Why buying a home with an unapproved structure could void your insurance

Desperate Aussie buyers are taking “big risks” to get into the market, taking on everything from granny flats and self-contained living areas to entire dwellings that do not have council approval.

And without it, they risk being ordered to demolish the illegal structures, fined or even voiding their home insurance altogether, experts have warned.

The Brisbane City Council – Australia’s largest council by population – has alone received over 2000 reports about suspected or detected ‘unlawful structures’ in the past 22 months – 1079 in 2024/25 and 972 in the 2025/26 financial year to date.

“In most cases, these are minor, ancillary structures such as sheds, patios and carports and are not used for living purposes,” a council spokesperson said.

“Most complaints about suspected unlawful structures are resolved early without enforcement.”

So far this financial year, council has issued nine show cause notices and two enforcement notices, with no fines issued to date.

Fines can range from $670 for minor works up to $3300 for individuals and $16,700 for companies for serious breaches or non-compliance.

Sellers have been legally required to declare any illegal structures and any outstanding show cause or enforcement notices attached to a property since the Sellers Disclosure Statement (SDS) came into effect in Queensland last year.

But there is no shortage of property listings nationally with structures that do not have council approval in place.

A house in regional NSW recently sold for well over $1 million, with the listing saying that a separate dwelling on the property did not have council approval.

The separate dwelling was being leased out, acording to the listing.

In NSW, anyone who leases out a non-approved or uninhabitable property risks a fine of up to $11,000.

A Queensland house also sold for seven figures despite a self-contained area not being council approved.

The listing also said it was being rented out at the time of sale.

The fine for renting out an unapproved space in Queensland is substantial, and can reach six figures if the matter goes to court.

Back in NSW, a property with a house sold for six figures despite there being no council approval or building entitlement on the land.

Tailored Buyers Agents co-founder Leanne Spring said that for some buyers, taking on the illegal structures was a risk they were willing to take.

“The biggest risk is loss of insurance and hefty fines, the smallest risk is the council asks them to demolish (which most perceive as very rare),” she said.

“If it’s an entertainment area with a roof that is not council approved, then the risk is council asking them to remove it, or having to pay a certifier to assess it and get it council approved.

“With an unapproved granny flat, I say no! Way too much risk. If the granny flat gets damaged, or worse, goes up in flames, insurance will not cover you … huge losses that are way too risky.”

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Founder of Tailored Buyers Agents Leanne Spring

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Ms Spring also warned that while a granny flat may be a tempting inclusion, one that was not approved was “uninhabitable”.

“If caught (renting it out) you risk your insurance over the whole property,” she said.

“Not to mention council fines and potential orders to demolish or remove it.

“All granny flats whether rented to a third party or family member must be council approved.”

LawLab Conveyancing director Ian Perkins said the SDS had made such risks “more visible” but had also made legal advice paramount.

“Many buyers are accepting the risk because it comes down to how desperate they are to get into the market,” he said.

“When such structures are approved, they often come at a premium, so for some, it is about taking that risk at a price they can afford.”
Mr Perkins said a conveyancer could advise on the potential cost to deal with the unapproved structure.

“The cost may be okay for some but in other cases it could be tens of thousands, hundreds of thousands, even millions, but some people, in this current market, are willing to take that chance,” he warned.

Peter Maloney, CEO of Herron Todd White (HTW), Australia’s largest independent property valuation and advisory firm, said owners with unapproved structures should approach the sale process carefully and with full transparency.

“While current market conditions may mean some buyers are prepared to accept the approval status and factor it into their decision-making, this will not be the case for all purchasers or lenders,” he said.

Peter Maloney CEO Herron Todd White

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Mr Maloney said that while putting a dollar value on an approved structure such as a granny flat was “highly context dependent”, HTW were seeing increased buyer demand for properties with secondary accommodation, driven by multi-generational living, affordability pressures, home office requirements and rental income potential.

“A council-approved structure provides buyers with a greater level of certainty, and that certainty is generally reflected in market confidence and buyer willingness,” he said.

“Whether a granny flat construction cost directly translates dollar-for-dollar into value uplift is difficult to generalise, as outcomes vary by location, demand and property type.

“However, approved secondary accommodation typically broadens the buyer pool, which in competitive conditions can support stronger overall sale outcomes compared to similar properties without that flexibility.”