Leaky apartment leaves couple hundreds of thousands out of pocket

Owners of a unit in Wellington's Sirocco Apartment complex have lost hundreds of thousands of dollars after the building was discovered to have major problems with leaks. Photo / Mark Mitchell

A couple who purchased an apartment in a building that later turned out to have major leaky problems have lost hundreds of thousands of dollars after failing to prove the vendor knew of the issues at the time of the sale.

In June 2013 Bruce Gadd agreed to sell unit 803 in Sirocco Apartments, which he had owned since 2004, to Daniel and Elizabeth Miles for $540,000.

Sirocco is an 11-storey, 44-apartment building situated in central Wellington.

The sale was completed in July 2013 but eight months later in April 2014, rotten timber was discovered under the deck of another apartment.

An engineer's report later that year revealed 40 per cent of the structure's cladding had moisture penetration, with corresponding deterioration of timber and steelwork and recommended a larger scale inspection be carried out.

In November 2014 the body corporate committee's recommendation to raise a special levy of $500,000 to fund further investigations and some initial repair work was approved.

Building consultants, hired to identify the extent of the damage and assess the scope of the required remedial works, reported in July 2015 that there were numerous weathertightness defects in the building and the only viable repair option was to fully re-clad the entire structure, including roofs and balconies.

Initially, the work to make the repairs was estimated at $10 million but after further reports, between September 2017 and May 2019, confirmed the extensive repairs required it ballooned to $22 million.

The Miles' began legal proceedings against Gadd in the High Court at Wellington in June 2019 alleging he breached the warranty by not disclosing any issues which might result in or indicate the possibility of they could incurring any other liability.

In May 2020 the couple sold the apartment for $305,000, a loss of $235,000 in seven years.

They claimed the apartment would have been worth $992,000 and sought recovery of $687,000 ($992,000 less $305,000) plus $18,852.32 for their share of the special levy raised in November 2014 and general damages of $30,000 for stress, anxiety and
inconvenience.

Gadd denied breaching the warranty but acknowledged he was aware parts of the building required repair, but said he was not aware of any reason why this would not be addressed through normal maintenance.

The High Court found the Miles had not established, on the balance of probabilities, that Gadd had notice or knowledge of any fact within the terms of the warranty.

Historical building issues, raised by the couple, going back many years before the agreement was entered into, recording leaking taps and a toilet in one apartment and a leak in the shower of another apartment didn't prove Gadd knew of the possibility of a levy to investigate and remediate other defects reported in 2015, the judge ruled.

"These issues have nothing to do with the systemic weathertightness defects in other areas of the complex.

"Mr Gadd did not have the knowledge or notice that the plaintiffs claim he possessed. Mr Gadd understood that some apartments had issues with leaking but that those issues had either been addressed or were being addressed."

The Miles then took their fight to the Court of Appeal arguing the judge was wrong to limit the warranty to their unit and challenged the findings Gadd did not have knowledge or notice of facts that may have given rise to the prospective liability.

In it's decision released on Tuesday the Court dismissed the appeal.

"We have not been persuaded that the Judge's key factual findings were wrong."

The ruling set out by owning the apartment for almost nine years, Gadd had good reason to believe any ongoing repairs would be appropriately addressed as they arose and paid
for using funds accumulated from normal periodic levies.

"We agree with the Judge that a reasonable vendor in Mr Gadd's position would not have been alerted to the possibility of a special levy being required to investigate and remediate the major systemic weathertightness issues found much later."

The body corporate has, so far, decided not to remediate the building.