Granny Flat or Home & Income?

With the growing number of property transactions in 2015, we have noticed frequent reference to “granny flat or home & income” from property advertisements and agreements that have been sent to our office.

With the growing shortage of suitable property and escalating property prices, home buyers and investors have preferred the option of purchasing a property with an additional granny flat or minor dwelling.

Each council may have different requirements for these granny flats or minor dwellings but Auckland Council does not have aj separate category for granny flats or minor dwelling units. It is normally regarded that any flat with additional kitchen (which is in addition to the kitchen located in the main house) is considered to be an additional or second property. If you own or are buying a property it is important that you review your council’s District Plan relating to the minor or second dwellings. There are many requirements which are associated with this work including, but not limited to, the size of your land, car parking areas, available open space and other matters.

You may also require a resource consent and also a building consent. Prior to undertaking any work or making any commitments, it is important that you seek advice from relevant advisors including your lawyers, your surveyor, your planner and also a building consultant.

In the case of large land, there are various options including subdivision, cross-lease structure and minor dwelling options. This will depend on many factors including whether it is a permitted activity and zoning and costing matters.

The granny flat option has been preferred by many owners as:
– it is cheaper (and possibly quicker) option than the subdivision;
– you might be able to avoid further consent process – e.g. building consent;
– you might be able to avoid any development contribution and/or any financial contribution to the local council;
– potentially better cash flow and better rate of return for the property investor;
– more option for the large family;

It is important that these are all permitted under the relevant Building Act and also the relevant regulations. If the work has been done without the proper consents or permits, the owners (including the buyers) may face:
– abatement notice or notice to fix from the council;
– possible fine;
– insurance being void;
– breach of mortgage covenants if there is any mortgage;

Hence, it is important that you as the property owner or the property purchaser undertake proper due diligence investigation before you convert the property into a granny flat or purchase the existing property which has this structure in place. You will need to engage professional advisors including lawyers and property consultants to ensure the existing work or the proposed work is permitted. This will include:

– reviewing of LIM report;
– reviewing of property file held by the council;
– reviewing the zoning and permitted activity;
– reviewing the title to ensure that there is no covenant or encumbrance which prohibits such work;
– reviewing the building inspection report.

If you wish to purchase a property with such structure or own a property which has a granny flat, and you would like to ensure it is fully compliant, it is important that you contact us and seek our advice.

We offer this service at our firm and you should definitely seek our advice before making any further commitments, which may include (1) selling the existing property; (2) undertaking further development work; (3) purchasing the property.

To read more about the author John Jon click here.

You can download the PDF version of this blog here.

Please feel free to contact the staff at Queen City Law for further guidance.