The term “leaky building” has now been in the kiwi vocabulary for over 10 years and yet the country is still struggling to come to grips with the reality that many of our homes built in the last 15 years are seriously defective and in need of repairs which often cost hundreds of thousands of dollars.  Unfortunately there are no short cuts to restoring the value of these homes!

The initial response to the leaky building crisis was the introduction of the Weathertight Homes Resolution Services Act in 2002 which was later replaced by the 2006 Act in force today.  This Act was intended to provide speedy, flexible, and cost-effective procedures for assessment and resolution of claims relating to leaky buildings, as opposed to using privately engaged building surveyors and the Courts.

In April 2009 the new National Government engaged Price Waterhouse Coopers to produce a report on the size and cost of New Zealand’s weathertightness problem.   The report released to the public late in December 2009 found that the likely number of homes effected was in a range from 22,000 to 89,000 with a “consensus forecast” of 42,000 failures at an economic cost to repair of $11.3 billion.  The report also recorded the view of many experts that the majority of monolithic-clad dwellings constructed before 2006 would suffer from weathertightness issues making the total number of failures in excess of 110,000 homes at an estimated repair cost of around $30 billion.  We believe this is more likely to be the case and may even understate the size of the problem.

As a response the Minister of Building and Construction, Maurice Williamson announced the Financial Assistance Package for leaky home owners in May 2010 (now referred to as “the FAP”).  Under the package an eligible owner will get a contribution of either 25% or 50% of the “agreed repair cost” if they can prove their ability to fund the balance.  The FAP has been described by the Prime Minister as "spreading the costs as evenly and fairly as possible" and it has been touted as a solution to the leaky homes problem.  Owners of leaky and defective homes will need to make up their own minds as to whether they consider this to be the case.

Leaky and defective homes fall into various categories:

  • Standalone homes constructed or renovated more than 10 years ago.  The 10th birthday of a home is very important.  Under New Zealand law owners of homes more than 10 years old have no chance of recovering the cost of repairing their home from those responsible for the faulty construction.  To be eligible to use the Governments system for assessment and resolution or to take up the FAP your home must have been built within the last 10 years. Therefore owners whose homes are more than 10 years old are left to bear the full financial burden of repair by themselves.  There are situations where homes may not meet the eligibility criteria for the Government system but may still have a viable claim in the Courts (read more about limitation periods).   
  • Standalone homes less than 10 years old certified by a local Council:  Where a local Council has been responsible  for the certification of a home they owe a duty of care to the owner no matter whether you are the first owner or a subsequent owner.  As a result owners in this category have the opportunity to recover a significant portion of their repair cost from the local Council and any other original parties still in existence, either through the Government Weathertight Homes Tribunal or the Court.  Where a Council is found to have breached its duty to the owner it will usually be found liable for 100% of the total amount awarded, with the opportunity to recover a portion of this from other liable parties.  Referred to as joint and several liability this ensures that an owner gets paid all that is owing to them even if others default.  Under the FAP an eligible owner in this category would receive a contribution of 25% of the agreed repair cost from Council and the same from Government as long as they can prove their ability to fund the remaining 50%. 
  • Standalone homes less than 10 years old certified by a private certifier (as opposed to a local Council).  Where a home was certified by a private certifier unfortunately the local Council owes no duty of care to an owner.  As all the private certifiers are now in liquidation or are struck off and in many cases the other parties involved in construction are also long gone owners in this category often have no chance of recovering their repair costs. Under the FAP eligible owners in this category will be able to get a 25% contribution from Government if they can prove their ability to fund the remaining 75%.
  • Apartments and Townhouses situated in multi unit complexes.  These can be divided into the same 3 categories as the standalone dwellings but they are generally far more difficult to resolve as cooperation between all owners in a complex is required and each finds themselves in a very different personal situation in terms of their ability to fund their share of the repair cost.

For more information contact HOBANZ 09 360 8083 or email consult@hobanz.org.nz