Leaky building claims – some certainty for homeowners and a lesson for builders

Litigation

Leaky Building Syndrome is still a major issue in New Zealand. A recent decision of the Supreme Court has clarified the law in relation to the timeframe within which homeowners must bring claims in accordance with the WHRSA.

Almost 20 years on, Leaky Building Syndrome remains a topical issue in New Zealand. A recent decision of the Supreme Court, Osborne v Auckland Council).

The lesson for builders or those working in the construction industry to take note of, is to obtain a code compliance certificate for a build as soon as possible.

Background
The Osborne’s bought their newly built house in April 1997. While construction of it had been largely completed by August 1996 (the date of the last Council inspection), code compliance certificates were not issued until February and April 1997.

The house began to leak and in February 2007 the Osborne’s applied under the WHRSA for an assessor’s report. This had the effect of stopping time running for limitation purposes, at least in respect of proceedings under the WHRSA.

At that time the Osborne’s were within the 10 year long stop period under the Building Act to bring a claim against the Auckland Council in regards to the issue of the code compliance certificates.

Difficulties arose for the Osborne’s when in June 2007 the WHRSA deemed their claim to be ineligible. By that time the Osborne’s were outside of the 10 year longstop period in the Building Act and were left with no remedy.

The Weathertight Homes Tribunal
Since Leaky Building Syndrome emerged almost 20 years ago the Government has passed legislation in the form of the WHRSA (and its 2002 predecessor) which introduced a scheme under which the owners of leaky homes are able to have their claims heard by a specialist tribunal, the Weathertight Homes Tribunal (“WHT”), as an alternative to taking their matter to the courts.

The WHRSA sets out eligibility criteria which must be met for a claim to be heard in the WHT. Time stops running for the purposes of a claim under the WHRSA when an application is made by a claimant for an assessor’s report. Once the application is made the claim is then assessed by the WHRS for eligibility.

One of the eligibility criteria that must be satisfied under the WHRSA is that the dwelling in question was built (or alterations giving rise to the claim were made to the dwelling) before 1 January 2012, and within the period of 10 years immediately before the day on which the claim is brought.

Until the Supreme Court’s decision in Osborne, the courts had tended to interpret “built” for the purposes of the WHRSA as being determined primarily by when the dwelling had been completed to the extent required by the building consent.

In the Osborne’s’ case, their claim was rejected by the WHRS on the basis that the house was “built” before 13 February 1997, meaning they were outside the 10 year limitation period.

A different approach
The approach taken in interpreting when a dwelling was “built” for the purposes of the WHRSA is inconsistent with the long stop period in the Building Act 2004. According to the Building Act, civil proceedings relating to building work must be brought within 10 years from the date of the act or omission on which the proceedings are based. In the case of a claim against a council in regards to a code compliance certificate, it will be within 10 years from the date of the issue of the certificate.

So under the Building Act, the 10 year period for a claim against a Council for issue of a code compliance certificate runs from the date the certificate is issued. In cases where the physical building work is completed quite some time before the code compliance certificate is issued, the deadline to bring a claim under the WHRSA could be significantly earlier than the deadline under the Building Act.

What the Court found
The Court saw a number of difficulties in interpreting “built” for the purposes of the WHRSA differently to the criteria in the Building Act. These included:

  • The date of completion of a house to building consent requirements will necessarily come before the date on which the code compliance certificate issues, which will almost always be the last relevant act of the Council.
  • There is no good reason why a claim which is within the ten year long stop period under the Building Act should not be eligible under the WHRSA.
  • A trap can arise, which is what happened with the Osborne’s in this case, where an application is made for an assessor’s report under the WHRSA at a time when the claim is eligible under the Building Act, but the eligibility decision is issued after the Building Act long stop period has expired.

Against this background the Court found that the term “built” under the WHRSA must have been intended to have the same meaning as “building work” in the Building Act, which does include certification.


What does this mean for parties involved in leaky home litigation?
The Court has aligned the circumstances given in the Building Act and the WHRSA so that time will run from the date that the code of compliance certificate has issued, even if the physical building work on site was completed before that date.

It is important to note that the eligibility criteria simply act as a screening process for claims under the WHRSA. A decision that a claim is eligible does not mean that the claim is within time; only that it may be heard in the WHT.

Going forward it will be simpler for leaky homeowners to determine whether their claims will be eligible and to choose how any claim should be dealt with (for example under the WHRSA or in the courts).

It is not yet clear how many homeowners, who have had their claims determined ineligible under the WHRSA for being outside the ten year period, might have scope to have that decision revisited.

Had the code compliance certificate in Osborne issued around the time the build was completed (August 1996) then under the Supreme Court’s eligibility criteria the claim would have been ineligible under the WHRSA. This is something for builders and construction professionals to keep in mind in terms of ensuring that code compliance certificates are issued sooner rather than later.

Please do not hesitate to contact our construction specialists for further information or advice.

 

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