Q&A

The following Question and Answer section is designed to kick-start this process.

4. Check the outside of your house for the following details which can pose potential risk. If you answer “yes” to any of these questions you may have increased weathertightness risk”

Ground Clearance

Buyers should also be aware that while councils are obliged to identify properties in Land Information Memorandum (LIM) reoprts that are or have been subject to WHT claims, properties that have been subject to weathertightness claims through the courts or private actions do not have to be identified.

Homeowner FAQ

Q: If I contact a registered building surveyor to discuss my concerns what will the building surveyor want to know?

A: Initially the building surveyor will want to know:

• The age of construction.
• The type of cladding.
• The number of storeys.
• How long you have owned the property.

Q: What should I ask the building surveyor to do?

A: After discussing your concerns with the building surveyor it is best to request a brief, visual, non-destructive inspection, with a written report.

Preparing a list beforehand helps and it is advisable to obtain a fee proposal before commissioning any report.

Information relevant to the affected property is helpful to the investigation and report. A homeowner can obtain a relevant Property File from the local council. Ring the council and check the uplifting procedures – some councils offer digital retrieval procedures. This contains information relevant to a property, such as.

• Files of building consents or permits and associated drawings and documents.
• Inspection records and other relevant documents.

Property file data will help with dates and timing relevant to the construction of your home, and possibly provide information on issues related to its construction. Look for dates of Building Consents, Inspections, Notices to Fix, Code Compliance Certificates (CCCs) and other material relevant to your situation.

It is a good idea for the homeowner to be on site at the time of the preliminary survey to:

• Ensure the building surveyor has ready access.
• Answer the building surveyor’s questions.
• Obtain insight into any potential weathertightness issues identified by the building surveyor.

The purpose of a preliminary investigation is to determine the nature and likely extent of any potential problems and whether further investigation is required. It also allows the surveyor to more accurately determine a fee estimate or quote for further investigation if considered necessary.

If you are present during the inspection do not expect detailed answers to questions. Discussion regarding findings and solutions is best left to a later stage following a more detailed invasive investigation and report.

Q: I now have the building surveyor’s report – what next?

A: You have two options:

1. If the preliminary report finds no problems you can accept it or seek a second opinion.

2. If the report indicates potential issues:

• Arrange for a more detailed inspection (obtain a fee estimate or quote first).
• Check the type and extent of any further investigation and how it will be carried out.
• Check whether the investigation makes use of an independent agency to identify decay and/or mould and timber treatment – it is important that it does so.

Q: What does a more invasive investigation achieve?

A: Good information is essential to good decision-making. This usually means an initial assessment needs to be followed by a more detailed and invasive investigation and report. The level of detail sought will depend on whether legal action is being contemplated and if repair is to take place before or after legal action is completed.

An invasive investigation consists of a visual survey of the building to identify defects and hidden leaks. Moisture readings are then taken of timber framing moisture levels via holes drilled in the cladding in at-risk locations. These holes are re-sealed after the investigation but can later be repaired to a higher level at the homeowner’s expense.

Where decay is suspected or the method of construction needs to be investigated a 300mm square piece of cladding is removed and timber samples taken for laboratory analysis. Again, holes are temporarily sealed and can be later repaired to a higher standard at the homeowner’s expense.

Other tests such as air sampling of the interior spaces may be recommended to determine mould spore levels which might present a health hazard. Other expert advice may be necessary to assess corrosion or structural concerns.

Following the investigation and report a building surveyor in conjunction with a quantity surveyor can provide the owner with a scope of work for remediation and an estimate of the likely cost of repair.

Q: What should I do if the Invasive Investigation Report indicates problems?

A: The 10-year long-stop provisions now prevent many homeowners – but not all – from taking legal action to claim damages. Homeowners without legal recourse still need to decide how to proceed; a number of options areavailable.

Homeowners should to seek legal advice to determine whether or not they are in a position to seek legal redress. If they are, legal counsel is likely to advise you to file a claim either with the Courts or the MBIE.

1. District or High Court

• The MBIE and WHT path is claimed to be quicker and cheaper than District or High Court but this is not always the case. The process allows parties to have legal representation or to be your own advocate but the latter course is not easy: extensive time is needed to understand relevant legal issues and legal principles of law still apply to any outcome. Knowledge of relevant laws is, therefore, advisable, particularly in situations where respondent parties have highly skilled legal representation.
• In seeking legal advice, be careful to ensure that the legal advisor is experienced in this field. Meeting with two or three lawyers is advisable before deciding who you want to represent you.
• Legal counsel will help prepare your case and notify potential parties.
• With both the WHT and Court you can proceed with repair. (However, if using the Financial Assistance Package (FAP) you need to follow the steps as laid out by MBIE to approve a repair – see below for more information on the FAP.)

2. MBIE & the WHT offer three claims processes:

• 1. Claims for repair below $20,000 are quite rare and follow a streamlined resolution process within the MBIE. The claims process uses negotiation and where that fails, mediation to arrive at a settlement. If mediation fails a decision via adjudication can be sought from the WHT.

  2. Claims for repair above $20,000 are handled by the WHT. The claim process uses either MBIE mediation process to arrive at a settlement or, if that fails, a WHT adjudication hearing to arrive at a decision.

  3. The FAP: under this package the government and local council – if it carried out the building inspections and issued the Code Compliance Certificate (CCC) – will each contribute 25% of the “agreed repair cost” to help owners fund the repair of their home. The homeowner must agree not to sue the contributing council and the government, although they can still pursue other liable parties such as builders, developers and manufacturers of defective products.

For further information and an overview on claimant eligibility and how these various claims processes work, see the following webpage: www.dbh.govt.nz/weathertight-services

Q: Should I repair my leaky home first or litigate first?

A: As a homeowner you have three realistic paths of action.

Path 1. Repair then litigate

If you have the money or can raise the funds needed for the repair and legal processes this option generally gives the best possible outcome.

• The surveyor is required to do just enough investigation to determine the scope of repair.
• Better evidence of the cause of leaks and subsequent damage becomes apparent during the repair process.
• The cost of repair is based on fact rather than opinion.
• Almost all issues relating to the claim become evident during repair. (Note there is a point of difference in what can be claimed under WHT and Court claims. Under WHT you cannot recover any of your legal or expert costs other than those for the investigative report and the design and administration of repairs. The Courts allow claims for legal and expert costs and damage other than that caused by weathertightness defects, such as structural defects.)
• This approach is very compelling for defendant parties to settle.

Note: 1. At the same time you begin the repair process you should instruct your lawyer to inform those whom you intend suing to give them the chance to respond. 
2. It is likely that any ensuing legal process, whether through the WHT or High Court, will be interrupted by a mediation process which is designed to achieve an outcome acceptable to all parties but is unlikely to return the full claim.

Path 2. Tender the repair work then litigate

If you do not have sufficient money to fully fund both the repairs and the legal process you can choose to obtain a full report, commission design documents, tender or negotiate the remediation work (using a detailed estimate prepared by a quantity surveyor for comparison) and then seek legal redress. By doing this you establish a competitive process which is valid. The issues to be aware of are:

• The investigative report needs to be thorough.
• Hidden issues remain hidden.
• Any legal action undertaken is effectively based on an estimate of the extent of remediation which may not be an accurate reflection of the full extent or cost of the work.

Note: 1. Tenderers should be given a letter of intent to proceed when satisfactory settlement isreached.
2. WHT decisions are often of lower quality, tend to award less financial compensation and are more subject to appeal than those of the Courts, especially the High Court.

Path 3. Quantify the repair work then litigate

The third and potentially least effective course of action is to commission a report and estimate of the anticipated repair work and then seek legal redress to fund the repair work. The issues to be aware of are the same as Path 2 with the additional consideration that:

• The court or WHT is likely to base its decision on the ‘lowest reasonable value’ and both the extent of the repair work and the actual cost are thus diminished.

Q: What do I need to effectively support my case?

A: Sufficient information. In particular you need to:

• Know what is wrong with the building and the various causes.
• Know how the causes of various problems relate to the parties involved in the design and building processes and be able to identify their role.
• Obtain through a registered building surveyor support material in the form of photos, test result of decay and mould, reports on timber treatment and other relevant technical literature.
• Expert evidence is needed to support your case. Obtain historic records from the Council and other documents such as drawings and specifications relevant to the building process, correspondence between parties, records of site meetings, inspections, changes to drawings or specifications etc. and have it reviewed by the expert.
• Understand court or tribunal procedural processes. Discuss these either with your MBIE case manager or legal counsel.

Q: What are the pros and cons of the Court and WHT processes?

A: The following points are noted.

Pros Court

• Legal and expert costs can be claimed as a part of the claim and will be factored into any settlement that might be negotiated.
• A broad range of issues can be addressed – the claim is not limited to weathertightness issues. It is surprisingly common for leaky homes to have other issues with design and construction some of which might not be able to be claimed in the WHT process.

Cons Court

• Procedural matters are slower and therefore legal costs are often higher.

Pros WHT

• It is less costly for the homeowner to initiate and fund a claim.

Cons WHT

• You cannot sell your property until the matter is settled.
• You cannot recover any of your legal or expert costs other than those for the investigative report and the design and administration of repairs. Additional costs might typically be between $80,000 – $150,000, or possible higher with bigger houses.
• Claims are restricted to leak matters. Other matters including structural failure independent of leaking are not dealt with.

Mediation

1. Both the Court and WHT processes are often resolved by voluntary mediation between parties, which usually takes one day to resolve. Using mediation you need to be aware that:

• Early negotiated settlements are possible but rare because defendants have little incentive to negotiate early on.
• Full recovery is not likely but you avoid the cost of a lengthy legal process.
• Mediation can also deliver a better result in complex cases involving numerous parties where the probable cost to all parties of pursuing recovery through a lengthy court or WHT process far outweighs the value of the case. This scenario, which applies equally to cases involving small as well as large sums of money, highlights the fact that there is usually a point at which you are better to settle, take the money and get on with life.
• Mediation is designed to achieve an agreed settlement rather than a ‘fair’ outcome. This means the outcome is likely to be one in which the homeowner agrees to give up some part of their claim. If you decide to use the Court process to pursue a more ‘just’ solution, you might win all you want but it will cost much more to do so and the likelihood of receiving such a favourable judgment is often less than homeowners want to believe.
• In almost all cases mediated agreements are eventually settled before going to court and there is no risk of appeal.

2. Going to Court or WHT can be a risky thing in that you put yourself entirely in the hands of your lawyer and the judge or adjudicator.

• All litigation is risky. The Court or WHT will decide your case based on the evidence that it hears and you have to remember that the other parties will be there fighting just as hard as you to win the case. In the end the Judge or Adjudicator will have to come to a decision. With a good lawyer and good experts you would hope to succeed, but there is always a risk that the decision may be one that you do not like.

Mediation makes you a more active player – you take part in the decision-making process and decide whether or not you are prepared to accept a given settlement. In mediation the parties rather than the mediator have the final say but ironically the threat of failed mediation being ultimately decided in another venue by an adjudicator or judge acts as a keen incentive for mediation to succeed.

As a rule of thumb you can expect both processes to deliver less money than it costs to repair your home and seek legal redress.

Q: How much will it cost to repair my leaky home and litigate?

A: It is impossible to put a definitive price tag on the process – the size and cost of repair of each home is different.

• Generally, the overall cost of repair and litigation is likely to be about one-and-a-half to two times the cost of the repair bill alone.
• Early resolution of the legal process reduces legal costs but may lower your chance of a higher return. The flip side of this is that resolution of the legal process at a later stage may cost you more in legal fees but give you a better chance of a greater return.
• There are no guarantees on levels of return. Legal and mediation processes are dependent on circumstance and those involved.

Q: What about funding?

A: Personal finances influence decision-making processes and these in turn influence outcomes. Homeowners realistically have two options for covering the cost of carrying out repairs and taking legal action.

Covering Costs – Option One

This option requires the homeowner to have access to a considerable sum of money to repair and then litigate. These might be private funds or funds arranged through a loan or a mortgage.

Borrowed Funds: Borrowing more than 100% of the value of the property to carry out repairs and pay for the legal process creates a situation where there is more debt on the property than there is equity to cover it, which is not a situation lenders like. Under such circumstances lenders would be expected to turn down a request for a loan.

Lenders who have an existing interest in a property will sometimes lend additional money to fund the remediation process because it reinstates the value of the asset which might otherwise be difficult to sell.

If the bank is unsure of your position, ask that it talk to your building surveyor to gain confidence in the process. The questions the bank will want answered are:

• Can you get the dwelling back to a code compliant state?
• Will there be financial controls on the remediation process?
• Can the bank be kept informed of progress all the way through?

The answer to all these questions is usually yes but the building surveyor rather than the homeowner needs to create this assurance to the bank and become involved in certifying drawdown payments.

Covering costs – Option Two

This requires the homeowner to generally spend a minimal amount of money then initiate a claim with either the WHT or under the FAP.

Under the FAP, in theory if a council is involved there is a contribution of 50% of the cost of repairs, and if the work was under a Private Building Certifier then only a 25% contribution from government applies. Our experience is they regard certain parts of the actual repair to be betterment. In addition, the extra time involved in dealing with the bureaucratic process is significant and further diminishes the 50% or 25% contributions. Overall, the final contribution may be reduced to around 40% or 20% respectively of the actual cost of repair.