KEY POINTS:
National is calling on the Government to begin immediate talks with councils on how they might be helped to fund leaky home compensation packages in the wake of a landmark court ruling.
National local government spokesman John Carter said the precedent-setting ruling, which is expected to result in
many similar ones, could bankrupt some smaller councils.
The ruling, revealed in the Weekend Herald, saw Hobsonville landowner Colleen Dicks awarded $250,000 to replace her badly built home and found the Waitakere City Council negligent for failing to pick up key building errors.
"I don't think local government could afford to meet these costs by itself. I mean you're talking hundreds of millions of dollars," Mr Carter said. "It seems to me the Government can't just stand aside and let local government and ratepayers front it all themselves."
Asked if that meant the Government should financially bail out some councils, he said: "Well, the Government needs to be sitting down and talking turkey now with local government from a financial perspective." It should be discussing "how the helping- out with the leaky homes should be funded".
Waitakere Mayor Bob Harvey has predicted a "legal landslide" against councils as a result of the ruling.
While his council had some insurance, Mr Harvey was unable to say yesterday what the excess on it was.
Mr Carter believed some councils had excesses as high as $1 million on individual claims, which could see ratepayers forced to pay most of the bills.
He believed that the industry should also be taking greater responsibility and suggested a law change to catch some of those who had closed businesses and reopened others to avoid being sued.
Denis Sheard, Waitakere City Council legal services manager, said leaky building victims were suing councils, builders and others but often the council was the only party with financial resources.
Councils were suffering unfairly and were "the last man standing". Councils could claim on their insurance to cover claims by victims, but ratepayers would eventually end up paying, he said.
Auckland City Council is also worried. Chief executive David Rankin said about a third of all claims were from his area and his council had more claims than any other.
The Weathertight Homes Resolution Service had more than 3000 leaky building claims of which 1419 were within Auckland City boundaries.
The council was having to foot the bill for many claims because others who were liable had vanished, he said.
"There is unanimous agreement that the problem of leaky homes is a systemic problem. This means that everyone is to blame collectively."
But corporate structures, company law, family trust and shifting were just some of the ways those responsible for the problem avoided mediation and adjudication.
"This means that the cost of fixing homes is unfairly distributed on those few who turn up. Worse than that, the financial burden is increasingly being carried by ratepayers."
Irene Clarke, senior policy analyst at Local Government NZ, criticised the situation as unfair.
"We are strongly against councils being adjudicated additional liability because of builders who are insolvent or no longer exist. Ratepayers should not be made to pay for damages incurred by failures of a systemor by defaulting builders."
Councils were being found liable for about 20 per cent of a claim but if other parties had not been able to pay the balance, councils and any other solvent parties were required to pay up to 100 per cent.
Building and Construction Minister Clayton Cosgrove yesterday refused to comment on whether there was any chance the Government would give financial help to councils.
"That's not an issue within my responsibilities and it's not an issue I comment on. My job is to continue to reform, as we are doing, the building industry so Mum and Dad Kiwi are assured when they build a house they are getting professionals."
Neither Local Government Minister Mark Burton nor Finance Minister Michael Cullen returned calls.
