Compensation plan for leaky homes deleted

By ANDREW LAXON

EXCLUSIVE - An inquiry into the leaky building crisis has asked the Government to consider paying millions of dollars in compensation to affected homeowners.

But the proposal has been removed from the final report, along with other legally sensitive material still being considered by Government lawyers.

The inquiry team- whose report will be made public today - is understood to have floated the idea of taxpayer aid in its original report to the Building Industry Authority.

It is thought to have argued that the Government may have a moral or social obligation to help homeowners, even if it is not legally liable.

The payments, based on recommendations from a similar inquiry into the "leaky condo crisis" in Canada, would come on top of any council settlements paid for by ratepayers.

However, the Herald understands that the compensation proposal was removed and sent to the Crown Law Office, which is preparing a legal response for the Government.

Other crucial technical recommendations in the report - such as the compulsory introduction of a water-draining cavity inside outer walls and a return to greater use of chemically treated timber, which is more resistant to rot - have also been toned down for legal reasons.

The report will still urge the Building Industry Authority to investigate these solutions.

But it has stopped short of recommending them outright because lawyers worry that the Government-backed authority could be liable if these solutions fail.

The three-man inquiry team - former State Services Commissioner Don Hunn, former Victoria University architecture dean David Kerhohan and engineering consultant Ian Bond - is expected to strengthen its preliminary advice in May that New Zealand faces "a major systemic breakdown" in the building industry unless action is taken fast.

The report will also reinforce the national safety warning issued by the authority last month that people could be killed or seriously injured by rotting balconies.

It is likely to estimate the national repair bill at hundreds of millions of dollars, a slightly more conservative estimate than the $1 billion minimum suggested by Herald sources this year.

The inquiry is expected to criticise most groups in the building industry - architects for failing to design homes for New Zealand conditions, developers for cutting corners to save costs, and builders for lacking basic technical knowledge, such as the need for protective flashings on roofs and windows.

The held-over compensation proposal is based on the findings of a 1999 Canadian commission, which recommended that victims of the "leaky condo crisis" in British Columbia should receive C$900 million ($1.2 billion), paid by the federal and state governments and local construction industry.

If New Zealand adopted the Canadian proposal to pay all repair bills up to C$25,000 ($33,000) - which is about the average figure in Auckland, according to a study last year - the cost to taxpayers could easily run into tens of millions of dollars a year.

But the Crown Law Office is expected to advise the Government against making any payments, on the grounds that owners can already sue and some homeowners may have knowingly taken short cuts on their houses.

Ministers will have noted that Canadian authorities ruled out full compensation, instead offering interest-free loans to the worst-affected homeowners.

In the week leading up to the report's release, the Herald revealed fresh evidence of the scale of the leaky building crisis, including estimates by the country's two biggest leak investigation firms that they are dealing with about 2500 leaking apartments and terraced homes alone.

In some of the worst examples:

* New Zealand's biggest terraced housing developer, Taradale, faces a multimillion-dollar lawsuit and repairs to more than 350 homes at four of its largest sites.

* Balconies are rotting after only 18 months at one of Auckland's biggest and newest developments, the 97-apartment Eden Two in Mt Eden.

* More than 100 residents at the leaking Silverfield terraces in St Lukes may have to leave if toxic mould is found inside the walls.

* The full report will be available at nzherald.co.nz/leaky when it is released this morning.

* If you have information about leaking buildings,
email the Herald or fax (09) 373-6421.