The leaky home/leaky building crisis appears far from over as new cases continue emerging and affected owners still battle for solutions

Fernhill Body Corporate units in Auckland, affected by the leaky crisis.

By Jenée Tibshraeny

The leaky home and leaky building era is far from over.

As builders, local councils, property owners and building materials manufacturers continue to fob off responsibility for the crisis, new cases are still coming out of the woodwork.

So far this year, for example, interest.co.nz has reported on emerging leaky issues in Auckland at the Heritage Hotel, the Scene One apartment complex, and the Scotia Tower.

At the same time the Government's Financial Assistance Package (FAP) for leaky home owners has turned out to be a flop for the affected home owners.

Touted five years ago as likely to help tens of thousands of home owners and cost taxpayers around $1 billion, the Government now expects it to cost taxpayers just $112 million with a fraction of the initially estimated home owners assisted.

Against this backdrop a massive reconstruction programme is underway in Christchurch following the earthquakes there, and the race is on to build homes in Auckland to catch up with demand and slow down stubbornly high house price inflation.

Against this backdrop Home Owners and Buyers Association of New Zealand (HOBANZ) president, John Gray, says the youngest leaky home he's aware of is still in construction.

“The thought of the leaky home problem being a distant memory, insofar as new builds are concerned, is just a fallacy”, he says.

“We are still seeing some of the repeated behaviours of building practitioners, which compromise the performance and integrity of these homes.

“And this is at a time when building activity is at a very low ebb. Once the heat goes on again, we’re just going to see a repeat of what we saw in the 90s – unskilled, unsupervised workers, building houses in breach of the law and getting away with it.”

Gray says a builder has recently spoken to him about how a developer, tendering a large housing complex, said he was only interested in builders who would charge $1480 per square metre. Unable to do the job for less than $1800-$2000 per square metre, the builder walked away from deal.

Gray believes, “That developer will get some schmuck who comes along with a building company – a paper company worth $100 – who will build that and cut every corner in the book to make it work.”

But what about the regulators? Have they not responded to the crisis by toughening the rules?

A partner at Grimshaw and Co, a law firm that’s represented over 5000 leaky home clients, says the Building Code is toothless and in need of some wholesale amendments.

Paul Grimshaw says, “The Building Code really doesn’t say anything. Or put more eloquently, it’s proscriptive, rather than prescriptive.

“All it says is, you can build a house and the structure must last for 50 years, and the cladding must last for 15 years… I think there needs to be far more instruction to builders and council about how to build a safe and dry home.”

Grimshaw says inferior building practices were used as recently as 2005, where leaky homes were fixed simply by putting new cladding over old cladding.

Grimshaw and Co has just wrapped up a six-week High Court trial on the issue. Auckland lawyer, Adina Thron, is also launching a plaster cladding law suit on behalf building owners.

The Ministry of Business Innovation and Employment (MBIE) confirms, “The Building Code does not prescribe how work should be done but states, in general terms, how the completed building must perform in its intended use”.

The Code was reviewed in 2004, and in mid-2008 the Government agreed to implement recommendations in a staged approach. Housing Minister, Nick Smith, says the Government doesn’t have direct plans to further amend the code.

HOBANZ’s John Gray says local council inspectors are also not meeting high enough standards during the leaky building repairs process.

“We are seeing some issues with the way in which the council inspectors are handling the assessment of the state of the timber in order to determine what has to be removed and what can stay.

“By bitter experience some owners have ended up with decayed timber being left in situ, only to find that it has continued to deteriorate over the ensuing years.

“The council and council inspectors who are charged with this responsibility are indemnified – so it is all care and absolutely no responsibility.”

What are the options available to leaky building owners seeking restitution ?

A government commissioned report by PwC in 2009 estimated there were up to 89,000 leaky homes in New Zealand.

There are three things owners of these building can do to try and cover repair costs.

One, take the matter to the Weathertight Homes Tribunal; two, apply for the Government's FAP; three, litigation.

Few are going down the FAP route. As at the end of February, 979 of the 1,217 applications made for a FAP since it was established in 2011, were approved. Repairs have only been completed to 700 of the 2,937 households these claims relate to.

Meanwhile, MBIE says 1138 claims have been filed with the weathertighhtness tribunal since it was established in 2007. Of these, 670 have achieved a resolution through mediation, 178 were resolved through adjudication, 188 were closed for other reasons, and 102 are still with the tribunal.

Financial assistance from the Government more of a gesture than a help

Grimshaw says most owners opt for litigation to recover their costs, as the FAP is a toothless scheme that doesn’t leave you with a decent payout.

It also only covers weathertight, not structural defects.

The Government and your local council each pay 25% of the repair cost and you pay the remaining 50%. However, if your council didn’t sign off on the building work, or has chosen not to participate in the FAP, you will need to agree to pay 75% of the costs to get payments under the scheme.

Grimshaw says those who’ve had their buildings signed off by their council, may be able to recover the full cost from the council.

“So why would anyone take 25% from the council, when they could get 100% from the council?” he says.

Furthermore he says the size of your FAP is based on Government estimations of the repair cost, which is often around 20% less than the actual cost.

Both Grimshaw and Gray agree a large portion of leaky home owners are also left out of the scheme as their dwelling has to have been built in the 10 years immediately before they lodge your claim to be eligible.

Gray argues the timeframe should to be extended so the owners of properties built in the 90s can be eligible.

“The FAP is very much a token gesture, and whilst we’ve made the best of it for those owners we’ve been assisting, it’s been a very torturous path, and we’re still not convinced repairs managed under the FAP are going to be durable”, he says.

“The Government has made no effort to campaign to encourage owners to apply for Weathertight Homes Resolution Service assessment in the first place. A considerable number of people who are coming to us have fallen off the 10-year cliff, insofar as the limitation to bringing a claim.”

Housing Minister, Nick Smith, says the Government won’t extend that timeframe, as builders are only required to keep their records for 10 years, so this too will have to be pushed out if the FAP timeframe was to be extended.

He says, “After a person has completed building a home you do need to put some limit on when a person can be held liable for any deficiencies for the building of that home.

“I think 10 years is a sufficient period for any defects in construction work to be brought to light.

“The most important thing we need to do is better communicate, to the sector and to home owners, the nature of the 10-year limitation, so that a prudent home owner will get an inspection before that period runs out, particularly if there’s any suspicion that home may not have been built to full standard.”

Another potential barrier to receiving the FAP is the fact that you have to show that you have the money to pay your share of the repair cost.

The major banks operating in New Zealand have agreed to assist those receiving the package by signing up to a loss sharing agreement.

The Bankers Association says this means banks and the Government will bear the risk in case a home owner defaults on the loan they take out to contribute to the FAP.

Gray reckons loans from government would also be useful.

Should ratepayers have to pay the price for deficient building inspectors?

Local Government New Zealand (LGNZ) chief executive, Malcolm Alexander, says the FAP acknowledges that fault lies in the broader building management system including construction, product and design particularly where design features are not suitable for the NZ climate.

“However, it is important to note that LGNZ and local authorities have advocated for proportionate liability, which would see local authorities paying for costs only where they are responsible, as against the current regime where they may pay the plaintiff’s entire loss and then have to recover these costs from other parties. Sometimes these parties are no longer solvent.

“Typically local authorities' adjudicated costs are 20% to 30%, but they often pay up to 45% – a big impost on councils and their communities.

“As an example, in the 2012-22 long term plans this equated in dollar terms to projected costs of $470 million for Auckland Council and community, $7.5 million for Thames Coromandel District Council (with a ratepayer base of approximately 25,000) and Tauranga City Council, $2.5 million.”

Using the resources available

Fernhill Body Corporate has come through a leaky home fiasco without forking out for most the repairs itself.

Chairperson Mike Fox says its two blocks of flats, each consisting of eight units in Oteha Valley, Auckland, were found to be leaky in 2008.

After going through arbitration with the developer, builder, cladding and roofing companies through the Weathertight Homes Tribunal, it managed to get the group to pay 25% of repair costs.

The unit owners also paid 25% of the cost, and the FAP the remaining 50%.

Fox says assistance from HOBANZ (formerly known as Lighthouse) through the process was crucial. He says endeavouring to get the FAP was time consuming and highly technical.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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32 Comments

Why can't a precedent be set after a successful law suit?  Should rate/tax payers pay for the repairs?  Yes, collectively you voted for these clowns either directly or indirectly.
 
There is enough literature on building technology around the world to make this sort of thing completely avoidable.  Not fair owners who bought a signed off house/apartment are stuck paying for repairs.  

No ratepayers should not pay  The contract that the owner had was with the builder/developer.  "avoidable" it was pre- the changes that have caused this mess.  The owners should have done due diligence otherwise moral hazard comes to the fore.

Just like the housing shortage - no one has the money to pay for someone else.
Therefore it will revert back to who owns or wishes to own to pay.
One can't blame the majority materials but the installer i.e. Hardies are well versed in litigation.
Most companies involved with construction are going, going, gone.
Council have built many claim limitations.
The disfunctionality of the property and construction industries speculitive cost cutting practices coming home to roost and will continue to do so until the Governement legislates standardised house prices, like produce or power etc.
That means no more house bidding and hidden practices :) but off the shelf house prices tied to local incomes, no need for all the ancillery costs - agents, valuers, economic threatening mortgages etc.
Yes and its the Lawyers who really gets the  $$MULLA$$$
 

"Council have built many claim limitations"
 
Yeah but the question is not what can councils/govt get away with legally, we all know there is a difference between whats legal and whats moral or fair. 
A private company has a right to toe the legal line and pay lawyers to get off the hook. 
Councils/govt are not purely profit based but look to do whats right and fair I always thought?  

It can be a complicated, drawn and expensive legal argument as to who's responsible.
Council / rate payers have limited funds and can't afford to pay for other peoples leakys, even thou it would be nice thing to do, there are other high priorities i.e public tranport, services etc.
Its largely a case "Caveat Emptor" your money, your choice, your problem.
It is all about "making a profit" if not one isn't in buisness i.e. Government Council etc. go broke / bankrupt. We all know who pays then - the tax or rate payer and Austerity measures:)
Morally these bodies have a duty to protect themselves and the people they represent.

"Morally these bodies have a duty to protect themselves and the people they represent."
They made a mistake that costs a small section of the people that they represent a significant amount of money.  
Shouldn't these bodies, and all the people they represent (rate/tax payers) share the burden of this mistake instead of concentrating it on some purely unlucky individuals who bought houses that carried all the correct sign offs/paper work at the time of purchase? 
It's more 'unfair' than the red zoned land in chch, as the govt. cant control nature or what land becomes worthless as a result of an UNPREDICTABLE earthquake.  No real blame can be placed here.  Yet still the chch individuals who own red zoned land argue that govt. (all NZ'ers) should bare this cost by buying the land off them.  The chch situation is where buyer beware can come into play, not where an actual mistake or incompetence on council/mbie/govt.'s  behalf is concerned.
You can not argue that given the state of the art of building in the late 1990s that these sorts of builds should reasonably be considered fit for purpose, i.e a if they used all resources available at the time they would have PREDICTED the failure.  As opposed to forming CHCH city on a hidden fault  during the 1900s-2011 which, using the state of the art at the time, would not have been able to predict even with the upmost due diligence, that the land would become worthless.

No, fFor instance if you get an appliance due you sue the electrical / lines company if you get an electrical shock when you plug it in? no you go back to the seller.
 

What if you had paid the lines company at $300 per hour to come and check out the applicance first before pluging it in and they gave it the big tick of approval (after waiting several months and being forced to jump through multiple hoops)?

Simon the quality of the build has nothing to do with the local authorities LC.
The LC make sure the building is built to code i.e fire requirements, access, bounderies, right of ways etc. Not the structure cladding, shape or finishings to the building - thats registered consultant land.
BRANZ establish standards that trained and qualified trades people adhere to, but don't monitor on site. Saying that if they allow H1 framing in leiu of H3 in there documentation then they could be held responsible $$ - but bear in mind the cladding failed...
The build quality is up to the parties doing the construction; thier used to be a Clerk of Works COW but that cost ended with the advent ISO9004 where the contractor monitored and signed of there own work :)
A building is just another product that largely falls under the Consumer Gaurantees Act, you really need to take time to clearly understand what part bodies / people play.
Cheers

Who is responsible for the content of the building code?
If a building code failed to specify an important building requirement (for example a gap between cladding anf framming), and this lead to every developer and there dog building this type of house, which then leaked, is it not the people behind the building code that are to blame? (if we assume they should of known better at the time). 
I dont care if its the council, mbie, or the government (my point is not to pin point blame on any one of these govt/council authorities, as to me they are all the same, so long as it is accepted that collectively, the LC, mbie, govt. combined to tick off properties, which were then bought with the understanding they were built to a code that meant a sound building for 50 YEARS, that then failed.  Collectively they are to blame not the people currently suffering (buyers)).  
 

Quality of the build has everything to do with local authorities. They are the only people under the law who are allowed to sign off if a building is built to comply with the NZBC. That's what Building Inspectors do. That's what a Code Compliance Certificate.
NZ is reasonably unique in doing this.
BRANZ does not set standards. Standards NZ does and the NZBC accepts these as proving compliance with some NZBC clauses (they are called Acceptable Solutions).
 

The Council does not design, build, monitor or guarantee the product.
This is a fact - through the Councils terms, Consultant Consent Producer Statements and why plaintifs arn't wining cases.
Registered practioners work to the code and are resposible for the product, they should be hunted down and made to pay. Under the Fair Trading Act. i.e. just like any retail product that has to adhere to codes.
The building leaks mainly because its been incorrectly weatherproofed during construction and some cases material failure.
One is clutching at straws and well be for years to come, as yet more Consultants cost (lawyers, experts, hearings etc.) and mental anguish to boot.
Rediculous to try and get somone else to pay for your problem - Caveat Emptor.

Read the Building Act excerpts below. The Council is the only party allowed/required to "monitor the build" and the only party allowed/requies to ensure design complies with Building Code.
 
 
 

And I wouldnt blame the 'inspector' either if they were working to a checklist that was handed down by a higher authority, and did every thing correctly.  But if the checklist left out important things to check (e.g check that there is not exposed wire on the cord) and so faulty appliances got ticked off, then people died, then the people designing the checklist are to blame.  
 

If the checklist said something like 'check leads are safe', and the inspector was considered to be qualified enough to known that an exposed wire made the lead unsafe, and he checked it anyway, then I would blame the inspector. 
If the building inspectors were deemed skilled enough, and if it was there responsibility, to assess if a build was water tight or resistance to water ingress, and they ticked them off anyway because the code didnt specify exactly what that meant (assuming they should know as they're skilled etc), then yes, LC do wear some of the blame

How many developers, builders, manufacturers of products and architects have walked away? why just about all of them.  I fail to see why the council on my behalf wishes to pay for others mistakes and failures, so no thanks. 
 
 

The word 'designer' appears once in the 2004 Building Act "A designer is responsible for ensuring that the plans and specifications or the advice in question are sufficient to result in the building work complying with the building code, if the building work were properly completed in accordance with those plans and specifications or that advice."
 
The "consent authority" 28 times including their responsibility to "to ensure that—

  • (i)an application for a building consent complies with the building code:
  • (ii)building work has been carried out in accordance with the building consent for that work:

 
 
A designer is almost never employed to check work has been carried out in accordance with the building consent as owners have paid council to do that job and are always trying to cut costs.
 
A Consent Authority must not issue a BC unless documentation complies. It must not issue a CCC unless work is carried out in accordance with Consent. There is no ability in law (or most contracts) for a designer to ensure work is carried out to their specifications.
 
It is completely Councils fault if they don't do the job the law requires them to do - they are the only people allowed to do it.
 
 
 

It would be interesting if you provided a specific example of what failed, rather than picking and choosings argueing your own general excerpt and interpretations?

I think the entire system failed myself.  Before the changes we had a robust code suitable for NZ conditions, that however cost to do properly.  The changes, a) allowed architects to design buildings un-suitable for NZ conditions but "fancy"  looking, so we got internal balconies, complax roofs with internal drainage and flat roofs.  b) We then had the manufacturers keen to sell "cheap" products that had to be used in the right situations and the right way which the architects didnt often understand or care about.  c) It then got left to the builder, some of whom were marginally capable to make it all work and who got no training.  Result a mess.
Simple to sort, go back tot the code before this mess.  

I'm simply quoting the Building Act. The article is about leaky buildings being built now. 
 
If you want a specific example as designers we are commisioned to design a building. It is designed to code (as is our responsibility under the Act - see above). Council check it complies and approve building consent as is their responsibility under the act. Then as it is built Council (and only council) do the inspections. We are not paid to do inspections. The building is not built to the specifications (inadequate falls causing ponding). Council inspectors do not inspect frequently enough or thoroughly enough to notice. Council give CCC and building is legally complete - although flawed. We have no power to force owners or builders to remedy or Council to recind their approval.
 
When this building fails we expect to be sued along with Council. As we are not responsible we will get off (although that will cost 10k-20K). The media will only report on who's being sued - never who is found innocent. Commentators like Steven will jump up and down saying we have 'run away' and 'dodged our responsibility'. 

May be it's time to get rid of BRANZ and have a fresh start.  There are many products that are more suitable to NZ climate tahn the Aussie made ones.

I agree, there are lots of cheap building products/ kitsets we could be importing from Europe, China and the States, and the imported stuff couldn't be any worse that the utter sham of what we have here already. Branz and their predecessor should have been flushed down the loo a long time ago.

I would suspect from the testing Ive seen of US v NZ structures that most foreign kitsets are not compliant with our earthquake code.

A large house building coy representative told me that they have been involved in the repair of several leaky buildings and the repairs are generaly not permanent.  His advice was that, it costs a bit more but it is often a better long term solution to pull down the house and start again.  Hard experience has taught me that patching up something that is fundamentally wrong is never the best solution.  
It is an awful proposition for the owners.

Agree, this has been my experience, but then the owners expect to have passed on the problem to someone else.

Building a House
Approx 20 years ago, while engaged on an IT contract with Melbourne Water (a very large State Government organisation covering the wider metropolitan area, embracing something like 100+ suburbs) I observed their mapping department where they were in the process of digitising all their records. Cadastral maps, location of every lot of land, residence, section, houses, where the sewers and water mains were located, where the on-section connection pipes and services were located etc etc. The lot. The IT equipment was impressive even then, huge 60cm screens, far beyond anything I had ever seen before.
 
Step forward to 2015 in New Zealand. Dealing with a particular city council, not Auckland, not the biggest. Oh, guess what. Luxury. Amazing. They had the lot on file. Digitised. Whatever you wanted they had it in technicolour. Then off to the regional council. Same again.
 
Went through the process of obtaining building consent and RMA consent. Building consent required 212 pages of detailed specifications which in turn has to meet the council strict requirements. Some of the works can only be performed by council approved contractors. Council will inspect every step of the way before each next stage can proceed.
 
And it's all on file. Digitised that is. For posterity.

So what does all this mean
 
In the audit profession, the auditor is required to establish a work-book to record the work done, who the audit juniors were, who the senior audit supervisor was, and who the audit partner was who signed off on the eventual audit report. Much the same as the murder-book in police work involving murder crimes.
 
All work is recorded each step of the way with the names of every participant involved
 
It seems an easy step to require the digitised records, an audit file, a work-book, of every house built to be maintained and made available to the public showing who the builder was, who the council officers were who signed off, when it was signed off, any corrective notices issued to the builder for defective materials, defective workmanship, departures from the approved plans, any remedial work done or not done et etc
 
It's all there already. They already have it now.
Just needs to be made available to prospective purchasers.
Sunlight is always the best dis-infectant

A site file is available on CD from most Councils. TCDC has it all on the web.

was thinking of a comprehenive searchable database that contais all the info set out above
 
Ideally it would then provide the ability to identify and review any number of properties built by the same builder and see if any of them had defect notices or "red cards"
 
Ideally all registered builders should be registered in the name of an individual and not a company
 
It would then inhibit builders registering a company, racking up debts and creditors, going broke, leaving a lot of people stranded, then phoenixing overnight into another company, and away they go again
 
What do councils and the builders associations do when a builder goes rogue?
 
Anything?

dp

Check these out - a boneyard of rotting houses in Hamilton
This is the type of thing that should be recorded on the register
Unless the council requires them to be demolished
 
The company had been trying to sell the completed houses to raise money for construction, "but they are not easy houses to sell because the demand for 9-bedroom 500 sqm houses is a niche market
 
http://www.stuff.co.nz/waikato-times/business/66776587/ghost-town-projec...
 
The houses, around 500 square metres each, are being marketed on greengardens.co.nz for between $1.69 million and $1.79m.
 
The Tamahere properties were being marketed in Singapore, Hong Kong, Malaysia, Australia, and New Zealand. Proprietor Gang Wang (AKA Thomas Wang) and Salesperson Troy Hung

Poor Tamahere - doesn't need that.

After reading and digesting I have decided that building and retaining ownership is the best model for builders.......it would be better that everyone becomes a tenant as this will remove liability from the builder, council, others including the home owner.....if something does go wrong then at least a builder has the skills to repair it and best of all those repairs will be tax deductible .........People better start saying goodbye to their home ownershp dreams and hello to their landlord.....Problem sorted!!!!!