As many as 90 per cent of standalone leaky homes are likely still rotting, says leaky homes specialist lawyer Tim Rainey. And tens of thousands of owners who have stuck their heads in the sand are too late for most forms of redress.

The Government's financial address package closed in July this year. Add in that once a code compliance certificate is issued, there is only a 10-year window of opportunity to file a complaint about a leaky home with the Weathertight Homes Resolution Service, and time is almost up for the majority of home owners. The whole process has been a "monumental failure", says Rainey.

The leaky home crisis was a perfect storm as a result of relaxations in the Building Act of 1991. But it's not just the buildings' designs, the lack of cavity, and the monolithic cladding that are the problem, says Gerard Ball, chartered building surveyor at Babbage.

When the building's outer layers are removed, other deficiencies are discovered such as non-compliant materials substituted for ones in the plans, and poor construction methods.


It's estimated that around 80,000 homes and apartments built between 1991 and 2005 used products and methods that have not proved weathertight. About 12,000 of those have been "remediated" (fixed) privately or with the help of government assistance, says Nick Gaites of the New Zealand Institute of Building Surveyors.

And the Rainey Law team says almost every street in the central city would have a leaky apartment building.

The exact number of leaky homes may never be known, says Rainey, because a recommendation in the 2002 Hunn Report that a survey be done was not carried out by the Government. Thanks to that, many owners are in denial. Some find out when they go to sell or when they seek a CCC for other work and receive a Section 95A notice back, says Gaites, which often means a six-figure repair bill.

Lawyer Adina Thorn says many owners are losing a life's earnings in equity thanks to the cost of remediating the homes combined with the loss in capital gain as a result of the leaky home stigma.

Ironically it's almost impossible to patch these buildings, says Rainey. If you want to fix a leaky deck, for example, it will require planning permission and the council requires the entire building to be fixed to the current Building Code - a higher standard than the house was built to.

Rainey has heard arguments by experts that buildings can be remediated cheaply. But he says nothing less than the "gold standard Prendos approach" ever works.

That is stripping off the cladding, treating the timber framing, installing battens and building wrap to provide a drained and ventilated cavity and then installing new cladding.

"We have found over time that all these consultants saying, 'You can fix this up for less money', were wrong. Ball now sees "third generation" leaky buildings where the first and second remediation hasn't worked.


Leaky home stigma
Leaky homes do sell, albeit for a discount. Often buyers are builders or developers who remediate the properties and flick them on or bowl the house and replace it with a new or multiple dwellings on one site.

Buyers need to be careful and see reports from qualified surveyors. But buyers going to auction often don't have the time to get the necessary report on a potentially leaky home and are taking risks.

What's more, says Gaites, it's unusual for vendors to allow the necessary invasive testing to properly determine if the home has a weather tightness problem. If they do, it will have tell-tale holes left in it which could deter buyers.

Unfortunately for owners, even a reclad and a CCC won't return the value of their home to that of an otherwise equal home on the same piece of land.

Whether or not remediated, homes built between 1991 and 2004/5 come with a costly stigma, found Massey University's Song Shi, Iona McCarthy and Uyen Mai. They are on the verge of releasing research into the price effect and say the drop in value is 11 per cent on average for general market stigma plus 5-10 per cent for post-remediation stigma.

Tim Rainey, a partner at Rainey Law. Picture / Supplied
Tim Rainey, a partner at Rainey Law. Picture / Supplied
We have found over time that all these consultants saying, 'You can fix this up for less money', were wrong.

In the apartment market, cashed-up buyers have a formula for buying into leaky buildings, says Peter Holmes, general manager at Crockers Property.

Where the remediation costs are known, but the work has not been yet done, they will typically deduct the estimated cost of the work, a contingency and then about one third more to cover their profit.

In the case of an apartment where the owner needed to pay $100,000 towards the remediation, the cashed up buyer might pay around $150,000 below the expected market value of the property.

Rainey Law has had the first case, but it expects to see more, where the apartment owner declared bankruptcy and the Official Assignee "disclaims the property as onerous property". In effect, it is abandoned and the body corporate takes it over to recoup some remediation costs.

Class action
Thorn is leading the class action against cladding manufacturer James Hardie on a "no fee, no win" basis supported by international litigation funders. The case involves homes, commercial buildings, schools, hospitals and others that were constructed with claddings such as James Hardie's Harditex, Monotek, and Titan Board.

She says ASX-listed James Hardie tried to argue that there was a 10-year limitation under the Building Act. But Thorn says that only covers the building work, not the products.

The $200 million class action involves more than 360 buildings and 1000 property owners.

The human cost
Thorn says at least two of her clients have taken their own lives. Others have gone bankrupt and many more are living in homes that are severely impacting their health.

In 2009 academics working in the field of public health at the University of Otago in Wellington estimated that the physical and mental health costs associated with leaky buildings was $26 million a year.

Rainey remembers attending meetings in apartment buildings with mostly older apartment owners who appeared to go downhill physically and mentally over the years that the case ran on. "It is heartbreaking."

Ball knows of tradespeople involved in building the leaky buildings who have committed suicide or lost life savings.

One tradesman who was the "last man standing" for a Whangaparaoa home owner had to pay around $60,000 on a job that he would have earned around $3000 for his portion of the work. It crushed him financially.