On 17 May, 2010, the Government announced details of a financial assistance package to help people get their leaky homes fixed faster.

The main points in the announcement are as follows:

Obtain a copy of the Ministers Media Release and the Leaky Home Package Q & A

The recent announcement is the first clear indication that the current National Government is prepared to make a significant contribution directly toward the repair of our leaky homes.  The announcement which has been long awaited represents a significant step forward.

The information released provides an indication of what owners can look forward to but much of the detail is still to be worked out.  We hope that HOBANZ will be invited to participate as this detail is developed in order to represent the interests of the thousands of leaky home owners around the country. We hope to provide practical input to help make the package relevant to as many homeowners as possible.

Here are some of the questions we have been asked as a result of the announcement and our current thoughts.

Is a 50% contribution a good deal?

We find it difficult to accept that an owner should have to pay anything toward the repair of their home where they have done nothing to contribute to the situation they find themselves in.  That said, we accept that the problem the country is facing is so large that owners will have to bear a portion of the cost if a viable rescue package is to be established.  For now we will reserve judgement until we have more details available to us.

How will I know if the Council will contribute their 25% in my situation?

In cases where the Council has issued Building Consent, inspected the property during the construction phase, or has been responsible for issuing the Code Compliance Certificate it seems clear that the Council will contribute their 25%.

However there will be many cases where the Council involvement and liability will not be as clear cut.  Right now it is not clear how these situations will be dealt with however an owner will certainly need to know the answer to this question before deciding whether or not to accept the package.

Will an owner be able to take the 25% offered by Government and still pursue the Council?

This is unclear from the announcement however it seems unlikely that Councils would participate in the package if this was an option in situations where the Council was involved when the home was built.  One of the attractive aspects of the package for Councils is that it effectively limits their exposure to 25% where they could end up paying anything up to 100% of the value of a claim pursued through the Tribunal or Court due to their joint and several liability.

Is it worthwhile pursuing the other parties that were involved in the construction of the home?

This will depend on who the parties are and whether they have the means to pay if a judgement is made against them.  In a situation where there are viable parties other than the Council, an owner will still incur legal costs to pursue these parties.

If an owner does intend to pursue other parties and a local authority is involved the package may be less attractive.  As legal costs will be incurred anyway it seems sensible to include the local authority in the proceedings as this will provide the back up of joint and several liability should the action against the other parties fail.  Unfortunately this package does not provide for Government or Council to take over the rights of an owner to sue other parties.

Who will this package be attractive to?

Based on the information currently available it appears that the package will suit owners with lower value claims and owners whose claim against the local authority is weakened for some reason.  It would also appear attractive to owners whose homes were certified by private building certifiers as it is common in these cases to have few viable parties to pursue.

Other owners will need to get their legal positions properly assessed before deciding whether the package provides them with an acceptable outcome from a financial perspective.  Even where an owner could do better pursuing their claim through the legal process they may decide that the Government package provides a way out where they will get certainty of outcome and will not have to suffer the stress and intrusion of the legal process.  Each owner will need to make this decision based on their own individual situation.

Is it true that legal fees often eat up most of the money owners recover via the Courts or Tribunal?

This is somewhat of a misconception.  Certainly for a smaller claim the legal fees can be high in proportion to the amount an owner might recover. However, in many situations where owners have strong claims they often recover amounts close to their actual repair cost which far exceed 50% of their total financial outlay including legal fees.  In most cases these results are achieved prior to a hearing (usually at mediation) and details remain confidential.

How will the package assist owners of units in a multi-unit complex?

There is very little information on how the package will be applied for owners in multi-unit complexes. Although we would expect the Government to provide assistance to unit owners at an individual level, a body corporate may still not be in a position to proceed with repairs if there are owners in the complex who are unable to take up the package.

We hope that as the details of the package are developed those involved will recognise the unique situations faced by unit owners and will look to provide a more complete option which will allow bodies corporate to move ahead with the repair of their properties.

How will the Agreed Repair Cost be determined?

Very little direction has been provided to help answer this question and until this is known it will be difficult to assess whether the package is a viable option in each individual and unique situation.

The Minister of Building and Construction, Maurice Williamson, has stated that “we must be certain that this is a repair of what your property was”. No matter who decides on the appropriate repair proposition, which will lead to the Agreed Repair Cost, we hold that the home must be brought up to the current building standards which have now been set specifically to avoid a recurrence of the leaky building problem. There is little point in repairing a home back to a sub-standard state.

A further relevant consideration when determining the Agreed Repair Cost is whether any allowance will be made for the additional costs a home owner faces as a result of their situation.  These include things like the cost of alternative accommodation or loss of rent while the home is being repaired, and interest on the portion of money they need to borrow.  If these additional consequential costs are not allowed for in the Agreed Repair Cost then the actual percentage of the contribution made by Government and the local authority will be diminished.

If the Government or Council have some influence over the scope of repair will they take responsibility if there are weathertightness problems with the home in the future?

This is a very good question.  The scope of repair for a leaky home is often more extensive than you would first think due to the obligations placed on those involved to meet the performance and durability requirements of the Building Code.  If Government or Council are to have some influence over this scope in the process of establishing the Agreed Repair Cost then it follows that they would have to take some responsibility for future failure just like any of the other parties involved.

What if the most viable option is to demolish and rebuild the home?

The announcement makes it clear that the Government and local authority contributions will only be available “on receipt of work done”.  This approach has been taken to ensure that owners are not able to accept the available contributions and then not apply them to the repair of the home.  The Minister refers to this as “gaming the system”. We certainly agree that we must ensure that any contributions made by Government and local authority are used to get homes fixed and it seems sensible for the package to provide for the rebuild situation where this really does provide the most viable option.  It is not clear whether this approach has been considered.

How will the loan guarantee scheme work?

The Minister has indicated that the eight retail banks have been briefed and they have indicated a willingness to work with the Government on the package.  It is clear from the announcement, however, that owners will need to meet bank lending criteria in order to get a loan. 

Our concern here is that many owners may be left in a position where they are unable to fund their portion of the proposed package because they do not have the capacity to meet these criteria and service a loan.  We hope that a solution will be found for those owners in this difficult financial position.

What action should I take as a result of this announcement?

For leaky home owners, things are very much ‘business as usual’.  Until details of the package are finalised and announced it is impossible to properly assess whether the package provides a viable option.  If you are already registered in the Weathertight Homes Resolution Service system then you should be able to access the package in the future.

If you are not already registered and it is less than 10 years since your home was constructed you should register with the WHRS immediately. This will protect your legal position and allow you to access the package if you feel it is appropriate. 

For details on how to register go to the Department of Building and Housing website www.dbh.govt.nz or phone 0800 116 926.

Note: Many owners have been hesitant to register under the WHRS Act because this appears on a LIM report and will effect future value.  We feel this concern is short sighted.  Homes that were built within the “at risk” period, and are of a design or constructed with materials known to be hallmarks of a leaky home, are already reducing in value and becoming harder to sell.  The focus must therefore be on restoring the value of the home which can only be done by repairing it properly.  As the result of the repair the home should meet current building standards and value will be restored.

If you need confidential, reliable and independent advice as to how you should proceed with the repair of your leaky home or complex or pursuing compensation via the Weathertight Homes Tribunal or Courts please click here to contact us

Many Mayors have noted that the Councils will only be found liable for 20% if any claim against them succeeds, but this is quite misleading in that their share of the apportioned liability is based on legal precedents that mean that indeed the figure does sit at around 20% - however, if they are found to be joint and severally liable then they will have to pay the full amount if any of the other liable parties are unable to pay. The leaky home owners and indeed some lawyers ignorance of this joint and several liability has seen some owners end up worse off than they were before when they have accepted settlement payments from the Councils, and then, even though they succeed against the other parties, there is no one of substance financially to pay the amounts awarded.

The Councils and their lawyers are mercenary when it comes to dealings with leaky home owners and they continually shed crocodile tears in sympathy; and yet ratepayers money is being used to cripple fellow citizens and in some cases resulting in their homes not being repaired and inflicting enormous losses, stress and anxiety it is morally repugnant that Local Government should treat home owners and citizens this way.

It is most unfortunate that the ratepayers will ultimately have to bear the financial burden for these claims, but those ratepayers that think that their money should not be spent to compensate leaky home owners should firstly take a very careful look at their own home, and secondly should remember that if the Councils were not found to have been negligent in these matters the ratepayers would not be having to bear the burden at all. Therefore serious questions need to be asked of the Councils as to how they let this happen when they were, as the Territorial Authority, presiding over building works in their respective territories and yet they failed in one or more of the many elements they were responsible for under the Building Act to control building works that is the issue of building consents, building inspections and issuing Code Compliance Certificates. It is our opinion that the Councils have generally failed to properly understand their duties and responsibilities under the Building Act and to put in place systems and suitably qualified staff to execute those duties and responsibilities in order to ensure that the houses or apartments that were being built in their respective territories were going to meet the performance and durability requirements of the Building Code. Furthermore we believe that some Councils have been even more negligent in that beyond appropriate systems and personnel they have failed to ensure that an appropriate level of insurance was in place to protect the public purse both from the claims made against them for their negligence and the enormous amount they are paying out in legal and experts fees to defend what we say is almost the indefensible indications are that of the total amount the Councils are estimating their potential liability to be approximately one third is made up by those fees. (more information on this subject and what we intend to do about it can be obtained by registering your interest click here to contact us)

There is a 10 year limitation imposed under the Building Act and the Weathertight Homes Resolution Services Act (WHRS Act) on the bringing of claims in the Weathertight Homes Tribunal or the Courts. That is you must, for simplicity sake, have lodged a claim under the WHRS Act or filed proceedings in the Courts within 10 years of the home being built or in the case of failed alterations within 10 years of those alterations being completed. This is what is referred to as the long stop limitation and it is interesting to note that when the Building Act legislation was imported from the United Kingdom the limitation period was 15 years. Without any consumer voice’ advocating for its retention it seems that Government of the time was swayed by the industry to reduce the limitation to just 10 years. In light of the leaky homes disaster that has beset New Zealand and the level of evidence of the poor design, consent, building and inspection processes that is easily indentified in even 15 year old houses, it is distressing to see that this limitation is now resulting in significant losses being inflicted on the innocent so far down the track and they are simply unable to take any steps that will see their financial position restored. Sadly many people only find out when they are trying to sell their home and a prospective purchaser gets a competent pre-purchase inspection company to assess the home and uncovers significant weathertightness issues and damage. In almost all of the instances we have seen the owners have been genuinely unaware of the insidious nature of the leaks that have caused their home to quietly rot from the outside in and there is no obvious sign inside their home that those problems existed or at least none that would have alerted them to the extent to which their home was damaged. Those owners are then left to either fund repairs themselves or sell the house as is resulting in them having to absorb these losses and try and get on with their lives many are going into retirement and are having to break into their retirement savings or their house represented at least part of their retirement savings and it has deeply impacted on their retirement lifestyle or indeed prevented them from retiring at all. (more information on this subject and what we intend to do about it can be obtained by registering your interest click here to contact us)

Under the Limitations Act you must lodge your claim under the WHRS Act or file proceedings in the Courts within 6 years of discovering that you have a problem with your home or within 6 years of the time that the defects and/or damage were reasonably discoverable. Like the 10 year limitation this limitation can be fatal to any claim both in the Weathertight Homes Tribunal or the Courts.

Several recent High Court Cases have dealt a fatal blow to the claims made by owners that purchased their homes with either full knowledge of the weathertightness issues and leveraged some level of discount on the purchase price or they have, or ought to have had knowledge of the weathertightness issues and have purchased at a price which represented a full market price and they have therefore contributed to their own loss.

We will progressively publish more information on the various other topics that are affecting owners of leaky and defective homes, but in the meantime please contact us if you have any concerns or wish to obtain any further information.