Auckland Council still facing $200m bill for leaky buildings

By Steve Forbes

Auckland Council still has $200 million of leaky and defective building claims on its books.

The number, released by council, covers active cases which are still going through the resolution process. Council also paid out $57 million in settlements for defective building claims in 2020/2021.

In many leaky building cases, councils are the only party property owners can take legal action against when the builders and developers involved have ceased trading under the same name.

This allows them to avoid liability for damages, leaving the local authority to pick up the bill because it signed off the work.

Auckland Mayor Phil Goff said the leaky building crisis had cost council hundreds of millions of dollars over the last 10 years and resulted in the construction of thousands of unsafe, damp and mouldy homes.

"Ratepayers shouldn't be on the hook for damages caused by shoddy building work, but under the existing liability framework Auckland Council is too often forced to bail out substandard builders, designers and product manufacturers who avoid liability by winding up their businesses."

Goff wants to see the Government come up with a "fit for purpose regime" to reduce the liability faced by councils, and ultimately ratepayers, for leaky and defective buildings.

Auckland mayor Phil Goff. Photo / Alex Burton

In 2019, then-Minister of Building and Construction, Jenny Salesa, announced plans to change both the Building Act and Building Code. As part of the overhaul, Salesa said she would look at how risk and liability were managed in the industry.

In a submission, Auckland Council called for an end to the use of joint and several liability - which allows homeowners to claim against councils - and the introduction of a liability cap of 20 per cent of costs claimed.

Late last year the new minister, Poto Williams, said she planned to take time to carefully consider a full range of views and advice before making a decision.

But she all but ruled out a compulsory guarantee, or insurance scheme, for builders and developers on the grounds the insurance industry wasn't in a position to meet the demand.

But Home Owners and Buyers Association (Hobanz) chief executive Roger Levie said such a scheme is what is needed to address the leaky building crisis and ensure consumers and councils aren't continually left footing the bill.

Levie said insurers wouldn't be queuing up to provide cover for the construction industry and such a scheme would require the government to underwrite it.

"We need to shift the responsibility onto the people who are responsible for the problem. But there doesn't appear to be a willingness to do that," he said.

"We've had 20 years of dealing with this stuff and yet we are still building leaky buildings."

In a statement Auckland Council Group treasurer John Bishop said the increase in the projected cost of leaky and defective building claims was due to a rise in the number of multi-unit and single-unit claims since last year.

When asked if council had received an update from the minister regarding the issue of its liability, Bishop said he hadn't heard anything.

"As far as Auckland Council is aware, the minister and MBIE (Ministry of Business, Innovation and Employment) are still considering stakeholder feedback on this issue."

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