On 29 July, the Government released its financial assistance package for owners of leaky homes. The package allows the owners of leaky homes built in the last 10 years to recover up to 50% of agreed remedial costs from central and local government, if they agree not to pursue a claim against their council.
Please contact us if you would like to discuss the financial assistance package or what it means for you.
How did the package come about?
Current estimates are that around 42,000 homes built in New Zealand between 1992 and 2008 may be leaky buildings. The total economic costs of fixing the affected homes could be in the region of $11.3 billion.
Territorial authorities became concerned that: money spent on litigation would be better spent on repairs of the affected buildings, and money spent on settling claims did not necessarily go to repairs. Out of an initiative by the Local Government New Zealand Metro Sector Mayoral Forum in 2007, Local Government New Zealand began lobbying for a "no fault" approach.
In May 2009, the Government proposed a financial assistance package (FAP) to help homeowners get their leaky homes fixed faster. Following two years of negotiations and planning with territorial authorities and banks, the FAP came into effect on 29 July 2011.
Who qualifies for assistance under the package?
Claimants must have an eligible claim under the Weathertight Homes Resolution Services Act 2006 (Act), and meet the contribution criteria. The contribution criteria is divided into two parts - Crown Contribution Criteria and Participating Territorial Authority Contribution Criteria. A Participating Territorial Authority is a council that has agreed to contribute to leaky home owners under the FAP.
If a claimant qualifies, they can choose whether to proceed with assistance under the FAP. It is not compulsory.
What is the Crown Contribution Criteria?
Claimants who meet the Crown Contribution Criteria qualify for 25% of the costs of the agreed repair plan for the home to be paid by the Crown.
The Crown Contribution Criteria includes:
- There must be no prior settlement of a weathertight claim in relation to the house with a Participating Territorial Authority - this includes an adjudication decision or a judgment in other civil proceedings.
- If the house is the subject of civil proceedings where a Participating Territorial Authority has been named as a party, the claimant must discontinue the proceedings entirely, and the Participating Territorial Authority must agree to the claimant receiving a financial contribution.
- The claimant must have obtained an Assessor's Report under the Act, and agree a repair plan with the Department of Building and Housing (DBH).
- The claimant must be able to show that they can fund their share of the costs of the works in the agreed repair plan, by borrowing or from their own funds.
What about claims that have already been filed?
If a claimant has filed a claim before 29 July they must advise the DBH in writing, no later than 28 October 2011, that they wish to be assessed to determine whether they meet the contribution criteria. If remedial works have already been carried out, the agreed repair costs will be an amount determined by the DBH - it may not be the amount actually paid for the remedial works.
What is the Territorial Authority Contribution Criteria?
In addition to the 25% contribution from the Crown, claimants who also meet the Territorial Authority Contribution Criteria may get a further 25% of the agreed repair costs paid by their local council. While some councils have indicated they will opt in to the scheme, others are yet to decide.
In order to qualify for a contribution from their local council, their local council must be a Participating Territorial Authority, the claimant must: meet the Crown Contribution Criteria, and the claimant must be owed a duty of care by the local council. There is a non-exhaustive list of factors that may go to whether a duty is owed by the local council, including:
- The intended use of the development.
- Whether the Territorial Authority inspected the dwelling house or issued a Code Compliance Certificate.
- Whether the dwelling house was subject to a determination by the DBH.
- Whether a private certifier was involved in inspections and issuing certificates.
- Whether the Territorial Authority advised the owner of weathertightness defects (whether by issuing a notice to fix, notice to rectify, or otherwise).
Dwelling houses within retirement villages may not be eligible for a contribution from the local council (depending on the ownership structure of the development).
What about the remainder of the repair costs?
The other 50% of the repair costs will need to be met by the home owner. However, home owners can claim against other parties to the construction to recover these costs. If they do, they are barred from naming the Crown in those proceedings. If the local council provided a contribution, no party, whether claimant or respondent, can subsequently join that council to proceedings.
In assessing damages in any civil proceedings, the Court or Tribunal must take into account any contributions made under the Contribution Agreement.
What are the advantages of the FAP?
- House gets fixed.
- Speedy resolution.
- No litigation cost.
- Supervised repair.
What are the disadvantages of the FAP?
- Homeowner must find funding for 50% of the repair costs.
Who might use the FAP?
- Are litigation shy or risk adverse.
- Want repairs done.
- Can afford to fund or borrow repairs.
- Might have their claim reduced for contributory negligence.
- Are not owed a duty of care by their local council.
- Have estimated remedial costs that do not justify investing in litigation.