Homeowners treading legal minefield

Christine Meechan | Tuesday 24 September 2002

The report released this week by the Building Industry Authority on the weather tightness of buildings raises as many questions as it answers. The thousands of home owners throughout New Zealand who are having to grapple with this problem will find little comfort from recommendations to review and improve industry training and building consent procedures. While these recommendations are laudable, even if they are implemented it will take some years before they "bite" in terms of insuring that the purchaser of a new home can be confident that their home will be sound and watertight.

The report is critical of the building sectors lack of responsiveness to this multi-million dollar problem and notes that up until now "the reaction has been largely one of angry owners, faced with large and unexpected repair bills seeking redress through the legal system". To date, none of these cases have got to Court but a day in Court may not necessarily bring satisfaction to home owners as they struggle, firstly to find someone who is worth suing, and secondly to establish either breach of contract or negligence on the part of those involved in the design, construction and approval for construction of the home.

If you have purchased your home from a previous owner rather than from the builder or developer directly, then there will be no contractual relationship between you and the builder and developer which means that you cannot bring a claim for breach of contract against them. You may be able to bring a claim in negligence but proving that the builder owed a duty of care to subsequent purchasers, that he has breached his duty and that he ought to have foreseen the loss or damage which has occurred, are by no means straight forward tasks.

Often others involved in the construction process, such as subcontractors who were involved in fixing the cladding or installing the windows to the house will also be sued but again the subsequent purchaser will face real difficulties in proving that those subcontractors owed him or her any kind of duty of care.

The legal minefield that these situations create no doubt add to the sense of frustration and disappointment that these home owners have. It would be naive to say that there is in fact an easy solution or indeed even a fair solution where the problem has been caused by a number of contributing factors and no one party can be fairly singled out as being completely responsible.

If you own a leaky home: Go back to your sale and purchase agreement and check the warranties and undertakings given by the vendor. The standard form of sale and purchase agreement will usually contain a warranty in relation to compliance with permits and consents and also that a code of compliance certificate has been obtained for any work done on the building. If your property was part of a subdivision or larger development, check any promotional material given to you for any assurances in relation to quality and standards of finishing and whether any misleading or deceptive representations in respect of the building were made. Find out what materials or building systems we used in construction and what if any warranties came with those products. Search the property file at the local Council's office to find out what consents were granted, what if any inspections were carried out by the local Council and who ultimately signed off the building by giving it a code of compliance certificate. Check your insurance policy; if your house was recently completed, there may be a contractors all risks policy taken out by the builder that can be relied upon to cover some of the loss or damage although this will very much depend on the nature of the damage and when it occurred. A standard home and contents policy will usually include an exclusion in respect of gradual deterioration, wear and tear and damage caused by water, mildew or mould. There may be arguments about what lawyers call the "proximate cause" of the damage.

If you are considering buying a home: Spend money on a comprehensive pre-purchase check - the check needs to be more than just a purely visual inspection of the outside of the house and you will need to get the vendors agreement to the test. If you want to put in an offer prior to the test being completed, make sure you include an appropriate condition in the sale and purchase agreement enabling you to cancel if the test is not satisfactory. Find out who the original builder was and find out as much as you can about construction of the house from him - ie. what products or systems were used. Ask the vendor and the real estate agent whether there has ever been any problems with water ingress in any part of the structure. Ask if any internal walls have been painted or wallpapered and whether any carpets have been replaced in the last two years. If the answer is yes, find out why. Have a look at the house on a wet and windy day - are the gutters coping with the flow of water off the roofs, is rain being driven on to unflashed windows? Inspect the local Council's file for the property and get a LIM report before you sign a sale and purchase agreement. Make sure that there was in fact a code of compliance certificate issued by the territorial authority - the report highlighted the fact that there are many thousands of homes which have not in fact received this final sign off.