Avoiding Pitfalls with Leaky Homes

 

 

By Philip O’Sullivan
Introduction

Buying or selling anything has its problems, but when it involves a potentially leaky home there are many traps, especially for the unwary.  Understanding how we got into this mess, some of the legal pitfalls, what prepurchase reports offer and what code compliance certificates mean may assist purchasers.

For leaky homeowners the choices are bleak; expensive repairs, selling at a loss, or doing nothing.  Some attempt a patch up.  Whatever people choose, knowledge of the risks and pitfalls may assist in negotiating the way ahead.

 

Background

The origins of the leaky building crisis were in the heady times of the mid 1980’s.  This saw the arrival of polystyrene-based claddings from North America, which in turn led to the rebirth of stucco, and the development of fibre cement, all into seemingly versatile and durable claddings.

The design freedom these systems brought, with their versatility and apparent waterproof qualities, led to more complex and inherently risky designs.  By the late 1990s nearly half of our houses were clad with these materials directly onto wall framing.  At the same time the last vestige of protection was removed with loss of Boron treatment.  Boron was developed both as an insecticide and a fungicide, based on houses with subfloor problems built during the 1920s housing boom.

Legal concerns

The recent Building Amendment Act 2008 has clamped down on leaky building repairs. All such work is now required to have a building consent.  Whilst a quick fix and sell may seem the easy way out, beware!  Sale and purchase agreements contain vendor warranties.  Any work requiring a building consent has to be undertaken in accordance with the Building Act, which in turn invokes the Building Code.  This is performance or outcome based.

If the house leaks after it is repaired, then the vendor is potentially liable for the costs of putting it right.  It’s best to do repairs properly, or not at all.  Temporary repairs for mitigation of leaks is okay, but sealant used incorrectly can prevent drainage and make matters worse.

The ten-year limitation on building litigation remains.  This is reduced to six years, under the Limitation Act 1950, once the problem becomes known (reasonable discoverability) to the owner.  The six year limitation covers contract; e.g. warranty clauses within a sales and purchase agreement.

Misrepresentation is another basis for claims, even if they are made innocently.  For example, if a vendor provides a prepurchase report to help market a property, if the house is found to have defects not identified by the report, then the vendor is potentially liable.

Prepurchase Reports

Prepurchase reports vary greatly in quality.  Members of the New Zealand Institute of Building Surveyors attend theoretical and practical training courses, subject to examination.  Continuing professional development is a requirement.  Prendos building surveyors are members, however due to demand for our service, we are unable to provide these reports.

Builders, who provide prepurchase reports, often have a good eye for detail, but can misunderstand what they are seeing.  Then there are thermographic cameras.  Many operators have limited training and less building experience.

These cameras detect temperature differences emitted from the surface, as infra-red radiation.  This may indicate excess moisture.  They do not look into walls and they do not directly detect moisture.  If for example there is little or no temperature difference between inside and out, which is common in our climate and is the case with parapets and balustrades, or untreated framing has rotted and shrunk away from the cladding, they are unlikely to detect any problems.

Many prepurchase reports cite compliance with New Zealand Standard NZS 4306:2005 – Residential Property Inspection.  Surprisingly, weathertightness is specifically excluded as it is considered a “special purpose” property inspection.  The reason is that a destructive investigation is the only reliable means of confirming the presence of leaks and subsequent damage.

When I undertook a study of leaks and associated risk factors back in 2001, I calculated one in fifty, or 2% of leaks, were visually obvious.  The perception that there are buckets for collecting leaks, obvious decay smells, or visual damage in most leaky buildings is quite wrong.  In fact it is quite the reverse.

Code Compliance Certificates

A code compliance certificate (CCC) varies in its worth.  It is a statement by either a council or a building certifier, that they believed, on reasonable grounds, that a building complied with the building code, or a consent post Building Act 2004 coming into force.

The inadequacy of direct-fixed cladding systems, especially over non-fungicidally treated framing means even well constructed homes are at risk.  In that instance there may be no negligence on the part of the designer, builder or council, and no basis for a claim.  Building certifiers no longer exist, as there is no insurance cover. The building industry’s understanding of weathertightness has greatly improved.  We now commonly, but not always, use drained and vented cavities and treated timber.

Some purchasers may have bought yet to be completed homes. Generally settlement is conditional upon a CCC.  If a purchaser believes the CCC has been issued in error, they can apply for a Determination from the DBH; www.dbh.govt.nz/determinationsgovt.nz.  Once the application is received the CCC is automatically suspended, either until a decision is made, or the application is withdrawn.

A recent example is an apartment complex in Whitianga.  The purchasers became unhappy with various aspects of the completed development.  The Prendos survey confirmed there were concerns and these were accepted by the DBH.

A Final Word

Whilst we continue with this bureaucratic and litigious system, rather than one that is based on risk identification and minimisation, there will be no shortage of work for the legal profession.

With that in mind, make sure you consult your lawyer on any matters raised in this article, or any other relevant issues, before you enter into a sales and purchase agreement.

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