Auckland tots up damage as leak bills soar

A new Government report showing the cost of repairs on leaky buildings has soared fivefold to $1 billion has re-opened a debate in Auckland City about the size and cost of the problem to ratepayers.

A Department of Building and Housing paper to the Cabinet in June also said 15,000 homes could suffer damage from leaks - 3000 more than the previous highest official estimate in 2002.

Council general manager of finance Andrew McKenzie was adamant the increased costs and numbers were nothing to worry about but councillor Doug Armstrong and specialist leaky building law firm Grimshaw & Co said the council was greatly under-estimating the problem.

Half of the estimated 15,000 rotting homes are in Auckland City where blocks of multi-unit apartments and houses stripped of plaster cladding and covered in tarpaulins are becoming a common sight.

Mr McKenzie was comfortable with the council's liability figure of "tens of millions of dollars", which was based on paying 20 per cent of total repair bills and insurance cover for large claims.

Since 2000, the council has had a $2 million excess on liability insurance for any one claim, but no claims for leaky buildings have come anywhere near the excess.

The council has refused to release actual figures about its potential liability from rotting homes. That decision is being investigated by the Ombudsman after the Herald asked for the figures under the Official Information Act.

In a confidential update to councillors in September, part of which was released to the Herald, officers warned that other parties such as builders, engineers and project managers were getting out of settlements and "council's share of the liability could be expected to increase".

Mr McKenzie said the council had a dual responsibility; to people whose lives were affected by rotting homes and to ratepayers who had to pay for council mistakes.

The council was working with the Government on new solutions to leaky buildings, he said.

Former finance committee chairman Mr Armstrong said he stood by earlier statements that the council had woefully under-estimated its potential liability. The leaky building crisis could end up costing ratepayers $270 million, based on the "joint or several liability law" that saw builders and others not paying to leave the council as the "last one standing", he said in September.

Mr Armstrong said he could not comment on the new Government report because the council had restricted comment on leaky buildings to a handful of councillors and officers.

But Paul Grimshaw, of the law firm Grimshaw & Co, which represents 5000 leaky home victims in Auckland, Wellington and Queenstown, said the council needed to be more realistic when assessing its liability, saying the liability figure of 20 per cent for repairs was "ridiculously low" and "plain wrong".

He said there was no proportionate liability under New Zealand law. If a home owner could establish negligence and liability against a council then the owner could recover the full settlement from the council, Mr Grimshaw said.