Leaky Homes: Advice for Conveyancers/Property Lawvers
During the recent holiday break there were many high profile leaky home cases splashed across the front pages of the national and local newspapers.
Rather than slowing down, if anything the leaky home crisis is gathering pace, and in particular, the extent of the remedial works required is ever increasing.
Almost gone are the days of targeted repairs - a full re-clad is now almost always the minimum required repair.
In fact, as shown recently on the front page of the New Zealand Herald, the extent of the damage to many houses is such that they have to be demolished and built again from scratch.
Lawyers and in particular property lawyers, need to be aware of some key issues when advising clients in relation to buying or selling a home regardless of whether or not it is currently known to be a "leaky home".
By now most property lawyers should know that the standard clause 6.2(5) in the standard ADLS sale and purchase agreement holds the vendor liable to the purchaser for defective building works carried out while the vendor owned the property.
This is the case even if the vendor had all the works completed by qualified trades people and obtained a Building Consent and a Code Compliance Certificate.
In summary, the agreement provides a warranty that the provisions of the Building Act have been complied with.
The Act refers to the Building Code and the Code states that a building shall not leak (clause E2 requires it to shed external moisture).
Vendors do not escape their obligations by obtaining a Code Compliance Certificate.
If the building leaks, then the certificate was likely to have been improperly issued.
However, this does not release the vendor from their warranty (although they may in turn be able to pursue the Council or building certifier).
What is less well understood is the relationship between the Council and approved private building certifiers.
Approved building certifiers were established under the 1991 Building Act and a number of Councils contracted them to approve Building Consent applications and subsequently carry out on-site inspections for the issue of Building Certificates (Code Compliance Certificates).
However, the Act also provided that if a Council relied on an approved building certifier, then the Council could not be held liable if the building consent or the final Code Compliance Certificate were negligently issued - despite the owner having filed the original building consent, plans and specilications with the local Council.
In the Bay of Plenty this happened regularly - many will recall the now liquidated and struck off Bay Building Certifiers Ltd.
While private certifiers such as Bay Building Certifiers Ltd were required to hold insurance cover for their work, they only obtained cover on a claims made basis.
Accordingly, once the company was placed into liquidation any claims against it were worthless as that cover could not be renewed.
Accordingly, it is very important for both vendors and purchasers to know who in fact approved the Building Consent and who issued the Building Certificate (Code Compliance Certificate).
This information should be readily available from the Council file.
In effect, if a private certifier issued the Building Consent or the Building Certificate (Code Compliance Certificate), then these documents are effectively worthless.
Vendors should be advised that if any works requiring a building consent were carried out while they were the owners, they are providing a warranty to the purchasers that those works were completed in accordance with the Building Code (and therefore that the house does not leak).
Further if a private certifier issued the Building Consent or the Building Certificate, then they will have no ability to pass on any repair costs (which are usually a minimum of $100,000 and often up to $200,000 or $300,000) to the local Council.
Purchasers should also be provided with similar advice and in particular the consequences of a vendor attempting to remove or amend clause 6.2(5) in the ADLS agreement.
While they may both be able to pursue the builder or sub-trades, in many cases those builders and sub-trades have long since passed into liquidation.