Low take-up of leaky homes package boosts govt accounts

BUSINESSDESK: The helping hand to owners of leaky homes is being shunned, helping improve the government's accounts to the tune of $408 million in the latest financial year.

Under a financial assistance package, the government pays 25% of the repair costs of a leaky home, local government 25% and the homeowner 50%.

Paul Grimshaw, a partner at Grimshaw & Co, questioned why anyone would go for that when they could get 100% of remediation and other costs through the courts.

"People aren't going for the package," he says.

Only 30 households have so far taken up the package and the cost to taxpayers has been $1.3 million, according to the Ministry of Business Innovation & Employment.

That made a $567 million provision in the government's accounts appear over the top and the accounts for the year to June 30, 2012, released on Wednesday slashed the provision by $408 million.

"In the first year of operation, the focus of the scheme has been to assist claimants through the process to the repair stage," Megan Martin, acting deputy chief executive of service delivery for the building and housing group says.

"We expect to see more payments being made to claimants in the second and third year of the scheme as properties are physically repaired." 

The scheme became available to homeowners on July 29, 2011, and claims must be lodged by July 29, 2016.

An actuarial valuation for the government by Melville Jessup Weaver as at June 30, 2012, assumes only 3544 claims even though 14,721 dwellings are eligible. This take-up assumption is slashed from the 11,040 previously.

The actuary assumes it will cost $336,741 to fix a single dwelling and $134,696 to fix a unit in a multi-dwelling.

The ministry says 1104 claims against the financial assistance package have been assessed and 885 claims representing 2542 properties have qualified for the government portion.

In 2009 PricewaterhouseCoopers estimated that between 22,000 and 89,000 homes were leaky and the total cost of fixing 42,000 homes was $11.3 billion.

The package does not cover commercial properties, so a Supreme Court decision this week that is expect to trigger a deluge of claims on leaky commercial buildings does not increase government liabilities under the assistance package.

The Supreme Court ruled on Thursday that the Court of Appeal should not have struck out a claim by the owners of the building Spencer on Byron in Takapuna, Auckland, that the-then North Shore District Council only had a duty of care to residential buildings.

Mr Grimshaw says the decision is limited to buildings built in the last 10 years but there would be claims on commercial buildings worth hundreds of millions of dollars.

Any decision to extend the financial assistance package to commercial buildings was a "political decision".

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2 Comments & Questions

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God help us. If the taxpayers are liable for leaky commercial & industrial buildings, our national debt would soar.

People, stop listening to Paul Grimshaw. He has a vested interest in this, earning millions of dollars every year.

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I totally agree , there will little left for the poor clients after paying their account if anything like my experience. Get the consultants out of the picture , the cost will halve.They are in cohorts together more than doubling the cost of repair through unnecessary control,delays and fees through their own greed. Once Stanley Construction came on board we saw progress , good work ethic and a quality job but they were manipulated and controlled by the consultants. Frustrating!! They could have easily managed the consultative process as well.
I understand it is the judges who feel more secure to make decisions with these 'pet' consultants on board ie if you dont use them , you cant guarantee a favourable decision in court .Thats what we are told .
Council needs to manage/ oversee the process of repair ,putting themselves in a position of controlling their own liability and responsibility. it would save them/us millions.1) in the build process , 2) in court, as there wouldnt ,generally speaking , be a necessity for the victim to sue.( Court process is attempting to reduce liability for the Council rather than rejecting there is any , ie a simple arbitration .If the build costs and consultancy cashflowed back through the Council instead of to the lawyers, consultants ...surely that would create jobs instead of greedy rich individuals . ' We still have talented construction companies in NZ who need work .It might bring some of our valued work force home .
Body Corps cant manage this process effectively at the moment , you get rail roaded and blackmailed by the consultants , common sense goes out the window again ..

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