Home owners in a luxury apartment building at Mount Maunganui have launched a $36 million civil suit against 16 defendants including Tauranga City Council, a prominent developer and a building company, after major defects were discovered.

All but one of the 48 apartment owners at the Cayman Apartments on Maunganui Rd are part of the legal action that began after Tauranga City Council issued a notation against the $46 million building's property file.

The notation, discovered in early 2016, read the council was aware of "defects" in one apartment and there could be defects in all apartments.

It said the code compliance certificate [CCC] "may have been issued in error and therefore we do not recommend reliance on it".

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The note came after one apartment owner successfully settled out of court with Tauranga City Council over defects to his apartment.

Cayman Apartments body corporate chairman Paul Clark said the news was a huge shock to the owners who bought their apartments relying on the CCC certifying that the building met the Building Code.

"It was tantamount to the council saying the building didn't have a code compliance certificate, in other words the building possibly didn't comply with the Building Code," Clark said.

"Apart from living in a building that might not meet the Building Code, the other effect is that it makes it virtually impossible for home owners to sell their apartments or if they do it would likely have to be at a significantly discounted price."

Clark, a retired lawyer, said the council declined to remove the note based on an engineer's report it had commissioned, the full details of which it refused to divulge.

It left owners with no option but to investigate the building and its construction, he said.

A review raised "significant concerns" before a more in-depth investigation revealed major defects. The cost to owners so far is more than $2 million.

Some of the alleged defects include:

• Compromised structural integrity of the building;

• Waterproofing issues on the balconies, courtyards and roof;

• Inadequate passive fire protection;

• Stormwater issues. During two extreme rain events the ground floor apartments flooded, one with raw sewage once.

The claim alleges a substituted building material substantially altered the structural integrity of the building, did not meet Building Code standards, was not approved under consent, and that council was negligent in its oversight of the build.

"It's a nightmare," Clark said. "The owners have no choice but to bring proceedings, to recover the cost of the work needed to remediate the building, against the parties whose errors or omissions created the problem.

"All owners, many of whom are elderly and on fixed incomes, are suffering financial hardship from meeting their share of the cost associated with the investigation and litigation.

"The situation is also taking a mental toll. Some are distraught. Some have wanted to sell and haven't been able to while there is such uncertainty."

Tauranga developer Peter Cooney. Photo / John Borren
Tauranga developer Peter Cooney. Photo / John Borren

Owners also faced having to find temporary accommodation for at least 18 months while the repair work was carried out.

One elderly owner-resident, who did not want to be identified, said the building investigation findings had "completely devastated" him and his wife.

The tens of thousands the couple had paid toward investigations and legal fees left them with no financial safety net.

"It's cleaned us out. We never expected anything like this. We're in survival mode."

It comes as retired judge Graeme Colgan conducts an investigation into the council's building inspections after the Bella Vista subdivision debacle where it issued code compliance certificates on shoddily built houses.

The council was forced to buy back the houses from the 21 affected home owners late last year, at a cost of $14m, of which ratepayers paid $3.5m.

The Ministry of Business, Innovation and Employment is also investigating the council's consenting process.

Other defendants of the Cayman proceedings include XMP & D Ltd building company whose directors before it went into voluntary liquidation included Peter Cooney and Matthew Largerberg of Classic Builders, one of the biggest residential builders in the Bay of Plenty.

Cooney said he didn't believe the case would amount to much because he had done nothing wrong.

He said Cayman Apartments was built to the accepted standard under the Building Code at the time but the code had since changed.

"None of those buildings [from that era] are going to comply and there's going to be issues in every building because none of them meet that new standard.

"We do everything that we're supposed to do by the book. We stick to the code that's given us."

A Tauranga City Council spokesman said since leaky buildings came to light in the early 2000s, safeguards had been implemented by the council to tackle the problem.

When asked if the council should have been more vigilant by the time the Cayman was built in 2007 he said because the case was complex and before the courts he could not comment.

However, he said the case had nothing to do with Bella Vista, which was unrelated to weather-tight issues.

Rainey Law partner Jeanne Heatlie, acting for the owners, said they were unanimous in their plight.

"The ultimate goal of the owners is to have their building repaired and made code compliant."

A hearing is set for May next year at the High Court in Hamilton.

Cayman Apartments

• $46 million, 6-storey apartment building designed for permanent living in prime Mount Maunganui location.

• Completed in 2007 by XMP & D Ltd, formerly CBC Construction, which went into liquidation in 2014.

• 48 three-bedroom apartments between 150-180sqm. All except ground and lower floors have either harbour or sea views.

• Originally sold off the plan for between $595,000 to upwards of $1.5 million.

• 47 owners committed to $36 million legal action over structural defects.

• Tauranga City Council issued code compliance certificate [CCC] for the building but added a note in 2016 saying CCC could "no longer be relied upon".