Court to decide on 32 faulty flats

Pepperwood Mews owner/investors are seeking compensation from the state and council. Photo / Brett Phibbs

Housing New Zealand and the Auckland Council have denied being to blame for an empty West Auckland block of rotting apartments.

Court documents filed in the Pepperwood Mews dispute over who is at fault for the 32-unit Kelston block built in 2004 show the state and local government organisations stepping away from the battle.

The case is going to the High Court at Auckland.

In a statement of defence, Housing NZ says it leased the units from developer Prime Group, but floor plans were not prepared at its request and it had insufficient knowledge about the construction, marketing and sale phase of the project.

Housing NZ considered buying the units from Prime but decided instead to lease them.

It admits commissioning Opus International Consultants in 2006 to assess the buildings and advise on fixing them, but says the units do not comply with the Building Act or the Building Code on structure, durability or weathertightness.

The Auckland Council's statement says it had insufficient knowledge about the development and denies claims that it was closely involved, although it admits doing inspections and issuing code compliance certificates.

Unit owner/investors claim the apartments were built in a public-private partnership between Housing NZ and a developer.

All the apartments were leased to Housing NZ but have been empty since 2009 after it evacuated tenants because of safety concerns about the severe structural defects.

A spokeswoman for the owners said investors were extremely distressed.

"The battle has already taken a huge financial and emotional toll on the Kiwi mums and dads who put their money into the deal, and serves as a serious warning to those interested in the PPP co-investment models currently being promoted by HNZ," she said.

Roger Levie of the Home Owners and Buyers Association said he supported owners, but was not expecting any surprises from the statements of defence.

"Housing New Zealand has denied its involvement all along, claiming its only role was to lease the 32 units from the owners.

"But the court will hear evidence that Housing NZ was in fact deeply involved in both initiating the project and approving the design and specifications.

"Despite recent Housing NZ public statements to the contrary, the owners have documentary evidence clearly demonstrating this," Mr Levie said.

"The owners were encouraged to invest in these properties based on an understanding that they were built to a high standard set by HNZ and that this was low risk with a guarantee of 10-year HNZ leases.

"The Auckland Council [formerly Waitakere City Council] signed off on the development by issuing a code compliance certificate for what has now proven to be a seriously defective building," he said.

Housing Minister Phil Heatley had expressed enthusiasm for PPPs to boost state housing stocks. But Mr Levie questioned this after the Pepperwood debacle.

"The Government has made much of the benefits of PPPs to boost state housing stocks in recent months, and we expect more in the Budget," Mr Levie said.

"[But] before Government launches more housing PPPs it must find out what went so dreadfully wrong in HNZ with Pepperwood Mews and quickly find a solution."