How to ride the student loan money-go-round

Q: I'm wondering where your ethics are in relation to "Investing Your Student Loan" in last week's column.

I'm a student and have a student loan. As student loans are paid directly to the educational institution and the student never gets any money, I'm wondering how you imagine a student could choose to invest it.

This letter is obviously a fabrication. If it's your fabrication then it's highly unethical and I will complain to the editor.

A: Steady on! The letter is real - as is every letter in this column except a few when the column first started in 1998 and one I wrote several years ago when I was researching an issue and felt readers would benefit from what I had learned.

These days, I feel bad enough about all the letters I can't answer that there's no way I would make one up.

As you say, student loan money goes straight into course fees or course-related costs, although students can also borrow up to $150 a week for living costs.

But some lucky students, who have savings or income that they would otherwise have spent on courses or living costs, simply take out student loans to cover those expenses and then invest the savings or income.

While the actual dollars invested might not be loan money, there's just a money-go-round in the middle. In effect, they are investing their loans.

I don't think anybody knows how many people are doing this. But I've had several letters from people who do.

Q: In your February 26 column you suggest to a woman that she should allay her concerns about purchasing a leaky building by getting the house valued. You say that the valuer "should find any potential problems".

This advice is flawed on two counts, based on my many years experience as a lawyer who has acted for home owners in leaky home disputes and for valuers in other types of disputes.

Firstly, valuers include routine disclaimers to the effect that their valuations are not surveys, are based on what can be seen and assume that the house is sound.

Many valuers now include exclusions which exclude any liability for failing to detect that a building is leaky. These are quite justified as the purpose of a valuation is not to detect building defects.

Secondly, "leaky building syndrome" is an insidious problem. Most people are unaware, sometimes for years, that their home is leaky. This is because the leaking that causes the damage occurs in the space between the interior and exterior walls, rotting the framing timber.

Furthermore, visible signs such as damp interior walls are easily camouflaged by wily vendors who simply cover the affected area with furniture or sell in summer after a cosmetic paint job.

Such properties change hands on a regular basis and, unless the sellers were the developers of the property, they will have no liability to the purchasers.

Your correspondent is quite right to worry about buying a leaky home, of which there are many thousands in Auckland.

Anyone thinking of buying a home with monolithic cladding (stucco plaster, textured fibre cement or similar) should proceed with extreme caution, particularly if the house was built between 1996 and 2004, when untreated timber framing was likely to have been used.

Such a person should, before committing to the purchase, obtain a clean report from a building consultant with qualifications in weathertightness issues. A valuation is no protection whatsoever from leaky buildings.

A: Many thanks for pointing this out.

I based my comment on comprehensive valuer's reports that I have seen, but I should have checked further.

Glenda Whitehead, of QV Valuations, says: "Our reports do have exclusions. Our brief as a valuer is generally perhaps more narrow than you may have realised.

"As an industry, we are very aware of the issues and our inspections are intended to pick up some problems. But I agree with your writer that a visual inspection is not always adequate.

"If we're at all concerned about a property, we recommend that you get a qualified engineer to undertake a full inspection, including moisture tests. As pointed out, this is a complex issue."

It's quite possible, though, to be overly cautious. If you're considering buying a house that is not of the worrying type, a clear valuer's report - and a discussion with the valuer about possible leaks - may be enough.

I'm not belittling the leaky building problem. It must be horrendous. But it seems mad for someone to be afraid to buy any house because of it. The next letter helps put this in perspective.

P. S. Would it be cheeky for me to point out that only a lawyer would say, "include exclusions which exclude"?

A: As an architect nearing retirement I was interested in your answer to the correspondent who feared buying a leaky home.

In my experience, a typical valuer's report would provide little worthwhile reassurance. To quote from a recent valuer's report copied to me, "I could see no obvious faults ... [but] ... this report should not be construed as a structural survey".

And the value of house inspection reports depends on who does them.

My preference is for Members of the NZ Institute of Building Surveyors, but they are nearly all busy on (guess what?) leaky building reports - which can be expensive.

More encouragingly, most houses do not have costly leaks.

A few pragmatic hints might help: beware of older houses if they have changed hands too often; be very cautious about plaster finishes and over-complex designs; of decks built over rooms below; and sites exposed to strong winds.

A: Answer: Thanks to you, too.

It's lovely to see professionals taking time out to help the rest of us.