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Leaky Homes - Important New Developments and a Warning

As most New Zealanders will be aware the leaky homes crisis continues to cause misery and financial ruin to thousands.

Affected parties are not only home owners but also builders, developers, architects, building product suppliers, tilers, landscapers, roofers, waterproof product installers and ratepayers (in the form of local authorities). Indeed many tens of thousands of people and businesses have faced financial ruin as a result of a crisis which, on the whole, has not been of their own making. Latest estimates suggest that there may be as many as 90,000 affected homes. The repair costs will run into the many billions of dollars. It appears that possibly only 10% of these houses have been the subject of repairs and/or remedial work to date.

Financial Assistance Package (“FAP”)

Over the past few years the Government has been considering a relief package for homeowners. This has been finalised in the form of the government Financial Assistance Package (FAP) which came into effect on 29 July 2011. Parties who have an existing claim in the Weathertight Homes Tribunal must decide by 28 October 2011 whether they wish to register their interest in using the FAP.

In summary the FAP works as follows:

  1. Qualifying homeowners
    A qualifying homeowner must be the owner of a leaky home which would meet the criteria of the Weathertight Homes Resolution Service Act for eligibility. The question of eligibility turns on the nature of the defects concerned and limitation issues – (i.e. was the defective work or service performed or provided within 10 years of lodging the claim). In addition it appears that the government assistance package may preclude Body Corporates for large groups of apartments and the common areas that often require repairs in those types of developments.
  2. Government Contribution
    In circumstances where a qualifying homeowner elects to avail him or herself of the FAP the government will contribute 25% of the cost of the remedial work (as assessed by the assessor appointed by the Department of Building and Housing).
  3. Territorial Authority Contribution
    In circumstances where the relevant territorial authority (city council) has provided the building consents, inspections and sign off or compliance certificate and has chosen to participate in the FAP, that territorial authority will then contribute a further 25% of the assessed construction costs. It is important to understand that in some cases the territorial authority delegated the consent, certification and issue of compliance certificates to third party consultants and in those cases the territorial authority would not be liable. In almost every instance the third party consultants have ceased to operate. Further, that if the territorial authority did not issue a code compliance certificate it can refuse to make a 25% contribution. In addition some territorial authorities have not elected to take part in the FAP.
  4. Relief against other liable parties
    Where a homeowner has elected to avail him or herself of the FAP, he or she agrees not to sue the contributing council or government, however they retain the ability to pursue other potentially liable parties including builders, developers, architects, product manufacturers etc. However, given the proceedings against the FAP parties will be discontinued, a new claim will likely have to be brought against those additional parties, but the new claim must be brought within the limitation period. Parties can also attempt to bring an additional party to contribute to the FAP which will prevent them being a respondent in a subsequent claim.
  5. Once an application is made by a qualifying claimant, the Assessor is required to prepare a concise report relating to the application for financial assistance, providing further additional information over and above that which is currently required in an assessor’s report in the Weathertight Homes Resolution Service to enable the terms of the financial assistance provided to the qualifying claimant to be negotiated. It is likely the claimant will have to provide information on the design and scope of the remedial work, quotes for the remedial work and proof that the claimant can pay the balance of the remedial work costs.
  6. Once you register an interest to use the FAP, existing proceedings are put on hold. Upon accepting to use the FAP, the existing proceedings must then be discontinued.

It is therefore apparent that there are some cases in which it will be wise for an owner to invoke the FAP. Those cases will commonly be where the owner wishes to obtain 50% of the remedial costs, believes that there is a realistic likelihood of obtaining recovery of a significant portion of the balance from additional liable parties or can fund the balance themselves.

In other cases where additional potential liable parties are not available to be pursued it may be more prudent for the owners to pursue the territorial authority in the expectation that they could receive more than the amount that would be available pursuant to the FAP.

Commercial considerations such as the costs procedure and risks of litigation will need to be considered carefully in each case. Another very important consideration revolves around the time limitations which are becoming increasingly relevant. As a result it is crucial a claimant obtains legal advice as well as expert advice from experts such as a building surveyor in order to be able to make an informed decision regarding the acceptance, settlement and the negotiation of the FAP.

Limitation Issues – A Warning

The weathertight homes legislation provides for a 10 year “long stop” for the bringing of any claim for defective building workmanship or services giving rise to a leaky home. This factor is critical for many homeowners particularly in light of the fact that a large number of leaky homes were built no later than 2002.

We are constantly finding that people are considering making claims after the 10 year period has expired and therefore are usually precluded from making a claim. For example a claim against the territorial authority (city council) usually can only be brought within 10 years of the issue of the building consent, inspection or issue of code compliance.

The claims against architects, surveyors, engineers, builders, product suppliers etc can usually only be brought within 10 years of the date on which they provided their workmanship or service.

The passage of time is often very pleasing for those professionals and tradespeople. Our very clear advice to any homeowner who believes they may have a leaky home is to contact us with urgency to ensure that they do not fall foul of these very strict time limitations.

The reality is that after the 10 years have passed there is often absolutely no recourse available to the owner of a leaky home.

The law concerning leaky buildings is becoming complex. We recommend that any party involved in a leaky building claim, whether as an owner, a potential respondent or a claimant who qualifies for the FAP contact us with extreme urgency as soon as they become aware of the issue or potential claim.

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