Building and Construction Minister Williamson warns of 'ginormous' leaky homes bill we'll all have to pay. Your view?

Building and Construction Minister Williamson warns of 'ginormous' leaky homes bill we'll all have to pay. Your view?

A leaky building in Grey Lynn/Bernard Hickey

By Alex Tarrant

Building and Construction Minister Maurice Williamson has moved to caution leaky home owners not to get too excited by Friday’s Supreme Court ruling that found the North Shore City Council (now part of the Auckland Council) liable to pay for two leaky developments.

Williamson was responding to comments from lawyer Paul Grimshaw, who told Radio New Zealand that the ruling had opened up the way for 90% of leaky home owners to sue their respective councils that signed off developments.

“If you can show that the council was negligent in the way that it was in these cases, and you can show that they caused the loss of the home owner, then you can recover that whole amount from the council,” Grimshaw said.

However Williamson told Morning Report the Supreme Court ruling was “just one more step along a very long journey, and it’s added a little bit more certainty to certain circumstances and under certain cases”.

“My advice to most people is if you get involved in litigation, you may actually end up winning and then when your legal bills are all paid, you can end up actually losing,” Williamson told Morning Report’s Geoff Robinson.

“The package the Government’s putting together - it’s a voluntary package – no one has to take it, but if you sign up to it the council stumps up with 25% of the cost, the government with 25%. The remaining 50% goes as a loan guaranteed by the Government to a bank,” Williamson said.

Government plan sees half cost paid by 'someone else'

“That means that you get your house absolutely guaranteed fixed. Half of it’s paid by somebody else, and not a single cent for lawyers’ bills,” he said.

Williamson said he got upset when he heard people “gleefully saying, ‘ha ha, now the local authority’s going to have to pay.’ Local authorities are just a clearing house for rate-payers money, just as the Government is a clearing house for taxpayers. So it’s a long ghastly saga and in the end we’re all going to pay,” Williamson said.

He said his understanding was that councils’ insurance had very limited cover for the leaky homes issue.

“Because remember in many cases the local authorities did what they were supposed to,” he said.

“They checked that the building met the code of compliance and signed it off accordingly.”

“In the mid-90s [councils] had been allowed to sign off on untreated timber, then that timber rotted. So the councils will argue that in some cases they did do the proper checking, they did do the proper work.

“Right across the spectrum there’s a whole range for systemic failures, from poor builders to bad materials to shocking design to dreadful inspection processes and we’re all going to end up paying the bill for that,” he said.

The Supreme Court ruling applied to these two developments and every case would be different, Williamson said.

“When people have asked me ‘what should I do’, I said you’re going to have to really sit down and go through carefully what your predicament is in your case,” he said.

“With the Government’s package, it’s voluntary and you can be guaranteed what you get. But you may think ‘well I can get more by going to the courts and suing.’ You might, but I’ve known a number of people who, after they have won, felt like they had lost when they saw what their legal bills were.”  

'Ginormous disaster'

The leaky homes issue could cost anywhere between NZ$11 billion and almost twice that amount.

“It’s just a ginormous disaster. I was in Australia last year at a small-business ministers’ conference and they were talking about some of their huge disasters like the Queensland floods and the Victoria fires. I said, ‘well New Zealand’s had a bigger disaster than any of those.’ They all looked at me like I must have been on another planet,” Williamson said.

“I said, ‘the trouble is ours happened over a slow burning fuse of 15 years, yours happened all at once.’

“But ours is 11 and a half [billion dollars], and possibly nearly double that when it’s all finally finished.

This was because there were a lot of houses in the dryer areas of New Zealand that were still rotting but not known about yet, “and they’ll manifest themselves some time later”.

Williamson said he was confident new building standards were helping.

“Every building ever built actually leaks, but it’s what it does with that moisture, how it replenishes the air, how it dries and how the timber copes with any moisture on it. So with treated timber, it no longer rots. That’s all now mandatory,” he said.

“One piece of advice to everybody – if they register their claim with the Weather tight homes resolution service, the clock stops ticking on the ten years [claim provision in the Weather tight Homes Resolution Bill going through Parliament].

“Then at that point they’ve got all the time in the world to decide – do they want to opt for the government package, do they want to pursue people through the weather tight resolution service, or do they want to go through to the High Court?”

One big drawback of the fiasco was that council building inspectors had got notably tougher.

“When I became the minister I found that the risk averse behaviour of councils was quite serious. Of course you’d expect it because they’re scared witless of what their liability would be,” Williamson said.

“So part of the Building Act review, and the second tranche of legislation we’ll be bringing in in the new year, is to try and move to some form of a warranty-based system with some form of assurety holders, where a premium is paid. Then if anything does go wrong, it can be claimed through an insurance-based scheme [to] take away some of that liability from local authorities,” he said.

“It’s not fair on them, even if in many cases they didn’t do their job properly - in the vast bulk of cases they did do their job, but the houses still rotted.”

Also see story on banks yet to agree to the Government's rescue package.

And here is a media release from the Supreme Court on last week's ruling:

The North Shore City Council appealed from two decisions of the Court of Appeal regarding its liability for negligent inspection in leaky homes cases. Both appeals involved similar points of principle, albeit some issues arose only in one case or the other.

The Supreme Court has declined to reconsider the law as approved by the Privy Council in the case of Hamlin in 1996. It has done so for two reasons. Firstly, many people will have relied on that decision in organising their affairs. It would therefore be inappropriate to defeat that reliance by holding that the law was otherwise. Secondly, the Court is satisfied that the decision in Hamlin was and remains correct.

This means that the Court has affirmed that a council owes a duty to be careful when inspecting homes in the course of construction. The council is therefore liable for loss caused by negligent inspection. The duty is owed both to the first owner and to subsequent owners. All premises that are intended to be used as a home, according to the plans submitted to the council, are the subject of this duty. It does not matter whether the home is a stand-alone building or part of a block of apartments. The Court has upheld the decision of the Court of Appeal in this respect.

The Court has also upheld the decision of the Court of Appeal that a subsequent owner may sue the council for negligence, provided that owner has suffered loss as a result of the negligence, notwithstanding the fact that a previous owner may also have been able to sue the council.

On two other subsidiary issues concerning body corporates and the lack of a code of compliance certificate, the Court has agreed with the decision of the Court of Appeal.

Hence the two appeals by the Council have been dismissed.

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102 Comments

Maurice Williamson says: "Local authorities are just a clearing house for rate-payers money, just as the Government is a clearing house for taxpayers. So it’s a long ghastly saga and in the end we’re all going to pay."

Really?

Why should I as a taxpayer and ratepayer pay to fix someone else's house because of someone else's mistaken decision to build the house, buy the house and lend the loan.

Why is this cost being socialised?

Why should tenant taxpayers (who aren't home owners) pay to rebuild someone else's house?

Why should home owners of non-leaky homes pay to rebuild someone else's house?

Isn't this just a transfer of wealth from the poor and the non-leaky home owners to the builders and owners of these leaky homes?

Am I the only one grumpy about being forced to pay for someone else's mistake/poor fortune/incompetence/greed?

cheers

Bernard

No, your not the only one who is grumpy about it....but just to be safe I put the hose up inside the wall ......I need some alterations done on a subsidy basis.

Point number two how the hell did Williamson get out from under that rock we drove him to last time.....? Time to give the mouth with a slip differential to the brain....another good bashing methinks...

Now lemme see now.....hmmmm......what did he call us here....oh yeah Rednecks...! is whut it wuz.

Me too ! I was grumpy enuff at National socialising the costs of leaky homes and the finance companies , I left the country ............ If you hit a 1983 style full blown economic melt-down  I'll grab a small bag of Philippine pesos and come home to live like a king . ........ I guess that I must be a " red-neck " too , Count-of-Christov .

With the amount of rock you've seen broken n toted GBH your  just about a Deputy with a pump action's what u are.. 

The guys got 200 pesos/day ( $NZ 6.50 ) , plus pandasal ( local bread ) and coca cola twice a day , for slaving 9 hour days in the blazing heat , shifting rocks ............. And they tell me that I'm the best Boss Man they've had .

Apparently the American & German masters are tough !

I knew there was a Santa Claus.!....at least now I've got a positive address to send my begging letters to.

I remember writing him once and asking if he could git my Ma n Pa back together in time for Christmas.

He wrote me back n said.. what n spoil your Daddy's fun.!...boy he's been banging you ex baby sitter like a screen door in a hurricane............

he sent me some leggo.

Isn't free enterprise great...free to take all the tax free profits in the good times and free to "socialize" all the losses. Mind you nobody is willing to actually pay enough tax to fund any of this nonsense.

 

 

Free enterprise is only that good when you've got gut-less wonders for politicians , who're too spineless to say " caveat emptor " .  That goes for leaky home owners , debenture owners of SCF , and the  twits in Canterbury who had no building insurance .

But gee Bernard..if you apply the same twisted and dumb arsed logic that claims the earthquake rebuild will boost GDP...then 40ooo rotting homes and school buildings being rebuilt will make us all very wealthy!

So what's your solution Bernard? If the council is legally responsible, the only way they can pay is via your rates.

The reality is that the developer of such houses paid the council a sum of money to sign off that the house would last 50 years (called a building permit). The council took the money without checking the house would indeed last 50 years. Now we all have to pay for it.

You are lucky the cost is being 'socialised' to all of NZ and not just the Auckland council!!

My view is a bit like a banker's. When the value of an asset falls the first part to be wiped out is the equity. Then a debt restructure has to happen and the bank takes a loss.

Why haven't we seen that here first in this case?

Why should taxpayers and ratepayers help rescue the home owners and banks? Their decisions are what contributed to this mess in the first place.

Many, many of these homes were bought after the problems emerged in the press from 2002 onwards.

Creating bailouts like this risk creating more moral hazards.

Should the government compensate everyone for every 'accident' that happens when they buy something?

Should Fair Go become the government owned vehicle to uncover disasters and ensure everyone gets a handout?

cheers

Bernard

Ok to reply to your annoyance.

You should pay Bernard to fix somebody else's broken house because behind the small investors and homeowners who own the problem are banks. Australian owned banks who according to the article stand to loose between 10 and 20 billion dollars if their clients cannot afford to pay their loans back and the loss is written off their balance sheet.

I'm guessing a bank would have the resources to sue our council and government who among other things passed the housing code of compliance that lead to untreated timber being an acceptable product in housing.

I also imagine those banks are lobbying to get the situation resolved.

So to put it simply the cost needs to be socialized because it was a government approved error and while I don't like the situation either I also think that a home owner or investor shouldn't need to be an expert in construction, they should be able to rely on the standards set by the government and if the government is shown to have set substandard standards then they should pay to resolve the situation.

"When you buy a lemon why should everyone else be made suckers?"

Sums it up eh Bernard?

I'm grumpy too, but how is this paying for "someone else's" mistake? This was "socialiased" long ago when "we" the ratepayers and taxpayers had the stupidity to permit stupid building materials and designs. Then we inspected these stupid designs (hello? internal guttering and untreated timber!?), and signed them off as fantastic for rainy Auckland.

So yes it sucks, but how can we say homeowners are on the hook when society screwed up? Surely if I go to a council with a design for a home with a sieve instead of a roof, they should refuse to sign it off?

For the record, I own a nice weathertight 60's iron and weatherboard house, and don't need any repairs. I'm going to be really grumpy paying higher rates to fix pretty much all of Gulf Harbour, Botany, and the east side of Te Atatu Peninsula, but "I" was part of the system that signed off on that crap right?

 

 

 

Add in most of West Harbour and most of the older (90s) parts of Henderson Heights out West. 

An agent tried to offer me a leaky monolithic looking house with obvious visible leaky defects on the outside the other week. I asked the agent if it was leaky, they said "the vendor hasn't indicated it is", I told them it was and not to waste my time. Still trying to hush it all up eh?

Simple answer.  I lived on the shore in the 1990s, George Wood was Mayor.  There was plenty of debate over the infill housing and the quality of housing, and yet everyone still voted George. Why? Ex-National, and the other candidates were talking of intervention into the building industry, how unfreemarket and bloody socialist. Noitce the same thing didn't happen down in the South of Auckland, Franklin, where they had a sensible mayor.

This is why we pay, becasue George Wood is the sort of idiot that most of us vote in. In the case of the North Shore, because he was an ex-National man.

He could have been Hitler or Ghengis Khan, Jesus, you should see what he did to Albany, the man had a clean slate to work from for god's sake...

I think it was the National; party that signed off on the crappy building materials, not much political milage for the Nats there, just bury that discussion, end it, lets move on, past is past and all that.

 Christmas is a time for giving, and how can you give if no one receives.

I'll give anyone a bag of Gummy Bears if they give me a promise to pay for the repairs to their leaky home , themselves .

Merry Christmas !

Williamson says - “That means that you get your house absolutely guaranteed fixed. Half of it’s paid by somebody else”

I am pleased that someone in this National Gov't is willing to state their true Socailist principles.

 "It’s a long ghastly saga and in the end we’re all going to pay"......hear that Gummy Bear....we don't want you to miss out so we put your name down on the list of those to pay.....hehe.

If the $NZ eventually collapses to 50 cents US , again , we'll be back . The question is , how likely is that to happen ? I'd say 50/50 a chance, given the parlous state of NZ politics & appalling politicians .

What the Nat's campaign on , heading into the 2011 election , is crucial . We already know where Labour stand , and it's not a pretty sight , is it !

Having long tails enables them to stand Gummy...the whiskers help detect the gullible and envious. 

what I'm grumpy about is that the people who profited from building the homes are free and clear.

And that when the whistle was blown in 1998 or thereabouts, it took a further 4 or 5 years for the governments of the time to do anything about it.

Gross incompetence on part of the building authorities, so yes Bernard, morally, government (and thus the taxpayer) should be on the hook, because

a) the building authority allowed stupid building regs

b) did nothing for 4 or 5 years after one of the inspection companies blew the whistle.

The ACT party zealots will bleat about Caveat Emptor.  Which would be all well and good if you could go back and take the blighters who built the crap to court.  But you cannot.

In my eyes, there are a whole bunch of people who naively trusted that the building they purchased would be sound, are left between the devil and the deep blue sea.

If you buy a toyota, and the accelerator sticks due to a design fault, you can seek redress from toyota.

If you purchase a leaky home from a building company that is folded immediately the property is sold,  and the government / council were incompetent in their governance duties, who are you going to sue?

 

Exactly. How many of the council employee inspectors are still employed? Doing the same job? How many of the responsible Architects are still in business? How many of the builders are still around? How many folded, then did a phoenix and are now back in business? How many did a runner?

Not an ACT party zealot (loathe them really).

I have a Toyota Corolla, not an expert on cars but it has a proven record. I don't need the NZ govt. or Toyota to pay for repairs because it is an appalingly reliable appliance type car.

If I had bought a Great Wall Ute I wouldn't expect the Govt. to pay for it when it promptly breaks down.

When it comes to houses I needn't be an expert to pick one with eaves and a sloped roof - this is also a time tested design.

Unfortunately, because the politicians made a mistake signing off houses I am obliged to use my deposit money (via tax) to pay off leaky houses built by the feckless. I will keep patiently saving....

Can you explain where my ethical obligation to pay for the politician's mistakes stems from Gibber, I can't for the life of me see it and consider that I have a much stonger moral code than most.

Gibber - I like the points you and Monteiths make. In particular your last point about who had the financial benefit and whether they are still around to sue. As I see it, most of them probably are, even if guised in another way - XX Homes 20YY. Plus, it's not just XX Homes 1998 who are at fault, they were supplied materials and services by entities who are still very much around and who will be laughing all the way to the bank the way this going - off the hook and get to enjoy the remedial work. Sure, the relevant authorities could have performed better, but they didn't benefit from the work or the error - and what grumps me is that those who did, are not remotely doing a Toyota or a Rolls-Royce - far from it. (Perhaps BP needs to take a leaf....)

So are those who benefitted from the errors being asked to take an appropriate share of the responsibility? I don't think so.

Why not?

Les.

"Am I the only one grumpy about being forced to pay for someone else's mistake/poor fortune/incompetence/greed?"

"In my eyes, there are a whole bunch of people who naively trusted that the building they purchased would be sound, are left between the devil and the deep blue sea."

This is sounding awfully like finance companies.

Certainly is sounding like finance companies

If were starting to do predictions for 2011 Bernard, then I would say a  well known and Govt guaranteed finance company will fall over before March.

If I was building a house I'd be grumpy that I'd have to pay the council to approve the plans and carry out building inspections. What a waste of time and money what a useless track record they have. Another case of blithering incompetentcy from our government and local body bureaucracies set to cost the country billions.

Students, stay in NZ, pay off your student loan, buy a house and pay for mistakes that aren't even yours... or dont and get out while you still can!

It's a good point (about the students). What is even worse is the inter-generational condescension shown by the capital gains winning boomers. Surely, there are more than enough "capital gains" to compensate for the leaky homes costs. If we were to talk about "socializing" those gains, I'm sure you'll see some fireworks.

Stamp Duty @ 5% flat to pay exclusively into a Defective Housing Restitution Fund? That way only those 'in the business' ie: property owners, pay for their peers, and at a time of their choosing (sale time) not those who chose not to participate. Owners don't sell? They will one day; the Government can wait as long as it takes to recoup their money ~ whatever it grosses up to.

That is the nail on the head, it is not socialising the losses, it is crystalising the gains.

 

Guess what, a sh*tty leaking wooden tent was never worth $500k+. Ever.

 

The final slap in the face that a boomer gives to their kids and grandkids, sorry, you cannot afford a house as they are inflated, turns out they were crap, you can pay for my crap while being unable to afford it yourself.

 

What are those migrant rates to Aussie?

 

Thank you for raising this issue Bernard,

The immensity of it has hardly been addressed by the mainstream media to stimulate constructive debate. Excuse my diversion, but I find it a little disconcerting that Bernard or the contributors have not also mentioned the economic costs of health that are so closely associated with this problem. I understand that these costs are almost impossible to quantify accurately, but it seems that the problem is actually much larger in terms of cost to the taxpayer than everyone realizes. If we account for these externalities, then surely we have to accept some "socialization" of the cost, particularly to renters who are not responsible for ensuring that buildings meet minimum standards of habitation (which of course it appears they don't).

"minimum standards of habitation".
Surely this is the landlords responsibilty/liability.

Oh I see... begging the question!

Exactly KW. But I think that shows the insanity of it all. The landlords consider themselves "businesspeople", but they most definitely don't want to take all the risks associated with running a business. Ultimately, they will want the govt to wholly accept responsibility and cost. The property industry operates under free market ideals... when it suits them.

Excuse the lop-sided logic. Some of the principles involved here are similar to the Ngataringa Bay Fiasco of the 1970's where the mistakes of the Devonport council were borne by the residents of the suburb for many year afterwards, at enormous cost. For those who are not familiar with it its a worthwhile read. The circumstances are different, the outcome the same. If you vote the clowns in, then you have to wear the consequences. If not in direct compensation, then in sky-high rates.

J.C

I think you assume that the majority of the leaky buildings are rented out by landlords. A lot of them are owned by owner occupiers (Bernard had a report of a leaky apartment complex last week sometime). Bernard any stats on the % of owner-occupier leaky buildings?

Regards

I feel nothing but shame for our country over this. These losses should not be socialised, the people who made these mistakes by not doing due diligence should pay or go bankrupt. It is simply not our fault, I'm tempted to start a revolution against this crap, because its really the last straw, I mean, we socialised SCF and a bunch of other finance companies, we are turning communist and its bull$%^&. I for one won't stand for it and as a citizen of this country I have the right to defend it against tyranny and injustice, because thats exactly what this is, making someone pay for someone elses mistake.

Go , you good thing ! Let rip . Not before time that we gave both National and Labour a blasting , over their behaviour since 1999 .

[ Hey , but one spark of good news , John Wright is now coach of the NZ cricket team , the Crap Cats . ]

I don't think this is anything like the finance company bailout.

The simple fact is that the council took the money (building permit) and signed that these buildings would last 50 years and they didn't. Why they didn't have insurance to cover that seems rediculous, but they didn't. So the council is responsible, and the only place the money can come from is the ratepayers or the government. The council has a legal responsibility in the case of leaky homes - in the case of finance companies the government had no legal responsibility.

I won't stand for it ay, I'm not having my hard earned tax dollars going to pay for someone elses poor investments.

Oar...come on that Muppet King...a wee nick here and a slice there..you won't feel a thing...the fingers are already worming their way into your wallet...before you know the extent of your contribution..they will have you singing "dooooo you want any more"

I got a student loan, but didn't finish my degree. Can the government pay it off for me then?

How about they pay the interest for you? Sound fair?

To repeat my earlier post. How many of the council employee inspectors are still employed? Doing the same job? How many of the responsible Architects are still in business? How many of the builders are still around? How many folded, then did a phoenix and are now back in business? How many did a runner? Someone somewhere with a vested interest should set up a public register web-site listing the names of everyone culpable for this. Let them live with the stigma forever.

We could borrow an additional $22billion next year from some fancy rich overseas bank, fix the houses, then default.  Ireland, Greece, etc, would have done it that way in hindsight. 

Its pretty easy to sit here and whinge about our hard earned tax dollars / rates payments being 'socialised' to people who are probably better off than us. But no one has come up with a valid solution. If the court finds the councils are responsible, do you think:

a) The council should just not pay and ignore the supreme court

b) The government should pass a retrospective law that the council is not responsible

c) The council should declare itself bancrupt

d) Any other solutions

e) People take responsibility, realise that the property industry in New Zealand is a cesspool of greed,knock down and rebuild their houses using the capital gain posted over the last 8 years.

Yeah good luck with that one

Jimbo

c)  bankrupcy has to be a serious consideration - as Auckland ratepayers can't afford 25% of this problem.... let alone 100% if found the Council is found negligent in terms of inspection processes. 

And, one must consider if indeed, as Maurice admits, there were "dreadful inspection processes" (i.e. inspectors be they Council or contractor) .... I think we also have to look into the very likely possibility of corruption associated with those "dreadful" processes.  A recent survey in NZ found 4 in every 100 respondents had taken/offered a bribe in the last year.  Surely this has been going on for years. 

Most developers are very "tight" with the local Council's bureaucrats,  Xmas drinks for Council staffers, expense paid trips for Council officials to look at their other developments in out-of-local regions/areas, corporate box seats at major sporting events, dinner vouchers etc. etc ... all manner of "hospitalities" are common, common, common place in the development sector. 

When you've got a building going up - there are serious deadlines to meet - builders, contractors and subbies all standing idle while you wait for your inspection ... waiting can be very costly.   I'd say a whole lot of the pre-lines and other inspections were done on a wink and a nod and a backhander - yes, a bribe.  

And it's this corruption that I really, really, really don't think I should have to pay for.  A whole lotta folks in the building industry (manufacturers, developers, council staff and contractors) made ill gotten gains as a result of this travesty - and I believe criminal investigations should be undertaken.

We don't like to think there is any bribery and corruption in NZ, but the average NZer needs to get their head out of the sand - and demand to know the names of the individual inspectors who were "dreadful" at their job on multiple occasions. 

 

We are becoming a socialist country under NATIONAL - can't believe it! Why is everyone expecting the government (US) to pick up the tab for everything. Where has personal responsibility gone  and personal risk. The leaky home debacle is such a mess. What about the govt money going into Pike River - the govt should get a lean on any future profits to recoup it surely. Can't see how there is enought money to go around!

In all fairness to the current crop ( a dismal harvest ) of politicians , NZ has seldom strayed from it's socialist path . Decades of  the " entitlement " mentality have softened the populences' brains . Addled their thinking . Weakened them .

And dare you oppose that , and the lefties roar out of their public service cubicles and lambast you for being a " far right loonie " .

Now the government spendfest on Michael Cullen's " packages " to the " poor " , is coming from munny borrowed off-shore . That is insane !

Just another cost for the pay generation.

Pay for your own retirement...fair enough.

Pay for the stupid who hasn't saved for their retirement...hmmmm.

Pay for your education...fair enough.

Pay for your kids education...fair enough.

Pay for the criminals and the stupid who invested in finance companies...hmmmm

Pay for leaky homes....hmmmm

Pay through the nose for house...what to do.

Pay for the welfare state...fair enough for those that need it otherwise hmmmm

Pay for your own medical / health...fair enough.

Pay for a million other things while your at it...including our ever increaing national debt...hmmmm

While you're at it, heres another increase in rates...

Baby boomers, you've done a shite job of running this country on your watch.  Move over and we'll take it from here....we can't do any worse.

Like all of the tough problems there is no easy answers. Bailing out finance companies... that was dumb. People invested trying to realise their risk, they gambled, and should have lost.

Housing and leaky homes is a different story. That should not be a gamble. The councils signed off. They are responsible. End of story. If I bought a house that I had to jump rings through to achieve the permits etc, then I should be covered by those documents. It's like insurance, otherwise what is the point of permits. The councils okay'd the building.

There will be a few scoundrels that profit out of this, or are not brought to justice for it, but there are also a lot of people that followed procedure and have been shafted.

They want a fair deal, and I think they deserve one. If you can prove that they bought these homes thinking of the great returns they'd get by claiming money back when they went rotten... well good luck.

At the end of they day we live in a society. And society shouldn't shit on itself. Socialism be bollocksed. This is about a local government stuff up. Local government that was voted in by the people, and people always get the governments they deserve.

If you cannot handle that then you need to go live in a country where you are surrounded by more people that are like you and vote like you. Maybe that is the Congo, or maybe its North Korea.

To sit and moan about people getting subsidised because of the fact they bought a signed off, council verified house that went rotten and calling that socialism is daft. Dafter still is to say to them "Tough. You Lose."

I'd rather pay the money (even though I'm in Christchurch and have never bought a house yet), than to live in a country that indignantly shits on itself, and then blames itself for being shat on.

Thats my 10 cents.

Well said

Most people are not qualified to tell what is a well-built house, and what is not.  So we have two government institutions that enable citizens to be able to purchase a house without ridiculous cost in due diligence every time a house changes hands.  The first is a building code, which sets national guidelines for safety and quality, and the second is councils, which set location-specific guidelines and certify that a building has been built according to the various codes.

 

If these structures were not in place, then the libertarian views above re. buyers bewaring would be valid, but given the huge apparatus that exists to guarantee the safety and quality of residential building, it is logical that those parties are liable if something goes wrong.

 

The councils have known this for some time, and have fought a rearguard action of delaying every possible claim, then offering out of court settlements to prevent anyone going as far as the recent Supreme Court judgement went.  The methods that they have used to avoid paying out in cases where they know they are legally liable are plainly immoral.   They know that if they delay the case there's a good chance that the homeowner cannot afford to carry on prosecuting (or will figure that any future win will have been eaten up in legal costs), and have used this as their primary mechanism for reducing liability.

 

The 25/25/50 deal was an attempt to entice homeowners into not suing, and thereby discounting each payout by 50%.  Now that this supreme court judgement has been made a homeowner would be foolish to take it up as the cost of litigation will be reduce, and is likely to be much less than 50% of repairs.

 

My crystal ball says that councils will finally admit their liability some time in the next 12 months, and there will be some sort of government bailout to share the costs not too long afterwards.  Ie. the costs will be socialised.  A pain, but you can't change it without retrospective legislation.

Always interesting Hugh, but let's be realistic, responsibility for the cost will ultimately lie on the taxpayer. These "non-core" assets that you refer to belong to the taxpayer, not the council. In your obsession with the councils largesse, you shouldn't lose sight of that. Furthermore, it seems that the core of the problem lies in incompetent planning and possibly corruption, not in the cost blow-outs (which is a whole other story).

Hugh, 

As a long-term non-resident who has been working in manufacturing, I would argue that manufacturers want to protect their brand and they want repeat business. Secondly, particularly in manufacturing, to simply sell a product is not enough in the modern world if company's want to survive.  I agree with you that there are laws to protect consumers, but I'm not sure if it's simply rules and regulation that makes companies behave the way they do. 

It appears that councils in NZ are not responsible and don't feel any responsibility. Why do I say this? They're a monopoly who don't face any competition so they're ultimately never hit where it hurts. Councils' stakeholders are ratepayers but I would think that the councils don't think of ratepayers as their owners, similar to what a corporation might think of their shareholders. 

Your point is well taken though.

Well said Hugh,

In terms of sustainable objectives, the govt and councils have failed miserably. What makes it worse is that accountability is elusive. Of course, if this were to happen in private sector, the chances are the organization would not have survived such failure. I also think that your highlighting of the opportunity costs is important. We sold out for a housing shopping spree and got caught up into believing our own bullshit.   

Well yes,Hugh,  the quality of house construction plummeted

AND in many cases, you would agree, many should not have passed their inspections - even under the then current building regs. 

So why did they pass - simple - corruption in the inspection process.

Hugh,

You are claiming pregnancy, but with immaculate conception - and that is not very credible. Corruption is at the heart of systemic failure.

Kate has got it, but you haven't yet.

The old places built by Fred the Farmer,a hundred years ago.are still as good today as they were when he moved the missus and kids in. Something tells me,the whole shonky mess needs a severe tweaking. 

Monteiths

Hugh's on to it. 

Don't remember stating anything other than it's another thing to pay for....you can chip in my bit of the bill if you feel the need.  

I'll continue to come and go from NZ as I see fit thanks...unfortunately the people who should leave don't seem to want to or can't....now thats a shame. .

P.S North Korea is a bit cold this time of year and they don't seem to trust outsiders for some reason. 

Ging. That wasn't meant to be a reply to your post. I meant it to be a stand alone post. I agree to the post you made, we are the pay generation.

 

 

 

Roger that. 

Have a good Xmas.

 

 

It is a bit of a myth that treated timber doesn't rot, treatment merely delays the process by 5-10 years. You can't now use Douglas-fir because it can't be readily treated but it is a superior structural timber to radiata. They key is proper design so that the structure is not exposed to water, no more Mediterranean style villas please.

I'm getting pretty grumpy about socialising losses. What's the point of being risk-averse if you end up paying for other people's follies anyway?

I've always wondered how we get such rubbish timber for our houses. They have just milled a block not far from me, 24 years old. The pruned log is for export, the next log up is for framing timber. That top part of the tree is maybe 12 years old , we a using something akin to Balsa wood to make what is often peoples most important asset. The forestry industry should be forced to higher standards, the radiata they grow, is as Wally said Rhubarb. We need choice in the timber industry the big boy's get to much sway over government.

the big boy's get to much sway over government.

"Too much sway" is too polite/politically correct.  Why did the untreated timber get approved by BRANZ.  Again, I would say it was a bribe.  The folks there who approved it and how it was approved needs to be investigated - every email, every text, every chat over a few drinks, every personal bank account etc etc.

I didn't give the shit that name AJ...it came out of the time period when they ran out of crappy Rimu(the heart is the only good bit) and the pine was delivered to building sites...where it promptly twisted and turned into bananas in front of the builders....Rhubarb.

The stupidity comes with the decision to run with planting more pine....they should have planted Yellow Pine. Then the vested interests got stuck in to protect their plantations of shite and we got stuck with Rhubarb.

If you want proper timber use Yellow Pine...in the roof away from the ground use DFir...better still go for rammed earth on a slab with Dfir roof framing and a steel roof with bloody wide eaves.

The govt finally changed the nanny state laws and you can build your own again.....excellent.

The poor quality Rimu used between the time the heart wood ran out and the Rhubarb arrived...this Rimu is xmas dinner to borer....they just love it.

rammed earth.... you give me hope!   Now a google for xmas - 'Inosculate' (don't let Rog pervert it!)

 

 

Did Len Brown factor this contingent liability into his "rates at the rate of inflation" pipe dream. 

Maurice W is a great accountant who once told me that the Donation of Musick Point land back to the Crown would cost nothing despite my pointing out that Telecom would end up with a minimum $4m tax saving in writing down the land value on its books.

A very logical fellow is our Maurice

I am renting and have no leaky property, ,so there is no conflict of interest. I voted for national as well which I regret now.

I believe that no one would want to or should have to pay for the leaky homes  in principle. Having said that why the hell councils charge people money and make them jump through hoops for resource consent/building consent if they are unable to monitor the standards. To have no accountability for the  council is a moral hazard as well.The councils must be held accountable. What about the role of producers of various building products that are implicated in this sorry saga. It seems that the big guns in NZ have no accountability just as the finance companies who plundered and roamed free. Look at the monopolies in construction industry, the more one digs the clearer it becomes that NZ is not as corruption free as we are led to believe. Caveat Emptor  is fine as long as people had a choice to design ,choose materials and had the option to use private building inspectors. If humans  were as logical and methodical as some people here expect them to be, there would be no need for laws,police and rules. There are countless people who were unaware of the leaky issues. The term socialism is used rather indiscriminately and very loosely.  

the more one digs the clearer it becomes that NZ is not as corruption free as we are led to believe

My point exactly.

the second reaction to 'corrupt'.

Interesting.

By that reckoning, Hugh, anyone who reacts to the pointing out of geographical, geometric and volumetric limits, with the simplistic dismissal "malthusian", has their head in a fridge.

The problem was an issue in Canada before it was here. Yet ole NZ kept on the same building dodgy way without learing from others mistakes. .(is that an example of idiot behavior)
Ah well. Tick it up on the credit card will you Mr Bondholder. My grandkids will pay for it (or their grandkids)

The problem was an issue in Canada before it was here. Yet ole NZ kept on the same building dodgy way without learing from others mistakes. .(is that an example of idiot behavior)
Ah well. Tick it up on the credit card will you Mr Bondholder. My grandkids will pay for it (or their grandkids)

What we need to see built in NZ are rammed earth houses on raised slabs with wide eaves and confine the Rhubarb to boxing status. Go Google rammed earth nz and check out what's being done by real builders.

Bernard, thought we lived in a socialised state, how else do you explain welfare like national super etc.  Why is it the fault of some trusting, well-meaning person who had a house built to specifications and checked/approved by the authorities? Problem is not as simplistic as you seeem to claim. And I say this not out of any self-interest but as a person owning some properties, all of which no doubt will have rates levied to help redress the situation.

Why should future generations be asked to pay for the governments / councils / builders / architects etc mistakes? 

It will be them that ultimately cops the majority of the bill.

I would be interested to hear from those who want the rate / tax payer to foot the bill and wheel out the line…it’s not my fault!

Why should future generations be responsible for paying these costs? 

It’s not their fault…it was not of their making…why should they pay? 

Ultimately, is it fair that future generations keep on getting asked to pay for the mistakes of the present? 

Can see where you are coming from Ging, but it can work both ways. ie developments done and now paid for years ago provide facilities for current population's use

I don't have a leaky home and assume you don't either, but there are some tragic cases out there and we do live in a socialised state- as opposed to every man for himself situation in those that are not eg not even unemployed benefit in many non-western countries, and forget about 'entitlements' like national super etc

 

Granted - fair comment. 

Yes, the are alot of poor b#stards out there who've been shafted and I feel sorry for them too.  I don't have a leaky house...but that isn't due to good luck mind. 

Apart from the dole if required, the state won't look after me or you. I learnt along time ago not to rely on the government or other people...you got to look after yourself and your family first. 

I don't mind paying my taxes if its means that we / my kids get to live a better society but it seems to me that self reliance is a non starter at the moment.   

But I digress from the topic at hand.

 

"So essentially they are forced to play these political games and curry favour with those in the political / regulatory establishment - and it is this that creates the environment where poor performance and corruption can occur."

I agree with you that corruption is driven from the top. Lord Acton was spot on:
Power tends to corrupt, and absolute power corrupts absolutely.

http://en.wikipedia.org/wiki/John_Dalberg-Acton,_1st_Baron_Acton

"Kate and Colin Riden bring up some interesting points with respect to the issue of corruption."

Interesting!!? Corruption, and our penchant for denying its existence in NZ, are defining aspects of our culture. Also our dependence on government to fix anything and everything - rather than viewing government as a necessary evil to be controlled. Those aspects of our culture provide a positive reiniforcement loop for greater dependence and more corruption.

"SYSTEMIC PROBLEMS BREED CORRUPTION" You have that back to front.

It is corruption that DRIVES systemic failure.

Nice piece Colin........further that Systemic Failure serves as a perfect environment  for the proliferation of corrupt practices........... the chicken and egg syndrome becomes the distraction.

Corruption on personal level requires justification to be acceptable...once acceptable it becomes a  repeatable sliding scale.......until it becomes normalised.......as in well everybody else is doing it...why not me...?

 That is why the word itself needs Clarification by perhaps a gradient means.....as in the case of insider trading............. and the penalties severe.

 The down side..........positions of advantage taken by persons who may have been involved in some (accidental or otherwise) improper practice because of the normalisation of where  the practice lies on the scale of corruption.

"Intent" is one of the hardest convictions to achieve without Clear Undiluted guidelines.

And sometimes that means the mostly good should be judged equally with recidivous offenders.

Thanks Christov - for the support, and for opening the can of worms a little further. And if we keep doing that for another 4 or 5 years some elements of our bold media may even start being prepared to "notice" the corruption.

Cheers Colin.....may you get some well earned respite this Festivus.

 

On a similar note. These guys value their goodwill at Zero obviously, or they would have fought.

 

According to the tribunal, during the period in question McDouall Stuart had failed to have the required level of liquid assets in its account on a number of occasions, incorrectly used a loan in the form of securities owned by directors as part of its liquid capital calculations, failed to hold sufficient client assets on a number of occasions, failed to hold some client accounts in trust and held onto more client funds than it needed to at a time when it was required to distribute funds whenever possible because of concerns over its financial position.

The tribunal issued five public censures, with four of the breaches resulting in fines, totalling $83,000.

In a statement McDouall Stuart said it disputed four of the five breaches and described the fines as ''manifestly extreme given the circumstances, lack of personal or other gain, and the protection at all times of clients assets and their best interests''.

It added: ''The directors nonetheless, have decided that there is a reasonable likelihood that costs would exceed the penalties imposed to continue to fight these allegations, and therefore have taken a commercially pragmatic approach of moving forward.''

http://www.stuff.co.nz/business/industries/4486117/Stockbroker-censured-...

 hey AndrewJ ...have a cracking Christmas have enjoyed much of your input over the last year. 

Same to you Christov, Im going to sit around the pool and enjoy a drink with some mates. Got all the presents, kids got a puppy which the vet said is going to be huge, 40Kg he said. Im going to have to shoot rabbits to feed it which I have a lot of fortunately. Its bloody hot here. Look forward to reading more of you posts in the new year, keep it up. I expect this friday will have lots of bad news just before the holidays, give people some time to forget before they get back .

FYI from a reader via email.

Hi Bernard,

Like your comments throughout the year. Would like to know what you think of this?  Builders are buying up the leaky homes real cheap and will now be able to get the taxpayer to help them pay for fixing them up and then putting them on the market. E.g. One firm I know of has bought five flats at Albany that are all leaky flats and they will be able to avail themselves of the Govt and the Councils 25% each so saving them half the cost of rebuilding them.

My contention is that as the firm bought them with the knowledge that they were leaky flats why should the taxpayer pick up the tab for rebuilding them?

 

 

 

 

 

Harrrrrrhahaha...what say you Mr Key....will the public be financing new builds for these builders...paying 50% of an inflated cost determined by them no doubt?....hey where'd he go...

A lovely demonstration of  the potential for the point made above Bernard. Cheers

Leaky homes actually reflect endemic human arrogance - at all levels.

It was actually the 'competition/free market types, who argued for a freeing up of the buiolding regs, unsurprisingly Hugh gets it upside down.

Material manufacturers, applicators, architects, builders, timber suppliers, developers, PI's, inspectors, councils and Govt, all guilty of arogance - assumed species superiority over physics and nature.

Rain will fall down, untreated radiata will rot, and monolithic panels without careful flashing, will leak.

To think they suddenly wouldn't, because we didn't want them to, is indicative of more social shortcomings than just this issue - we seem to have a fair percentage of folk across the board who have chose to believe the world is as they want it to be, rather than accept it the way it is.

I built right through that period - old do-ups and two new for us. I knew better than to go overhang-less, pitch-less, flash-less, I even know enough not to use radiata in either form (no $ rate is worth ingesting carcinogens).

Those at every link of the chain, who accepted, used, and signed-off such practices, need shot.

But - this is just another case of socialising the debt. I wasn't arrogant enough to tell rain to stay out, or to tell cardboard not to rot, but those who did want me to pay? I suggest the Govt Dept that Labour conveniently re-named, had the ability to veto the obviously flawed practices. They saw it coming, and took it out of the picture Trouble is, I'd be paying then as a taxpayer.

The reason they have re-tightened the rules, is that there are too many cowboys out there, for them not to. The worst I saw (and the only one I was so concerned about to 'pot' it to the Council - was the work of a Registered Master Builder.

This will happen again, though. I happen to be very sure that another widely-used product won't get to its guarantee-date (and you can bet the company will vanish at that point, re-emerging in the same premises making the same stuff under a different name......

I'm not a lawyer, and don't have a vested interest in this issue, but, seeing as it has been festering for so long, isn't this is a perfect opportunity for an ambulance chasing law firm to step up to the plate and run a class action ? Is there a contributor here with a legal background?

"When YOU buy a lemon why should everyone else be made suckers?"

Your Leaky homes ain't my problem, now naff OFF!

'Some' of these homes were built by so-called Master Builders ( a "protect our patch" org who think a little sticker on your van makes all the difference) so..............take it up with them directly

It's official "Baby Boomers are the most spoilt, corrupt, useless and parasitic generation EVER!

 

Bernard

Totally agree with you one this one, why should the taxpayer foot 50% of the rebuild costs when they knew the apartments were shot.  Socialise the costs and privatise the profits...hmmmm.

Here's something for thought.  If someone rebuilds using the 50% available, and the house is sold at a later date over and above the revaluation price, then a % of the profits / capital gains should be repaid upon completion of the transaction. I'll take the easy road here and say where there is no profit / capital gains over and above the revaluation price, no repayment due.  

Something like that anyway, I'm sure you get the drfit. 

It seems only fair to me.

You're quite right about these being moral issues.

Is something wrong because it's illegal, or illegal because it's wrong?

It is indeed a great disappointment that the churches are absolutely nowhere on all this. One of the reasons that the USA is a great nation, is because their constitution is against the "establishment" of churches, and they have multitudes of less formal churches where people actually get their minds clarified rather than stifled.

An interesting finding in this context, is buried in the recent study "Economic Enlightenment in Relation to College-going, Ideology, and other variables" by Zeljka Buturovic and Daniel B. Klein. The primary finding of this study is that people who self-identify with leftwing political ideology, have a very poor grasp of basic economic principles and were unable to correctly answer questions like "Restricting housing development will tend to drive up the price of housing; true or false"? But there are numerous other breakdowns of the statistics; one that is relevant here, is that among "religious groups", it is atheists AND Protestant "fundamentalists"/"evangelicals" who stand out as having the best grasp of basic economics. Roman Catholics, however, showed up extremely poorly. Women also showed up more poorly than men, on average.

Whoever asked the question

"Restricting housing development will tend to drive up the price of housing; true or false"?

Wasn't asking the right question.

"The deck chair is getting wet, true or false?"

Is the equivalent.

Who was the cranially-curtailed idiot who decided what was 'correct'?

Brainwashing is the same, whether it comes from the pulpit, from spinmeisters, or from economists.

Some folk are obviously vulnerable.....

 

By the way, F. A. Hayek had a great respect for Lord Acton, and indeed, for quite a few "Christian Fundamentalist" political writers. He specifically devotes a page of "The Road to Serfdom" to those writers preceding him, whose ideals would help preserve us from serfdom. Most of them are Christians.