Natural disaster risk and insurance
When you have lending secured by a mortgage on your home, it will be a condition of that lending that you have full replacement insurance for your house. This is a requirement for any new lending (and your lender won’t allow you to draw down the loan without seeing evidence that this in place), and an ongoing requirement with existing lending.
Insurers are now commonly asking whether the local council has recorded that a property could be impacted by any natural hazards (for example, whether it is in a flood zone). If it is noted that the property is potentially impacted by a natural hazard, the insurer may have some follow up questions before deciding on whether it will offer insurance. It may ask whether the local council has completed any remedial work to address the hazard, or whether any specific work has been completed with the property to reduce the impact of the hazard, such as the property being built on piles to elevate it above the anticipated flooding level.
Insurers are also asking questions about whether the property has previously been affected by natural hazard events, such as flooding, earthquakes or landslides/slips. As above, if it has, an insurer is likely to have follow up questions regarding any remedial work that may have been completed.
Depending on the potential hazards, some insurers may be reluctant to offer insurance cover. If you are considering buying a property that could potentially be impacted by natural hazards, we recommend you confirm you can obtain full replacement insurance before submitting an offer or within the period of your finance condition.
Unconsented works: what can go wrong when selling?
Completing work on your property without obtaining a building consent may seem like a good way to renovate your property without the time delays or cost of your local council involvement. It is, however, likely to lead to significant headaches during your ownership or when you sell your property.
Should you suffer a loss to your property that is caused by non-compliant work, such as installing a wet-area shower without a building consent and the shower room then floods and causes water damage to your property, you may find that your insurer declines your claim. Not only can this mean you will need to fund the cost of repairs yourself, but it can also have implications in obtaining other insurance policies in the future as you will need to disclose that you have previously had a claim denied.
When selling your property, you have an obligation to disclose to buyers any work you have completed but for which you have not obtained the required consent. Additionally, buyers will often review either a Land Information Memorandum or the Property File as part of their due diligence. If the buyer (or their lawyer) notices that there are renovations to the property which required a building consent and it was not obtained, the buyer may not be able to obtain insurance or finance.
Any unconsented works will need to be disclosed to both the insurer and the lender. Depending on the nature of the work (and the insurer), insurers may decline to cover the property with the unconsented work.
If the buyer can’t obtain full replacement insurance, they will not be able to confirm satisfaction of a finance condition. Even if the buyer can obtain insurance, their lender may not accept the property as security; this means the buyer will be unable to confirm satisfaction of the finance condition.
We recommend you always obtain the required building consent before beginning any building work.
If you have already completed work without a building consent, talk to us about the best way to approach your local council to rectify the issue.
If you aren’t sure whether your next project requires consent, Can I Build It is a good tool which can be used as a guideline; the website can be found here.
