The High Court has ruled the Government's offer to buy out uninsured red zone land in Christchurch for 50% of 2007 values was "not made in accordance with the law."
The Government said it was considering its options after the court ruling, which could include an appeal. A spokesman for Earthquake Recovery Minister Gerry Brownlee said on Tuesday the ruling would be applealed.
The ruling throws into doubt the current time lines for the NZ$40 billion rebuild of Christchurch's CBD and residential areas, given many of the ininsured sections being compulsorily acquired are integrated into the 'anchor projects' seen as the focus of the rebuild. Corrected in next paragraph.
Justice Panckhurst ordered in his decision the offers to Fowler Developments, which owned 11 sections on north-eastern outskirts of Christchurch worth NZ$1.95 million, and those to 46 property owners in the 'Quake Outcasts' group, to be set aside. A spokesman for the minister said the ruling only applied to residential sections in the red zone, which would not be rebuilt on. The ruling did not apply to any of the anchor project land, he said.
The government is spending NZ$1.7 billion buying red zone properties, although not all of them were uninsured. Insured properties are being bought at 100% of the 2007 Registered Value. The properties referred to in the judgement represented less than 1% of the properties being bought.
Justice Panckhurst said the Outcasts group had argued the 50% offers were not made under the Earthquake Recovery Act and were therefore not lawful.
"They further allege that the offer is oppressive, disproportionate, contrary to their human rights and an abuse of power," he said.
The Government's decision to offer those with insured land 100% while those without insured land were offered 50% was a blunt instrument, given that many were uninsured through no fault of their own, he said.
"The lack of even-handedness argument however, has I think considerable merit. Clearly, the main impetus for the June 2011 decision to make 100 percent offers to insured property owners was the need to provide certainty and create the confidence necessary to enable people to move on with their lives, given that “many people have their life savings tied up in their homes”, to borrow the Prime Minister’s phrase. Importantly, these considerations apply equally to many of the applicants, particularly those who are the owners of uninsured house properties."
The 50% offers would not allow land owners to make a fresh start, he added.
"Many owners are people of modest means, some are elderly and it is commonplace that their land and home is their one substantial asset. I am satisfied that the plight of this relatively small group has not been adequately considered in light of the purposes of the Act," Justice Panckhurst said.
He directed Brownlee and Canterbury Earthquake Recovery Authority CEO Roger Sutton to reconsider and reach a new decision.
(Updated to correct reference to slowing the rebuild or that the ruling would affect anchor projects).
50 Comments
Thanks Bernard for reporting about the Canterbury rebuild. My memeory may not be any better than gummies, but I am sure JonKey three priorities before the last election was rebuilding Canterbury, addressing the deficit and asset sales.
I think many people assumed rebuilding Canterbury would be the most important of these priorities. But it seems the Gnats have made good progress on deficit and asset sales issues but not much progress on the rebuild front.
Given the mandate National have from the election the media needs to hold government to account on this issue.
Ifor one are sick and tired of hearing people in ChCh moaning and groaning about their houses being pulled down,or not being pulled down,payout too low etc.
Just be grateful you weren't in Chile ,Peru or China because you would get diddley sqaut
and be lucky to get that.
... yes , their gripes pale into insignificance compared to the problems Aucklanders have , such as having to put your all shopping bags down on the ground , to retrieve one's car-keys from one's pocket , at the mall ... that is so freakingly annoying , that is ....
Aucklanders have had it tough for so long .....
You know i've never thought of it that way GBH, but your absolutely right..! The next time I see a brave shopper stuggling with their baggage I'm going to go right over and tell them how very brave and enduring I think they are...
No, I wouldn't interfere, as that would steal from their fierce independence .
We should be grateful that companies (incl EQC) that we individually paid thousands of dollars to are being enabled by the government to reneg on their contractual obligations because they don't feel like honouring their policies or the law???
If you think that is moaning, I'm sure you'd be willing to turn up to work for the next five years without your boss paying you, because that is exactly the attitude insurance companies have, and oh you won't get any interest when you do possibly get paid you in 5 years time or maybe 10 years, it will be in 2010 value!
People in ChCh haven't moaned enough, and the conduct of EQC, IAG and others is so despicable that their leaders should be facing criminal charges for the heartache and despair they have wrought on their "customers".
Mr Ngakonui, I shall have no sympathy for you when a pyroclastic flow buries you in 20m of ash and pumice...
This is just out from Fletcher Building:
As a precautionary measure, Winstone Wallboards advises it has temporarily closed its Christchurch plasterboard manufacturing plant on Opawa Road following the discovery of traces of asbestos in the manufacturing building.
The company was notified of this on 26 August by an external testing agency, during preparations for the replacement of the building’s roof.
“It is understood the traces of asbestos originate from the roof and that those traces are likely to have been contained within the manufacturing building,” said Winstone Wallboards general manager David Thomas.
As a precaution the entire site, including office and dispatch buildings, was closed yesterday to ensure the safety of employees and contractors and so further testing could be carried out. We anticipate the results of these tests will be known by this afternoon.
“The company is not aware of any related health symptoms, however as a precaution health checks will be made available to employees and contractors. The health and safety of our workforce is our number one priority,” Mr Thomas said.
Staff will be retained on full pay and kept informed as further information becomes available.
Winstone Wallboards has been advised by an asbestos removal specialist that there should be no concern of contamination to neighbouring properties.
The company anticipates there could be initial order delays of 24 to 48 hours for South Island customers. It is hoped the Christchurch distribution centre will be operational again on Wednesday.
The company’s Auckland manufacturing plant will be utilised to maintain supply into the market until the Christchurch manufacturing plant is operational again.
All staff and contractors are being asked to remain out of the affected area until further notice.
It seems Jonkey wants to walk away... I think this is very symbolic of his attitude to the rebuild. The man has no creditability, most of us think he is a liar....
However, Prime Minister John Key also warned could simply walk away.
"The Government would say actually we are being pretty generous on an uninsured piece of land, we are paying you out 50 per cent.
"One option is the Government says 'thanks very much, it's been a lot of fun. If you don't want to take the offer, that's where it's at'."
The quake-damaged land was unusable, he said." http://www.stuff.co.nz/the-press/news/9089373/Govt-to-appeal-High-Court-red-zone-ruling
Note, you cannot insure bare land, and land owners are paying out rates for the full ratable value of the land despite JonKey saying it is worthless or at best only worth 50% of ratable value.
Because we have system for a government back earthquake insurance scheme -EQC, but its design was flawed. A small group have fallen through the crack. It was not their fault the scheme was flawed. It is the government (past ones) who designed the system so the government (present one) should be responsible to ensure a fair outcome to those affected.
Yes the design of EQC (probably) never contemplated the "liquefaction" of the land that occurred in Christchurch. The land degradation that occured is probably unique. Yet, we have seen here on interest.co.nz videos demonstrating the fact that the risk of liquefaction was well known back in the 1990's when the first video was produced. Yet, the CCC continued to issue building permits, and govt, and thereby EQC did nothing to encompass the potential risks and outcomes.
That raises the question "is Christchurch too big to fail" and the answer is yes. Hence the belated restrospective legislation of the Earthquake Recovery Act.
The inevitable and simplest solution is to include EQC levy into council rates
Government hasn't done anything about solving that problem yet
All it has done so far is increase the levy.
Sounds reasonable to a degree.
I would point out a danger in your rational.
If we say *because* it was a government design *therefore* the government is forever to blame without limit *then* we are arguing for unlimited open liability. Which is, by definition a dangerous thing to enter into.
There is such a concept as best effort. That means fair and reasonable effort was made at the time - and the fact it won't be perfect should not be extrapolated to a guarantee of outcomes for unforeseen circumstances.
Why? Because lawfully the council and state must maintain the roads and services to the now handful of properties remaining, and the cost to do that for those scattered properties would be significantly higher than paying them out the full value.
In reality all homeowners in the redzone should have got full MARKET value - this was the amount they were in general insured for under the EQC act. Instead the plan to pay rateable value left owners of smaller land parcels that would have been fully insured to market value under the EQC act with perhaps as little as 60% of what they were entitled to (particularly in areas like Bexley where the land values were out of whack with market value). While larger land owners in the more affluent parts of the red zone were able to walk away with full potentially above full market value for their entire sites (as land values had fallen in some of the higher valued pockets between 2007 and 2010).
It turned out being a lottery with some owners getting perhaps 50% more than market value and others getting 50% less. It was a completely unfair decision, based purely on expedience rather than any common sense.
(Brownlee will well be remembered for being an egregiously unfair man. God can judge him on the heartache and anguish he has caused to countless thousands of people in Canterbury (which of course given his girth will be sooner rather than later). For a man that commanded so little respect in his former life as a woodwork/tech drawing teacher, to become a man of such hubris is confounding and perplexing. I think of the shining examples on the school staff of men that I might aspire to be and Mr Brownlee doesn't even make the top half of the bottom 5% of that list...)
That comment makes no sense. It's not a threat that the property remains, it is a reality! If services are to be provided than there is a cost to that. Paying half the land value makes no real sense if they are requiring it to be acquired. Down the road in TC3 someone may have a section but as this has all the services so in theorey it CAN be built on. If they don't want the redzone land built on, then the offer has to be fair.
Ralph, simply because it would be unlawful for the government to use the threat of withdrawing services. If they don't offer fair compensation they can't withdraw services, simple as that.
Maintaining your existing use of a property that you own is not a threat it is a legal right. The High Court upheld that yesterday.
Very definite moral hazard here, and I can quite understand the Gubmint's caution.
At least one solution would be to have the EQC collect a levy via TLA rates (after all, they do it for their Regional Councils in many instances): that way at least there are 'premiums' getting paid in.
Another would be to throw a legislative ring-fence around the definition of 'land' for this purpose: subdivided, serviced, able to be built on without resource consent. That would for example cover Brooklands but not some coastal-erosion-hazard section out in the sticks.
Yet another would be to increase land transfer taxes (stamp duty, mild CGT) specifically to offset the vast new liability that this decision has now crystallised.
This isn't politics (as much as some common taters would like to have it). It's a new liability, and we are all gonna Pay for it one way or another.
I am not sure what your point was. Are you saying in the future EQC insurance payments should be collected along with rates to prevent the moral hazard of people expecting a full pay out despite having no insurance. If you are fair call - I Can agree with that.
But the question is what to do now with the unfortunate people who have fallen through the cracks of our system for insurance through no fault of there own?
Note JonKey promised no one would be disadvantaged by the earthquake or words to that effect. Clearly in this case the government is deliberating not giving some people the same value for their land as others. I would say they are being disadvantaged.
MdM it is a bit of a technicality but this group is made of people who had bought residential land with the intent to build on it. But did not do so before the earthquakes hit. They did not pay EQC insurance because it is only collected through insurance companies and they do not insure bare land.
There are examples of people paying over $200,000 for land, there ratable value being less than $200,000 and are being offered less than $100,000 by the 50% government offer. And the government 'offer' is of the arm twisting variety because they are threatened with no uitilities and services to their previously well served land.
Many of these people 'deposits' on their house building plans would have been in the land so they are in a very difficult position. Which ever option they take their home ownership plans are buggered.
To say the government is threatening is over stepping the mark. Insurance companies will not offer insurance on anything built on these sections; that is a fact independent of any government.
Why should rate payers be forced to finance services to land that is unsafe and bear the cost of servicing them every time there is a shake?
There could be a multitude of people to sue. My understanding is that the Council had declined some areas in the red-zone being suitable for housing but a developer took the CCC to the Environment Court and won. So you could add to your list of people to sue as the Developer, and the Environement Court Judge who allowed the application to go through?
I suspect this is a gross simplification.
"Back when" could be 1840. Or 1975. Or 2006.
What exactly was known and when was it known?
Did they know before or after the land was zoned and areas of it built on?
What was the legal situation over the more than 100 years of occupation?
If the Council is trying to save money by withdrawing services, then it should compensate the landowner fully.
At a bare minimum they should refund rates back dated to the earthquakes if they have no intention to provide services.
Much of the Red zone land is little different from TC3 land, so it is possible to rebuild on it given the right engineering for the specific geotech issues.
I think the problem which Chris_J is highlighting, is that what the government wants to do is legally questionable. The government wants to rezone residential land to non-residential land, which it calls the red zone. And it wants to value the land on the basis that it is non-residential land. The government does not want to compensate the landowner for the loss in their property rights. The legality of this is in question and has been challenged in the courts.
Imagine if the government wanted to acquire your residential section cheaply so rezoned it rural so it could buy it at 1/10 of the price. Would that be fair?
The problem is the wording of the report
A number of the properties were "vacant land" and didnt have buildings thus not insured in the normal course of the EQC procedures.
The Government's decision to offer those with insured land 100% while those without insured land were offered 50% was a blunt instrument, given that many were uninsured through no fault of their own
It revolves around the meaning of "with or without" insurance
"those without insured land were offered 50%" doesnt make sense
should read "those with un-insured land were offered 50%"
This decision highlights the weakness of the EQC procedure where the EQC charge is captured only at the time of insuring a building "on the land". Those with vacant land couldn't have insured their "land" even if they had wanted to.
The land that was red-zoned is a compulsory aquisition and I'm not sure if that places the land under the Public Works Act. There is mention of the Public Works Act on the CCDU website.
An interesting article in the ODT on the Public Works Act tells of a developer getting an apology and payout from the DCC.
http://www.odt.co.nz/news/dunedin/270489/apology-payout-developer.
Was the land red-zoned using the Public Works Act? If the Public Works Act applies then the Government, CERA and all others involved will have to comply.
I understand that the Government is going to the court of appeal.
I don't believe the government has used the Public Works Act for the Redzone, it is my understanding that the Earthquake Recovery Act gives the Minister -Brownlee the power to bypass the Public Works Act because of the need for a speedy rebuild. In the above instance of 50% payout for uninsured land the Judge has ruled this does not comply with the Earthquake Recovery Act.
Brendon - I got this off the CCDU website which I have put a link at the bottom. I have used bold font to highlight references to Public Works.
9. How will you determine the price for my land/building?Initial negotiations will be for a voluntary purchase of any designated land and the price will be decided between the vendor and purchaser. If a voluntary purchase cannot be negotiated then compulsory acquisition will apply.
Instead of a purchase price, the CER Act refers to compensation. Compensation is determined by the Minister having regard to the land’s current market value as determined by a valuation carried out by a registered valuer.
Market value is based upon the amount the land would be expected to sell for if sold on the open market by a willing seller to a willing buyer. No account is taken of the fact the property is being taken for a public work. The compensation is at the date of the compulsory acquisition.
10. What if I don't like the price that is offered to me for my property?You or your representative has the right to make representations to the Minister or his delegate on the amount of compensation payable. The Minister has to determine the compensation within a reasonable period. If you still do not agree you can appeal the Minister’s decision on compensation (but not taking) to the High Court, the Court of Appeal and the Supreme Court. The CER Act directs, however, that the compulsory acquisition can proceed without any claim for compensation being resolved. Any claim for compensation will be based on the date the Crown acquires the land and not when the compensation is resolved.
11. What about other costs I may incur such as for my lawyer?If the property is purchased as a result of voluntary negotiations, as with all sellers, you will no doubt take into account the cost of the transaction in the settlement price that you agree. Under compulsory acquisition the Minister is required to determine the compensation in accordance with the relevant provisions of Part 5 of the Public Works Act 1981. The entitlement to full compensation is intended to ensure that land owners are left in no better or no worse position. This may include a reimbursement for “disturbance” – being a payment for actual monetary loss or costs incurred of a temporary non-recurring nature arising as a direct result of the land being acquired and where the cost was unavoidable. Reasonable costs of valuation, legal and other professional advice incurred as a result of negotiating compensation can be reimbursed. Removal costs, loss on mortgage payments due to early repayment or transfer and loss of actual business profits may be possible. Individual circumstances will change what compensation you may be entitled to and should be discussed with the Crown’s agent.
Red Zoning did not involve any act of Parliament, and was merely an "offer" from the Government.
What was publicly threatened (both Brownlee and Sutton are on record) was that if the offer was not accepted, services WOULD be removed, and that COMPULSORY acquisition would ensue at market value, which given the red zoning prevented building and that services etc would be removed, would be about "10%" of prequake value according to Brownlee.
This made the offer illegal. This was obvious to any fairminded person.
I had thought we had laws against blackmail ... maybe charges could be laid against Gerry for trying to subvert the law and blackmailing redzoners into accepting illegal offers??
I expect litigation from others who accepted "offers" under duress to possibly be forthcoming with this ruling (which of course will be upheld on appeal, because Justice Panckhurst is completely 100% and utterly correct...)
It isnt a new liability is it? There is no obligation on EQC or the government to make a payment for uninsured land , it just seemed the fair thing to make what was effectively an ex gratia offer. The judge seems to have said that 50% was not fair given that people who fell inside the net got 100% but no rules exist to say what is fair.
EQC do not insure land used for commercial building either and insurance companies dont insure land so what has happened to non residential land no longer fit to build on. Is that covered by this decisiuon as well?
Waripori - There was no obligation to either the Government or EQC etc but then the Government decided to red-zone the land and take by compulsion and it appears to be under the Public Works Act. If this is how the Govt aquired the land then the owners would be entitled to full repayment the same as anyone else losing land through the Public Works Act.
The Government obviously thought it was the fair and right thing to do when the land was red-zoned. We are all going to pay for the mistakes (be worse off) after this as we are going to be contributing via taxes etc.
EQC insure land on which an insured dwelling stands and the insurance company collects a premium for that as a levy attached to their premium. You dont have to do anything.
If there is no dwelling on land or if it is not insured then there is no way to insure the land as the only things that can happen to it ( subsidence, change to flood risk etc ) are not covered by the insurance market. A bit tricky if a house is under construction as well as EQC dont provide cover until a house is habitable.
It is becoming clearer why the government should consider withdrawing from the buy out offer altogether and dezone the land. Owners can do whatever they want on their uninsurable land without services.
It appears as if any positive step forward will attract unlimited liability for tax payers and endless law suits.
But is that threat doable. The landowner bought the land with services, they have paid rates for those services. Their rates are still caclulated on the 2007 valuations. So legally can the Council and CERA/Brownlee who have taken over responsibility withdraw services?
But the key fact is all this court action and disagreements are resulting from the government trying to save a few quid and it is not only seriously affecting the individuals concerned but holding up the rebuild for everyone.
I would have to say that was not the overiding or *key* fact in my mind. Any responsible government owes its tax payers at least minimal consideration before handling out to every demand.
I might choose things like:
The earthquake itself and the results to land and buildings.
The EQC scheme and it's terms and conditions.
The position of the insurance industry going forward.
The extraordinary complexity of some circumstances the whole things has created.
There seems to be an assumption that tax payers owe a guaranteed outcome to all people in all circumstances. Which is wholly wrong in my opinion.
Firstly Bernard, you are incorrect saying that this decision will influence any rebuild timeline, as the only anchor project on residential land in the Avon Loop park and I don't believe that any of the properties in that zone fall into this category, and even if they did, the opening of a park is of no relevance to the rebuild. The compulsory acquisition of land in the CBD is being done under a different process, and I already now of a couple of big players that have stuck their toes in over those offers (however this decision won't affect that). They can always acquire the properties under the Public Works Act should all else fail in the CBD, it just means that they have to pay fair value (which is what you would have expected that they would have had to do...even though they are trying hard not to do that...).
Clearly this decision demonstrates that the competency and ability of the Earthquake Recovery Minister to make sound, fair, balanced and lawful decisions is non existant.
This is the second major court loss, after Brownlees decision to alter the zoning in the Canterbury district was thrown out by the High Court last year.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10855323
On top of this the Central City Plan offers, the other red zone offers, the illegal repairs being done by EQC (which one can only assume is under ministerial direction), and the lack of protection to Heritage, the lack of a plan to recover built resources (reuse houses).
So let's summarise the illegal and potentially illegal and stupid decisions:
1. Using CER Act to implement rezoning. Status - quashed by Appeal Court.
2. Offering 50% of RV. Status - overturned by High Court.
3. Red Zone RV offers. Potentially up for review given yesterday's ruling.
4. CBD City Plan buy up. Current process likely to be found unlawful if challenged - acquisitions should use Public Works Act not CER Act.
5. Demolition of heitage buildings. Probably lawful, although debateable in some cases (given covenants etc). However just downright stupid.
6. Crunching of lightly damaged red zoned houses. Legal but plain stupid, especially as rents have soared 50%+ in the past 2 years.
7. EQC not repairing damaged floors, and doing inadequate repairs, failing to follow policy wordings such as "as new" and "to current building code". Many repairs are illegal and done without permits and not to the current building code.
8. Allowing insurers to breach contractual obligations, and not providing the resources for individuals to fight insurers. This is actually going to lose the country at least $10b in insurance monies. I know of dozens of cases where properties which are in reality rebuilds have been assessed as say $119k (ie just over EQC), so the insurer (normally IAG) has got off paying nothing, as the owner in desparation has just cash settled and sold the property as is where is.
Brownlee clearly leaving a legacy as the stupidest man that ever lived...
Chris_J Thanks for holding the government to account. I hope interest.co.nz will continue reporting on these issues and maybe the MSM will follow suit.
So was it illegal for Brownlee to rezone more land to residential for rebuild/house price inflation reasons, or did he just go about it the wrong way?
Facts as I now understand them.
There was a legal process under the CERA Act by which the government could red zone land. This process had some checks and balances to guard against the concentration of executive powers in the Act.
CERA did not follow this procedure when they declared the Red Zones. It is probable some of the information given out to justify the classifying of land as Red was at the very least misleading.
Therefore the Red Zone was not legally created (under the CEAR Act) and Justice Pankhurst has set that decision aside.
What the government did was wrong and must be put to right now. They had a right to do what they wanted to do but rode rough shod over the rights of owners - insured or otherwise.
Perhaps they had good intentions at the time, who knows. It seems like the appeal will be a waste of everybodies money.
So the gvmt fronted up with $300m for the underinsured of AMI but want $20m worth of land but want to pay half that.
I don't agree with the gvmt being responsible for this, but is it fair compared how it has treated others. He'll no.
Within a few years lots of hard working Aucklanders are going to lose more than this when things crash. Will the govmt step in?
Easy there redcows - your generosity proceeds you:
The $500 million of financial support from the Crown
under the Crown Support Deed entered into between
the Crown and AMI in April 2011, now amended to
reflect Southern Response’s Crown ownership. On
5 April 2012 the new shareholders (the Minister of
Finance and the Minister for Canterbury Earthquake
Recovery) paid $100 million to the company to
convert 100 million of the 500 million convertible
preference shares to ordinary shares
Additional support provided by the Crown under
a $500 million uncalled capital facility entered
into after 30 June 2012, to be drawn on only if
the company fully utilises the proceeds of its
reinsurance, investments and Crown Support Deed.
Read latest 31 Dec 12 interim report
NZD 580 million SRESL Tbills are outstanding on NZDMO's books.
Net outstanding claims liability : NZD 1.232182 billion.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.