Is the Government’s Financial Assistance Package (FAP) really assisting ?

Financial Assistance Package (FAP) NZ for leaky homes

 

The reason for the lack of uptake of the Government’s FAP scheme is partly due to their bureaucratic system, but mostly to homeowners’ denial that they have a problem.  Even with Government assistance, the cost, time and upheaval of remediation is daunting, leading the majority of at-risk homeowners to believe they haven’t got a problem.  Most leaky homes do not display any obvious symptoms which reinforces this belief.

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Is the Government’s Financial Assistance Package really assisting?

The Weathertight Homes Resolution Service Financial Assistance Package, commonly referred to as the FAP was passed into law last year.  Its stated intention is to assist homeowners with the repair of leaky homes without having to resort to expensive and time consuming legal action.  But who is it really assisting? Some home owners are likely to benefit from the FAP, but according to one lawyer it is the councils who are benefitting by picking and choosing winners, and deciding whether to participate or not.  Lawyers and the experts remain part of the process so no change there.  The big winner appears to be Government with the problem now out of the headlines and claims to the WHRS (Weathertight Homes Resolution Service) and FAP substantially below that forecast.

Maurice Williamson when questioned last year about the FAP scheme stated ‘”I want houses fixed properly but I don’t want to get ripped off”, or words to that effect.  In addition to Government’s and Councils’ (when they elect to contribute) assistance, other parties may also contribute.  Such contribution does not seem to be occurring, although one person thought if the FAP and WHT (Weathertight Homes Tribunal) ran in parallel then a contribution from these other parties would become more likely.  This inadvertently occurred in one case and I was told all parties were satisfied with the outcome.

According to those involved with the FAP that I spoke to, it is proving too unwieldy for multi-unit claims.  In some of these claims council has elected to opt out, based on their limited legal exposure.  It is difficult for owners to assess any offer against what they may achieve elsewhere.  Those with a good case against council may be better off to persist with the WHT or Court.

Part of the problem has been the way MoBIE (Ministry of Business, Innovation and Employment) DBH (Department of Building and Housing) has interpreted and administered the Act.  An example is the Act allows reasonable costs for temporary accommodation, shifting and storing furniture which typically cost $15,000-$20,000.  MoBIE has set a maximum value of just $5,000.  Is this defrauding the homeowner?

MoBIE initially persisted in using some WHRS Assessor’s reports which it should have known were inadequate, but in recent times, because of the FAP, assessors reports have improved.  If you have or receive a report you consider inadequate, request an Addendum Report and seek independent expert advice.

One of the significant concerns is the idea that council should inspect and identify what timber needs to be replaced.  This is at odds with their recently released publication ‘Dealing With Timber in Leaky Buildings – A Guide for Builders and Building Professionals’.  For example on page 4 it states in part “where there is any doubt about where the timber should be removed or left in place, an expert in building assessment should be consulted (for example, a member of the NZ Institute of Building Surveyors).”

It is not appropriate for a council building control officer to direct any work on site; that is not their role under the Building Act 2004.  In doing so councils and their inspectors may become exposed to future legal claims. A limited number of building inspectors are members of the NZ Institute of Building Surveyors, so while they have theoretical knowledge of timber decay, they are reluctant because they do not have experience in this area.  We have already experienced so called “repaired houses” with much rotten timber left in place.

There was an initial unwillingness in the MoBIE’s team to engage directly with owners or industry.  They adopted a very much “a take it or leave it” approach.  Most staff appear to be non-technical and unable to accept the obvious.  An example was the replacement of an external garage wall which was stucco clad on both sides.  It was being replaced with a simple timber trellis and post.  The cost of the trellis and post was obviously less, but they required costings to prove this!  In another case where the WHRS Assessor’s report had recommended targeted repairs, it became obvious when the cladding was removed that a full re-clad was required.  The building surveyor organising the work had expected this.  Once the cladding was removed and the Council agreed, a call went out for the WHRS Assessor to return to site.  He finally appeared some 10 days later after all the decayed timber had been replaced – construction cannot wait.  Photos and samples of the damage had been taken.  And then there is their chain of command and communication whereby the building surveyor has to lodge a query with the case manager, who in turn contacts in Wellington, who in turn instructs a consultant, who then may have a query, which goes back to Wellington, then to the case manager, finally to the building surveyor, and so forth…

And then there is needless complexity.  For example their costing template contains so much detail that most builders let alone project managers would have trouble completing it.  Simple summary sheets would suffice and are far more useful for comparison purposes.  Only where a summary item is at variance with the norm should further information be necessary.  It seems to be a case of information for information’s sake.  Under Preliminary and General an example is cartage, which is normally attributed as a material cost and therefore is not a separate P&G item.  Under Exterior we have ill-defined categories such as walkways, parapets, trims soffits and sundry carpentry, drainage which is a service, and making good – whatever that is?

The consequences of the current FAP scheme are a greater level of uncertainty for owners, thus the need for additional legal and expert advice.  Rather than set up a scheme that assists, MoBIE has created obstacles to hinder and confuse.  Whether this is intentional I do not know, but there is an obvious benefit to Government with the reduced cost of the scheme.  In order for a lawyer to assess the viability of an FAP claim, a good quality WHRS Assessor’s report is needed both for evidence and quantum.  As stated earlier Addendum reports are often needed.  The lawyer needs to obtain in most cases expert advice to properly consider liability issues (these are not addressed in Assessors’ reports), the adequacy of the quantum and the likely difference between WHT and FAP outcomes.

Of course this is all guesswork.  The owner may not achieve a result at mediation, or if they do the settlement could be higher or lower.  There is so much uncertainty.  The point I am trying to convey is that this is not an area where advice can be given with confidence.  MoBIE have contributed to this lack of confidence by the way they have conducted the FAP scheme to date.

Then there are more interesting figures which are not surprising.  The cost of the Weathertight Homes Resolution Services was initially budgeted at $52 million for the 2011/2012 year, but this has been reduced in the supplementary estimates to $18.6 million.  This reflects a very real drop off in claims.  Similarly the budgetary allowance for the Financial Assistance Package has been reduced by $209 million from the previous forecast of $567 million.  I can only wonder whether the scheme has cost more to establish and operate than has been paid out to date.  We know there are a large number of leaky and unrepaired homes out there.  In part this is due to the latent nature of the problem and to wishful thinking, i.e. denial.  So if the Government wants to continue to save money it should carry on its present path.  It should pass the current building bill and then blame the designers and builders; and Parliament will keep on legislating – but this will never resolve these issues.

There is a popular misconception that the Building Act 1991 caused leaky buildings, in part cultivated by politicians and also by homeowner groups.  All the elements that contributed to leaky buildings were in place or occurred irrespective of the Building Act 1991.  Monolithic claddings already existed.  Design and building practice had been in decline for some time.  The Standard NZS3602 was amended to allow untreated kiln dried Radiata pine.  Standards were used as part of the old by-law system and the weakness that allowed this change i.e. the hazard class system for timber treatment, was introduced in the late 1980s was a result of Closer Economic Relations.  The Building Act 1991 was purely co-incidental.  So legislation was not the cause of the problem and it is not the solution.

If Government genuinely wants to help people and improve the FAP scheme it should set up a work group comprising people experienced in remediation who could then streamline the process, improve the outputs and reduce transaction costs.  It should also allow independent review of FAP offers it makes and then publish the reasons from these reviews, rather than its current ‘take it or leave it’ stance.  It needs to become outcome focused rather than cost driven.  If the Minister wants buildings properly repaired, the DBH should accredit designers, contract administrators and builders and work with these accredited providers to improve the process.  I believe the competence level set for LBP’s is too low and additional education, training and review is needed for this work.  It needs to conduct design and site audits to check the quality of the design and the performance on site.  In this way it would obtain the very necessary feedback to improve process and achieve the stated outcomes of the Minister.  Unless the Minister and his Government seizes the initiative it will soon too late.  I am afraid it is already too late for many.  The FAP is destined to become another sorry chapter in our leaky building history.

Philip O’Sullivan – Director

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