New Zealand Property Investors' Federation

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Ratepayers likely to face $2m leaky homes bill


Twelve Takapuna townhouse owners have been awarded more than $2 million to fix their leaky buildings - and the North Shore City Council is expected to foot the bill.

Residents of 45 Byron Ave went to the High Court after they discovered significant defects in their properties which they tried to fix in 2003 and 2004.

Justice Geoffrey Venning said the council would most likely have to pay, if the other parties were unable to pay their share, and the burden would be passed on to ratepayers.

Whether this was fair was an issue that deserved further discussion.

Stephen Smythe of Couldrey Properties developed the project and was also the architect, the judge said. Bracewell Construction built the townhouses.

One of the 12 owners, Pauline Hough, said the group was ecstatic about the decision.

She had endured six years of financial hardship, and said the struggle over her leaky unit was lonely, frightening, humiliating and sad.

Her townhouse is in the development once known as Byron Terraces, at the end of Byron Ave and overlooking the coastal marine area behind Barrys Point Rd.

Matt Josephson, a partner in the legal firm Grimshaw & Co who represented the owners, said the victory was important because it emphasised the role of councils in the leaky building disaster.

"This is an affirmation of the existing law in relation to the duty owed by the council to homeowners, including those who own houses or units for investment purposes," he said.

"The council's inspection process was negligent and caused the owners loss. This is a very good result for the owners. It should also benefit other leaky building claimants because it will enable them to settle claims more favourably.

"In this case, the council carried out numerous inspections but failed to identify key defects and did not issue a notice to rectify those defects."

He said the owners won slightly over $2 million from the council, the architect/developer and the plasterer. They were also awarded about $130,000 plus interest against the consultant who designed remedial works unsuccessfully implemented in 2004.

A claim against the project manager/administrator was rejected.

Greg O'Sullivan, of building consultants Prendos, said the ruling clarified that houses and apartments must be treated as residential properties, even if rented out by an investor.

The decision also clarified a council's responsibility, and confirmed previous court rulings.

"It does fire a warning shot about the knowledge and timing of a later purchaser with leaky buildings that could affect the level of judgment granted in favour of such a purchaser," Mr O'Sullivan said.

"However, it does not prevent them from being able to make a claim and receive a judgment in their favour."

The decision confirmed that owners who tried to fix their units were not barred from taking a claim against those involved in the original building, Mr O'Sullivan said.

"It clarifies that common property controlled by the body corporate belongs to all the owners and says the intended repair costs for the common property can be claimed by the owners against all defendants, including the council."

North Shore Mayor Andrew Williams said councils were still in discussions with the Government in a bid to get help with leaky homes bills.

Ministers were only just realising that councils did not have insurance to cover such losses.

Mr Williams said council inspectors' approval of leaky buildings had been based on faulty building code standards from the Government. "This is a national problem."

* Townhouse owners sued nine parties
* Units were built during 1997/98
* Council did not detect defects
* Repairs were attempted but failed
* Owners have had a huge victory