Leaky Homes - The fine print

August 2006

The front pages of our national newspapers continue to be splashed with stories about leaky homes: Fletcher Buildings CEO Spends $400,000 to fix his Home; Despair as Leak Repair Costs Triple; Leaky Homes to be Flagged on Council Records.

As many will know, the Weathertight Homes Resolution Services (WHRS) was established in late 2002 to help owners of affected properties.

The objective of the WHRS is to provide affected home owners with a cost effective means of resolving their claims based on an informal court model.

Despite constant public complaints culminating in the recent announcement that legislation will be passed next year to make the service even more user friendly, compared with the expense and lengthy waits associated with the court system, the service offers a fast, low cost and informal process.

As a brief overview for those unfamiliar with the WHRS, the WHRS process begins with the home owner applying for a WHRS assessor's report of their home. To be eligible, the home must be 10 years old or less.

A WHRS assessor visits the property and compiles a detailed report with photographs, relevant plans and building records and a summary of the causes and parties involved, all at no cost to the owner.

The assessor then recommends whether the WHRS should accept the house as a leaky home and allow the owner to take advantage of the WHRS.

Assuming the claim is accepted, the home owner can then choose to proceed to a mediation or the matter can be taken directly to a formal adjudication in which evidence is given in a court room style hearing, although in a much more relaxed fashion.

From my experience and involvement with leaky homes cases there are a few key matters to watch out for that will assist if you are involved in such a case.

It is not well known that the WHRS adjudication decisions have consistently interpreted the fine print (clause 6.2(5)) in the standard ADLS Sale and Purchase Agreement as holding the vendor liable to the purchaser for any defective leaky building works carried out while the vendor owned the land.

This is the case even if the vendor had all the works completed by qualified trades people. In summary, the Agreement provides a warranty that the provisions of the Building Act 1991 have been complied with.

The Act refers to the Regulations which in turn refer to the Building Code and the Code says that a building shall not leak.

The second matter to watch for, which many will be aware of from hard experience, is that the offending parties; building companies, certifiers and sub-trades are often impecunious or have long since ceased to exist.

Bay Building Certifiers Limited is a well known example. An early realistic assessment needs to be made of the likelihood of recovery against offending parties.

A further matter to note is the local council's (territorial authority) ability to extract itself from all liability under Section 50(3) of the Building Act 1991.

This arises where the Council has delegated the consent and inspection work to an approved building certifier - cue Bay Building Certifiers Limited.

Time and money can be wasted pursuing the local council only to be met with this complete bar.

A final matter to watch for is a misconception by many home owners that they should not carry out any repairs until after the outcome of the WHRS hearing. Given the recent newspaper headings "Leak Repair Costs Triple" it is usually far better to have the repairs completed as soon as possible after the assessor's inspection.

Building costs continue to rise and having the repairs completed can avoid your clients being short changed by an outdated costs award. In many cases, the extent of the repairs are also not known until the work is carried out providing another reason to complete the works prior to the hearing.

Nathan Smith.