A judge has criticised the unregulated pre-purchase building inspection sector and “poor quality” of reports after awarding $500,000 in damages to a first-home buyer saddled with a rotting, leaky house.
Justice Peter Andrew’s decision says three separate pre-purchase reports were conducted on the Selwyn St, Onehunga property in the months before its 2021 sale.
Though the house had serious weathertightness problems, two of the reports cleared the property, while just one identified moisture issues and recommended further investigation.
There are now calls for better standards, minimum qualifications and mandatory indemnity insurance for the sector to better protect Kiwis purchasing their biggest asset.
The plaintiff, Angelina Vanifatova, bought the four-bedroom unit in January 2021 for $773,000 but discovered that it leaked just six months after moving in.
As part of her due diligence, she’d earlier commissioned a building report from a company then owned by Ryan Clifford, which “did not identify any weathertightness issues”, a High Court decision found.
Clifford later reached a $75,000 settlement with Vanifatova over the “flawed” report, sold his business and is no longer in the sector.
He told the Herald he couldn’t comment on the settlement, but said the saga had put him through hell and he believed he’d been treated unfairly.
“I did what I had to for my family. These problems are life-changing for us as well as the client.”
Justice Andrew’s decision says that shortly before listing the property for sale, the defendant vendors, the Wang family, commissioned their own building report from another company, API Property Service Ltd, at the instruction of their Bayleys agents.
That report also cleared the property of having any significant defects, finding it was “well maintained” and that moisture readings were “of an acceptable level”.
However, a third report commissioned by potential buyer Dillon Sue from Grant Tibbits of The Property Inspectors 2010 Ltd identified elevated moisture levels and damage.
Sue withdrew his offer after receiving the report. Bayleys forwarded the report to the vendors’ solicitors and withdrew as listing agents a few months later, before being replaced by Barfoot & Thompson.
After realising she had bought a leaky home, Vanifatova commissioned expert consultants to assess the property, which found “weathertightness failure” and “decay damage”.
An expert said the damage would likely have been apparent to the previous owner, “and has been remediated on a superficial level only prior to the sale”.
The judge ultimately ordered the Wangs to pay more than $500,000 in damages and costs for deliberately withholding information about the true state of the home and carrying out “concealment works” to mask the damage.
The Onehunga case has similarities to one involving building inspection firm Metsons (NZ) Ltd, which conducted a pre-purchase inspection report on a Goodwood Heights, Manukau home in March 2020.
That report found the property was in “generally good condition” with “no moisture detected any place in the house”.
However, a day after the purchasers moved in, the property began leaking.
Vendor Davinder Rahal and his company First Trust Ltd were eventually ordered to pay the first home-buyer couple nearly $1m in damages and costs for deceptive conduct in a case described by a judge as “quite literally a cover-up”.
Metsons’ director Vinay Mehta was found jointly liable, but later reached a confidential financial settlement with the plaintiffs.
Real estate agent Gary Bal also made a confidential financial settlement, resulting in a claim against him being discontinued, with no admission of liability.
In the latest court decision, Justice Andrew referenced “the limits of pre-purchase inspection reports”, which had been canvassed in evidence by defence expert witness and chartered building surveyor Gerard Ball.
“There appears to be substantial merit in his criticism of the unregulated pre-purchase property inspection sector and the many poor-quality reports produced,” the judge stated.
Ball told the court that the pre-purchase property inspection sector was entirely unregulated.
“Formal qualifications, membership of a professional institution or indemnity insurance are not mandatory requirements and therefore anyone who is so-minded can set themselves up as a pre-purchase inspector and produce reports.”
While a New Zealand Standard for residential property inspections sets minimum requirements for visual residential building inspections and reports, “adherence to this standard is not mandatory”, Ball said.
Pre-purchase reports were also “entirely visual” and subject to “significant limitations”.
“Those undertaking inspections are predominantly reliant upon their personal knowledge and experience.”
While a small number of non-invasive tools, such as moisture meters and infrared cameras, could assist with those observations, the devices also came with limitations, Ball said.
“In the case of moisture meters, these provide indicative results only and are highly dependent upon prevailing local conditions.”
The Herald put the criticisms by Ball and Justice Andrew to Building and Construction Minister Chris Bishop. But a spokeswoman for the minister said the relevant legislation did not fall under his portfolio.
In terms of increasing accountability for poor workmanship, Bishop was strengthening the complaints and disciplinary process for Licensed Building Practitioners, “to give consumers confidence in the tradespeople building their homes”.
Consumer Affairs Minister Scott Simpson said buying a home was one of the biggest decisions and biggest investments most Kiwis would ever make.
“That’s why it’s so important people can trust the building inspections they rely on. Confidence in that process isn’t just nice to have.”
Under the Fair Trading Act, any statements businesses made about goods and services must be true and not misleading, Simpson said, adding that he had confidence in the existing laws.
“When you pay for a service like a building inspection, you have the right to expect it to be done properly. Under the Consumer Guarantees Act, businesses must carry out their services with reasonable care and skill. In simple terms, that means the job should be done to the standard you’d expect from a competent, experienced professional.
“If a business doesn’t meet that standard, they’re expected to fix it – and fast.
“Everyone deserves to feel confident when they hire a professional. That’s why I expect all businesses and people in trade in New Zealand to live up to their responsibilities.”
Lane Nichols is a senior journalist and Auckland desk editor for the New Zealand Herald with more than 20 years’ experience in the industry.
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