPro's council data is live in NSW, VIC and QLD, so that is where I'll focus.

NSW. The tool here is a Building Information Certificate (BIC), issued by the council. A BIC does not approve or legitimise the work, but it stops the council ordering its demolition or alteration for seven years, which gives you certainty to buy, hold and sell. A property buyer under a contract of sale can apply (as can the owner, or a third party with the owner's consent), so you can make the purchase conditional on a satisfactory certificate. The catch: applying does not guarantee you get one. If the work can't be shown to be adequate, the council can refuse it and can still issue an order to demolish, with a right of appeal to the Land and Environment Court. Councils also keep their powers over fire safety, pool safety and public health regardless, and can still penalise whoever did the original work.

VIC. Victoria runs on building permits issued by a registered building surveyor under the Building Act 1993, and on the Section 32 disclosure above. When work was done without a permit, a registered building surveyor is the person who assesses whether it can be certified as compliant or whether it has to be changed or removed; the council and the Building and Plumbing Commission can require the owner to demonstrate compliance once unapproved work is found. Where the disclosure is defective, a buyer can sometimes act before settlement to withdraw or renegotiate, so get your conveyancer onto it early rather than inheriting the problem.

QLD. Queensland allows retrospective (as-constructed) building approval through a private building certifier for the common culprits, patios, carports, garages, decks, retaining walls and internal work, but approval is assessed on its merits and is not guaranteed. If the council finds unapproved work first, it can issue a show-cause notice (your chance to respond) and then an enforcement notice requiring you to get it certified or remove it, under the Building Act 1975.

Across all three, the expensive part is often that regularising old work means bringing it up to the current building code, not the code it was built to, which can mean real structural or compliance work, not just a fee and a form.

What it costs you, and when it kills the deal

There are three separate costs, and you should price all three before you offer.

1. The approval or certification itself — the council or certifier fees, plus the surveyor, plans and engineering reports needed to prove the work is adequate.
2. The rectification — whatever it takes to bring the work up to current standards so it can be certified, from minor fixes to partial rebuild, or demolition and disposal if it can't be saved.
3. The holding cost of the delay — approvals take time, and time is money on a flip. A regularisation that adds months runs your holding costs the whole way.

Because those numbers swing so widely, I don't guess them. I get a building surveyor or certifier to scope the work and quote it, then put the rectification into the renovation cost calculator alongside the rest of my scope so it's a line item, not a shock. There are two more costs that don't show up on a quote but can sink a deal: finance and insurance. Lenders can baulk at a property with unapproved structures, and insurers may exclude or limit cover on them, which can mean a claim is reduced or denied. Confirm both, and check your renovation insurance actually covers the property as it stands.

How to handle unapproved building works when flipping a house

Put together, the way I run it is simple and it all happens before I'm committed:

1. Confirm what was approved. Order the council's building records and match every structure on the block against them. Anything standing that isn't on file is unapproved until proven otherwise.
2. Get it scoped by the right person. A registered building surveyor or certifier, not your builder, tells you whether the work can be certified, what it takes, and roughly what that costs.
3. Price all three cost layers into the offer. Approval, rectification and the holding cost of the delay all come off your buy price, the same discipline behind every maximum offer on a flip. The profit is set at the buy, so the buy has to assume the real cost.
4. Make the contract do the work. Where you can, buy conditional on a satisfactory certificate (a BIC in NSW) or on confirmation the work can be regularised, so you're not carrying a liability you can't quantify.
5. Check finance and insurance. Confirm your lender will fund it and your insurer will cover it as-is, and keep every record for your own resale disclosure.

This is distinct from working out whether your own planned renovation needs council approval: that's about the work you're going to do, this is about the work someone else already did without asking.

Does unapproved work kill the deal?

Usually not. On most flips it's a cost to quantify and a condition to write into the contract, not a reason to pass. The flippers who get burned are the ones who counted the unapproved extra room in their end value, paid for it, and only found out after settlement that it couldn't stay. Price it properly and a house that scared other buyers off over a dodgy backyard build can be a better buy than the clean one next door, because you understood the risk and they didn't.

The test is the same as every deal in the how to flip a house in Australia playbook: the numbers have to work with the real costs in them. Run the whole thing, rectification included, through a full analysis or at least a sample analysis before you offer. If it only pencils when you pretend the unapproved work is approved, it isn't your deal.

This is general information only and is not legal, planning, financial or building advice. Rules for approving, certifying or removing unapproved building work differ by state, council and property and change over time. Always confirm the position for your specific property with the relevant council, a registered building surveyor or certifier, and your own legal and financial advisers before you buy or start work.