A property owner who sold a leaky building after telling the buyer it did not have any weathertightness issues, has lost an appeal to pay the new owner half a million dollars.

In 2011, two years after Jill Grant bought the Takapuna townhouse, extensive damage was discovered from a leak that had been going for some time, and the row of houses was in fact a leaky building.

She took Ridgway Empire Ltd to court, saying its director Aaron Ridgway assured her it was not a leaky building when she asked him during a viewing.

Ridgway claimed he did not know the property was leaky when he sold it, and he should not be held at fault.

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The building was built in the 1970s, with a third floor added in 1983 - before the relaxation of building controls which led to the leaky building crisis, which has cost Auckland Council more than $600 million alone, with an extra $350m set aside for repairs.

Ridgway had lived in the townhouse until 2007, when he moved into the neighbouring unit, number 5.

Parnell Terraces under leaky building repair at The Strand Parnell in 2017. Photo / Doug Sherring
Parnell Terraces under leaky building repair at The Strand Parnell in 2017. Photo / Doug Sherring

He rented out unit 4 for two years before putting it up for sale, marketing it himself. He showed Grant around after spotting her looking at the For Sale sign.

During the viewing she asked him if the 1970s townhouse leaked and if it was a leaky building. He replied to the effect: "No, the unit does not leak and it is not a leaky building."

However, it was later found to have latent defects that made it leaky, and it had extensive damage.

Ridgway bought unit 4 in December 2003, and a couple of months later during renovations it was discovered that water had been leaking from the third-floor deck. The wood was found to be wet, but not rotten, and the surface of the third-floor deck was replaced. It passed a retrospective inspection, and Ridgway gave that report to Grant, prior to her purchase. However, he did not tell her about the leaks and they were also not mentioned in the report.

The leaks Grant discovered in 2011 were on the ceiling to the second floor lounge and originated from the leak on the third floor.

Basque Road Apartments in Eden Terrace shrink-wrapped during leaky building repairs. Auckland council has spent more than $600m fixing leaky buildings in the city. Photo / Dean Purcell.
Basque Road Apartments in Eden Terrace shrink-wrapped during leaky building repairs. Auckland council has spent more than $600m fixing leaky buildings in the city. Photo / Dean Purcell.

Damage to the timber framing showed clear signs of water ingress over a long period of time, predating Grant's purchase.

In a decision released yesterday, the Court of Appeal judges said the "problem for Mr Ridgway is that he did not disclose all material facts known to him".

"He did not tell Ms Grant the unit had suffered serious leaks in the past, leading to significant water ingress to the timber framing behind the walls and in the ceiling in the second-floor lounge, the very area in which leaks were later found by Ms Grant and which the experts agreed had persisted for an extended period, pre-dating her purchase.

"On the contrary, Mr Ridgway provided her with the safe and sanitary report, which did not refer to these leaks, to support his unqualified assurance the unit did not leak and it was not a leaky building. Providing this report without disclosing the leaks that had prompted the need for remediation was misleading."

Ridgway's lawyers argued that Grant should have asked further questions and should have commissioned a building report prior to purchase. However, the appeal judges did not agree - they said: "Mr Ridgway's response was clear and unequivocal. There was no need for follow-up questions to clarify it."

They added: "We consider she was entitled to rely on Ridgway's unqualified assurances given his superior knowledge of the unit."

Ridgway's appeal was dismissed, and he was ordered to pay $474,101 to cover the cost of repairs, and $25,000 in damages for the stress it caused.