By Alex Tarrant
The head of a group representing leaky building owners is calling on the government to hurry with an assistance package to help with a problem that has “put people’s lives on hold”.
Rolf Stucki, who chairs a body corporate for a leaky development of 55 townhouses on Mays Road in Onehunga in Auckland, said they wanted to rebuild, but uncertainty over the terms of a government guarantee was holding up the bank loans needed for the project to start.
Building and Construction Minister Maurice Williamson yesterday introduced the Weathertight Homes Resolution Services (Financial Assistance Package) Amendment Bill to Parliament to deal with the issue, although this has not provided any clarity as to whether the package will be agreed to by New Zealand’s retail banks.
The Bill will be reviewed by the Local Government and Environment Select Committee, which is not due to report back to parliament until April 28 next year.
Under the proposal, government would pay 25% of leaky building costs and councils another 25%, although councils would only pay for developments theit own certifiers had inspected, and not ones done by private inspectors. See all our previous Leaky Homes articles here.
This included the Mays Road development, Stucki said. As it was reviewed by a private inspector when building was completed around 2000, they were only eligible for the government’s 25%, and would have to fund the remaining 75% of costs themselves.
The government has indicated it would guarantee bank loans for dealing with leaky buildings. However a spokesman for the Bankers Association said the proposed legislation did not offer certainty.
"The current proposal falls short of how a guarantee is commonly perceived, in that what's being proposed would not cover 100 per cent of any loss, so it would be more like a loss-sharing arrangement between government and banks," the spokesman told The Dominion Post.
93-97 Mays Road, Onehunga. 55 leaky units
The 55 Mays Road units were built in 1999-2000 and signed off for the council by a private inspector, Stucki told interest.co.nz. The developers had been bankrupted, so the body corporate was not able to sue for costs of repair.
“Every single unit has been tested and they all now need to be repaired. We’re having the problem with having [had] private certifiers. That means that we don’t get the 25% from the council," he said.
The council didn’t want to have a bar of it, even though it had accepted the certification.
“The rest we have to pay ourselves. It could be more than 75%,” Stucki said.
“What the government is talking about is an ‘agreed’ value of repairs. That means it will only take into consideration things that are directly attributed to the leaking,” he said.
"The whole thing is so vague. The government [in 2009] put out an offer saying ‘we’re going to help you - it’s a rescue package - early next year. Then three months after the first announcement they say ‘oh no it will be mid-next year’, and then we’re hearing whispers [about it being longer due to problems with the banks].”
The problem had put peoples’ lives on hold, Stucki said.
“I know a chap that owns a unit here that he’s got a NZ$230,000 mortgage on. He’s had it for about two or three years, interest only. He’s got his own private property to back it up as security, so he borrowed basically NZ$230,000 at 100% finance,” he said.
“Now it’s leaky."
The units were selling now for as little as NZ$110,000.
“You’ve got a NZ$230,000 mortgage and it’s valued [at just its] land value. We now need to go to the the bank and say ‘we’re now going to need another, say NZ$150,000 to rebuild and everything.
“You’ve got a mortgage of NZ$230,000 and want another NZ$150,000. The overall value of it once it’s been done up will be around NZ$300,000 probably.”
“Well if you’ve got NZ$230,000 then another NZ$150,000 that’s NZ$380,000. Would the bank want to give you that money?
“You still need that other asset. In this particular case they’re also breaking up.
“They can’t sell their matrimonial home because it’s being used as a guarantee for this place here. They’re losing big time. And they can’t do anything unless the sell this at the going rate.
“You can’t do that. The bank may not even allow them to sell their house. It’s just financial ruin.”
Private certifiers, council not liable
At the time the development was built, private certifiers were allowed to do inspections on behalf of the council, Stucki said.
The council later stopped this, but not before a number of leaky developments had been build.
“The private certifiers, they’ve gone belly up, so you can’t sue them anymore. They’ve gone, like the developers as well. They’ve gone – they’re bankrupt, that’s what they claim,” Stucki said.
“So we’re literally faced now with paying all of it by ourselves,” he said.
“If the government is coming in with their rescue package, we appreciate 25% - that’s certainly helpful. We might get say a NZ$20,000-25,000 contribution. That’s better than a kick in the pants. But ultimately you still need to find the rest.
The banks had every right to say the government had to make sure they were going to get their money back due to the fact not many owners currently passed bank lending criteria, Stucki said.
“The odd [person would default], but at least you’ve got a unit [as collateral],” he said.
Inspected before he bought it
Like every home buyer, Stucki had to have the unit inspected for the bank before he was given a mortgage to buy the property
“They inspected it and wrote down what they could see. Nobody’s going to drill holes in places and things like that. And five years ago of course it wasn’t as bad as it is today,” he said.
“When the [leaky building] assessors came in to look [at the unit for the claim], you know garden mulch? That’s got more substance than what we’ve got in there. It is horrendous decay.”
“It’s a disaster.”
How did you find out it was leaky?
Over time, there were people in the development who had repairs done on their units. “And at that stage it became a whisper that they were leaking,” Stucki said.
Finally someone trying to buy a unit was refused a bank loan because of the moisture in it, he said. This meant the people who owned it could not sell.
“From there on in we then contracted a company that does moisture testing, probably about three years ago. They came back and said ‘yeah you’ve got a problem there,’” he said.
All 55 units eventually signed up and were inspected for a claim.
They were now just waiting for the government to come up with the money. “Simply we haven’t got the money”.
Given the chance, the body corporate would opt to rebuild the entire development, rather than just have repairs, although it was up in the air as to whether this could be done.
It would cost about NZ$125,000 to NZ$130,000 per unit for a rebuild against about NZ$120,000 per unit for repairs. “That’s the estimate.”
Repairs cost so much because they would have to be done by expert repairers, Stucki said.
“Ultimately they have to sign a piece of paper which makes them responsible for the integrity of the building,” he said.
“But it is widely recognised that particular industry is an absolute disgrace in ripping people off because they can charge whatever they want. A normal builder can’t do it. You have to have specialists.
“What happens is these buildings have been designed with flaws. In order to overcome those flaws, you can’t just go and replace a piece of timber with another piece of timber and put the cladding [back] over it and think it’s not going to happen again.
“It will happen again due to the design of the place, so what they have to do is design out the flaws.
This caused problems because there was still an existing structure. “To redesign the existing structure without having to go in [and] change designs is very difficult and costly.
“Whereas if you’re bowling it over to start anew, you design it correctly in the first place. Any builder can do that,” Stucki said.
Problems
“There are no eves. It’s a ‘Mediterranean’ design – it’s bad. What you’ve got is water penetrating form the top, and it runs down inside,” Stucki said.
“There’s no decent capping on top either, so you’ve got water running inside the wood. Then of course it goes in through the nail holes.”
Health issues?
"You don’t notice the moisture on the inside yet. Because while the interior’s still sealed, you don’t have a health issue. But there are units where, if you lift the carpet, that you notice there’s some black mould there already. So health issues are starting.”
Legislation
There was total uncertainty whether the claim would qualify if it was for a rebuild, or if the claim would only qualify if it was for repair-only.
“It’s too vague. There’s not enough detail.”
Williamson’s heart was in the right place. “But he’s got to deal with the banks, and the Finance Minister as well,” Stucki said.
“We just want to make sure we have access to money so we can get on with it. A majority of people here don’t qualify [for bank lending criteria] now because all their assets are in a place that’s over-mortgaged.”
Those trying to sell now would have to take “a pittance and walk away”. You’re looking at about NZ$110,000 to NZ$120,000, that’s what they’re selling for. At the moment if it wasn’t leaky you could probably get NZ$250,000-260,000.
“People can’t afford [to sell so low and walk away].
One couple who were owner-occupiers wanted to emigrate to Australia.
“They wanted to sell the place so they can purchase something in Australia. They couldn’t sell. So now they’ve got tenants in there and I’m not sure they’ve managed to buy a place in Australia or not.
It was easy enough now to get tenants for a unit, although it would become an issue as health problems associated with the moisture worsened.
“The health issues are something that will happen sooner or later in a serious way.
“Now it’s just wait for the government. You can’t use it as collateral for anything else.
“It literally puts your whole life on hold. You’ve got an asset that is probably worth less than what you still owe on it. It’s easy enough for people to say ‘oh you shouldn’t have bought the place like that’, well hang on, sometimes that’s the only thing that’s available in our price range.”
“And you take [the inspector’s] word for it.”
“Everybody has got a way out except for the poor bastard who owns the unit."
Life on hold
The problem literally put people’s lives on hold and not just for a year or two. “Money that they had saved for retirement, it’s gone, because you have to invest it in something else now,” Stucki said.
“If you have to find another NZ$125,000 – that’s money that you’ve put aside for other things,” he said.
“Our generation hasn’t had a war. This is our war here. At least we’re still alive. It’s just frustration. That’s what it is. And the quicker we know what’s going to happen, the quicker we can make a decision and move on. But the key is that the government guarantees that everybody will qualify for that package. That’s the key.
“If we have to repair them [rather than rebuild], ok, they’ll get repaired but guess what? I’ll be the first one to sell straight away. Because it’s going to go bad again, you still have a stigma on it and there’s no better time to sell than when it’s brand spanking new.
“You’ll find there are a lot of people who will just sell up.”
“My bubble has shrunk. My retirement fund’s gone. I’m back to starting from scratch.”
“NZ$150,000 say over 10 years – that’s NZ$15,000 a year. That’s over NZ$1,000 a month. That’s money you could have put in the bank.
“So yes, it’s changed my life.”
A PricewaterhouseCoopers report commissioned by the government last year estimated between 22,000 and 89,000 homes were leaky.
PwC said a consensus forecast suggested 42,000 dwellings were likely to be leaky homes and noted only about 3,500, or 8%, had been repaired. PwC estimated the total cost of fixing 42,000 leaky homes, including repair and transaction costs, at NZ$11.3 billion in 2008 dollar terms.
The central government has already estimated its share of the cost at NZ$1 billion.
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