With a growing population, townhouses have become hugely popular. And why shouldn’t they be? They’re ideal for people wanting to enter the market for the first time, downsize or invest. From an outsider’s perspective, they seem like a great investment as they’re relatively new, low maintenance and affordable, but have you really investigated the potential downfalls of buying a townhouse, especially those with a connecting wall to your neighbour?

Imagine you’ve bought a two-storey townhouse with a connecting wall. As an investment, you’re renting the property out to a professional couple.

Despite the property being less than 10 years old, your tenants have left the downlights on for days and the lights have caught fire to the cheap insulation in the ceiling. The entire townhouse is destroyed from fire and water damage, as well as part of your neighbour’s home. You’re devastated, but you know you have insurance so it’ll be fine. Wrong. Your neighbour doesn’t have insurance. This is where things start to get murky.

You put in a claim with your insurance company and they obtain a copy of the original building permit for your townhouse. Some of the structural information is missing from the permit, so the insurance company refuses to give you the full payout.

You’re unable to sue the builder or the building surveyor because of extenuating circumstances and now your neighbour is suing you.

You’ve previously borrowed against your townhouse to buy the home you currently live in, but with the water and fire damage, the value of the townhouse is now less than your original mortgage and the bank is threatening to foreclose your investment property.

In the end, you have to sell the home you live in and move into the townhouse when it has been repaired.

This is a true story and could happen to anyone.

When buying a property with a connecting wall you need to:

  • Conduct close building inspections before buying. It’s important to check the quality of the building, especially if you plan to have tenants. For example, can the electrical work stand the test of time? What insulation was used – is it good quality?
  • In addition to your own building inspection, ensure there was a good quality building surveyor doing regular inspections throughout the building process. Check that the extent of work done on the property reflects what’s on site and what’s written in the approved documentation, which you’ll be able to find through the archival information.
  • If you’re renting out the property, conduct regular and thorough tenant inspections.
  • Be aware that your neighbours might not have building insurance. If you can, try and find this out as soon as possible.

If you’ve completed comprehensive inspections and are confident with the independent, expert opinions you’ve received, then buying a townhouse can be a great choice of property.