Napier City Council leads charge for changes to defective building liability

The apartments at the centre of a recent defective building case, where Napier ratepayers bore the brunt of the settlement. Photo / File

Napier City Council plans to put pressure on central government to change rules to limit councils' liability in defective building cases, and hopes other councils will support it.

NCC has drafted a remit to take to the Local Government New Zealand Annual Meeting, which recommends capping the responsibility councils across the country have when it comes to defective buildings.

In a paper being put before NCC's Community Services Committee on Tuesday, it states that councils, as regulatory bodies, are disproportionately affected by defective building claims.

"The courts have held that councils will generally have a proportionate share of liability in defective building cases in the vicinity of 20 per cent," the paper states.

However, councils tend to have to cover the shortfall when other parties involved, for example builders, in such claims are unable to cover the costs, including when they go into liquidation.

The paper states that councils covering the shortfall tends to be the rule rather than the exception.

A 2014 report by the Law Commission recommended capping councils' liability in defective building cases, but no further work has been taken on this recommendation.

"The cost to ratepayers of the current joint and several liability system is significant, disproportionately so," the paper states.

"Although this was recognised in the Law Commission report in 2014, no substantive steps have been taken by central government to address the issue or implement the Law Commission's recommendation that council liability should be capped. "

The remit suggests councils across New Zealand form a working group with Ministry of Business, Innovation and Employment and the Ministry of Justice, draft amendments to the Building Act, and draft content for a cabinet paper regarding the Law Commissions recommendation.

NCC has recently been caught up in a case of an allegedly defective building case in regards to apartments on Humber St, and has another case pending.

Ratepayers will not know how much the recently settled case will cost them, as it is subject to a confidentiality clause, however earlier reports stated the remedial work on the buildings cost over $9million.

A council decision is needed so it can be discussed at a meeting of Zone 3 councils in April, a requirement before it can be put to the Local Government New Zealand. Zone 3 represents councils in the central North Island.