Leaky homes compensation rort fears raised

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Seminar told safeguards will stop house owners spending govt money on luxuries

There are worries leaky-building victims might holiday on the Government's new $1 billion financial assistance package instead of fixing rotting homes.

This fear was raised at Stop The Rot, a Property Council seminar in Auckland attended by about 70 people last week.

Allan Galloway of the Department of Building and Housing's weathertight services acknowledged his organisation had discussed the prospect of holidaying leaky-home victims.

But safeguards would ensure the money would be used on buildings rather than luxuries, he said.

"Before money is paid, we ensure work is being done and people have not gone on holiday. Obviously the bank is concerned too and the Crown and the council will be paying 25 per cent each," Mr Galloway told the seminar.

Afterwards, he said the package had been designed so it could not be abused.

"We don't want to pay the money and see it's not used for the house. This is achieved with all sorts of things, like repair plans which are very explicit and staged payments," he said.

The new 25:25:50 package grants state and council funds to homeowners who foot only half the repair bill in return for not suing their local council for its role in approving and signing off their places.

Only people whose homes are less than 10 years old can apply. The Government expects its share of the deal will be about $1 billion over five years, based on an estimated 70 per cent of eligible homeowners taking up this package.

Landlords can use the package because the Government said it would not discriminate between different types of owners. The key is to get more leaky homes fixed faster, it said.

The package was introduced under the National Government after Labour-led administrations refused to pay for the disaster, citing the Sacramento court action over a large South Auckland leaky townhouse complex which found the state was too far removed from the problem to be held accountable.

Repair costs covered under the package include full demolition and rebuild, design work, project management, building and resource consent fees, valuation fees needed for getting a loan and the cost of alternative accommodation and furniture storage up to a capped maximum.

The conference heard that just over 400 leaky-home victims had opted for the scheme since it started last winter.

Mr Galloway said that by October 31 the department had assessed 409 claims, for 1321 properties, and found 318 to qualify for the Government payout.

Karen Scott-Howman of the Bankers Association said all the major banks were affected by the disaster.

She rejected opting into the Government's new scheme: "In some cases, you might be best to sue. That option may be attractive for multi-unit owners."

Banks were ready to help victims and rather than applying a loan-to-value ratio for approval of a loan to meet the homeowners' half of the repair bill, she said banks used affordability. "It's all about the ability to service the loan."