You’ve found the perfect property. The granny flat out back looks solid, maybe you’ll even be able to rent it out. Your building inspector gives it a clean bill of health. You settle, hand over the keys to your first tenant, and two months later council sends a letter: the structure was never approved.
The rental income stops. Your insurance won’t cover it. And you’re now responsible for fixing a problem you didn’t create.
This happens more often than you’d think. Building inspections check whether a structure is physically sound. They don’t verify whether it’s legal to exist. That’s a different question entirely, and most buyers don’t realise the gap until it’s too late.
Here’s what you need to know about the difference between structural safety and planning legality, and how to protect yourself before you exchange contracts.
Your inspector checked the structure, but probably not the paperwork
Most buyers assume a building inspection validates everything about a granny flat. If the inspector doesn’t flag it, it must be fine. That’s not how it works.
Building inspectors assess visible defects and structural issues. They check roofing, plumbing, electrical systems, pest presence, and whether the structure looks like it might fall over. According to industry standards, inspectors evaluate visible and accessible areas without performing destructive testing. They’re not pulling apart walls or digging up foundations.
What they’re definitely not doing: checking council records to see if the granny flat was ever approved.
Did you assume your inspector verified the granny flat was legally approved? You’re not alone. But that’s outside their scope entirely.
If you’re purchasing a property in Sydney and want to understand what a standard inspection actually covers, our guide on Building Inspection Sydney Checks Apartment House breaks down the process in detail.
What building inspectors actually look for (and what they skip)
Inspectors DO check:
- Structural integrity: cracks, movement, foundation issues
- Visible defects: water damage, rot, corrosion
- Roofing condition and drainage
- Plumbing and electrical systems (visible components)
- Pest presence: termites, borers, moisture issues
Inspectors DON’T check:
- Development Approvals (DA)
- Complying Development Certificates (CDC)
- Planning compliance with council regulations
- Council records or approval history
- Whether the structure meets current setback, height, or floor area requirements
The report you receive is a condition assessment, and it will tell you what’s wrong with the building physically. It doesn’t tell you whether the building should legally be there in the first place.
The compliance checks that fall through the cracks
Specific gaps include:
- Setback measurements from boundaries
- Floor area ratios relative to the main dwelling
- Height restrictions under local planning controls
- Fire safety compliance for habitable structures
These require comparing the structure against planning controls, not just looking at it. A granny flat can be perfectly built and still breach every planning rule that matters.
Even new builds can have compliance issues despite looking perfect. The builder might have deviated from approved plans. The certifier might have missed something. Or the approval itself might have been invalid from the start.
Three ways a granny flat can be illegal, even if it looks perfect
A granny flat can be structurally sound and legally problematic at the same time. Visual inspection won’t reveal these issues. Here’s what your inspector’s report won’t tell you.
Built without Development Approval (DA) or Complying Development Certificate (CDC)
Development Approval is council permission to build, and a complying Development Certificate is a faster approval path for structures that meet specific criteria. Either one is legally required before construction starts.
The scenario: the previous owner built the granny flat without approval. Maybe they thought it was small enough to skip the process. Maybe they knew and did it anyway. Either way, you inherit the problem when you buy the property.
Some granny flats were built before the current regulations existed. That doesn’t make them legal but they will need retrospective approval, which is expensive and not guaranteed.
Doesn’t meet current planning controls (setbacks, height, floor area)
Setbacks are the minimum distance a structure must sit from property boundaries. Height limits restrict how tall a building can be. Floor area ratios control the total size relative to the block.
In Sydney, a typical granny flat might need to be at least 1.5 metres from the rear boundary. If it’s only 1 metre away, it breaches current planning controls. Even if it was approved years ago, regulations change. Structures can become non-compliant over time.
Inspectors don’t measure these against planning controls during standard inspections. They’re checking whether the roof leaks, not whether the building sits too close to the fence.
Missing or invalid Construction Certificate and Occupation Certificate
A Construction Certificate (CC) is approval to start building. An Occupation Certificate (OC) is approval to use the building once it’s finished. These are separate from DA or CDC, and equally important.
According to building certification standards, certifiers only check code compliance, not quality. A granny flat might have a DA but no OC, making it illegal to occupy. Or it might have an OC that was issued incorrectly.
The problem: without a valid OC, you can’t legally rent the granny flat. And if council finds out, they can order you to stop using it immediately.
What happens when you inherit someone else’s illegal build
You own the property, you own the problem. It doesn’t matter who built it or when. Once you settle, you’re responsible for fixing any compliance issues.
Council enforcement: fines, demolition orders, and rental income loss
Council has enforcement powers: compliance notices, fines, orders to cease use, and in extreme cases, demolition orders. If they discover an illegal granny flat through a complaint, they’ll issue a notice requiring you to either obtain retrospective approval or remove the structure.
Rental income stops immediately if council issues a prohibition order. Retrospective approval is possible but expensive and not guaranteed. If the structure doesn’t meet current planning controls, you might need to modify it or demolish it entirely.
Insurance claims that get rejected because the structure was never approved
Insurance policies typically require structures to be legally approved. If a fire or storm damages an unapproved granny flat, your insurer can deny the claim. This applies to both building and contents insurance.
The policy exclusion is straightforward: if the structure shouldn’t legally exist, the insurer won’t cover damage to it. You’re left paying for repairs out of pocket.
Resale complications when your conveyancer discovers the gap
When you sell, your conveyancer must disclose known issues to buyers. Missing approvals reduce property value and shrink the buyer pool. Many buyers’ banks will refuse to lend on properties with unapproved structures.
Fixing the problem before sale is costly and time-consuming. You might need to engage a town planner, submit a retrospective DA, and wait months for approval. Or you might need to demolish the structure entirely.
How to verify legality before you exchange contracts
Here’s how to protect yourself. These checks must happen before exchange, not after.
Request a Section 10.7 Planning Certificate and read the fine print
A Section 10.7 certificate is a council document showing approvals, zoning, and restrictions for a property. It lists approved structures, outstanding orders, and zoning information.
What to look for: approved structures matching what’s actually on the property. If the granny flat isn’t listed, that’s a red flag.
What it WON’T show: unapproved structures that council doesn’t know about. If the previous owner built without approval and no one complained, it won’t appear on the certificate.
Request this from the vendor’s agent or order it directly from council. It costs around $100 and takes a few days.
Commission a town planner’s compliance check (not just a building inspection)
Town planners assess planning compliance, which is different from building inspection. They check measurements against planning controls, review approval documentation, and verify zoning compliance.
The cost is separate from a building inspection but worthwhile for properties with granny flats. Engage a town planner during the cooling-off period if the granny flat is significant to your purchase decision.
For properties in Western Sydney, Building Inspection Parramatta services can coordinate both building and planning assessments to give you complete peace of mind.
The inspection won’t save you, but asking the right questions will
Building inspections are valuable. They’ll tell you if the roof leaks, if there’s termite damage, or if the foundations are cracked. But they won’t tell you if the granny flat is legal.
You need to actively verify approvals. Don’t assume your inspector has done it. They haven’t, because it’s not their job.
Three essential checks:
- Request a Section 10.7 Planning Certificate from the council
- Ask your conveyancer to verify DA, CDC, CC, and OC documentation
- Commission a town planner’s compliance check if the granny flat is significant to your purchase
Do this before you exchange contracts. Once you settle, the problem becomes yours.
If you need expert guidance navigating building inspections and compliance checks, contact Vital building inspection for a comprehensive assessment that covers both structural condition and planning compliance.
