Another interesting bill was proposed just before Christmas, the “Weathertight Homes Resolution Services (Financial Assistance Package) Amendment Bill”.  If passed this would enable people with leaky homes to settle with the Government and Council for up to 50% of their repair costs.

A lot of the commentary has dismissed the 50% contribution as inadequate. Council’s may have legal liability for the full 100% and there remain questions over the Government’s role and corresponding liability. 

From a commercial perspective, if the choice was litigating for the full 100% and settling for 50% now, the 50% now will be very tempting. It’s a case-by-case analysis, but factors that favour settling include:

   • legal costs – these are not fully recoverable and need to be funded before you receive your damages if you sue, 
   • litigation risk -there is a risk you could lose, 
   • delay and the time value of money – $1 now is worth more than $1 in many years time 
   • avoiding the personal stress and time commitment that comes with litigation

The legislation enables eligible leaky homeowners to enter into a settlement agreement with Government called a “contribution agreement”.  Government will pay 25% of agreed repair costs and the homeowner agrees not to sue Government; they can still sue others.  Councils and others with liability can also be a party to a contribution agreement, if they agree to. In the context of councils, the “if they agree to” is probably to cover the 10% or so of councils who have not opted into the scheme and to allow councils to continue to deny responsibility where an independent certifier has signed off the work.

Repair costs that are recoverable will include design, project management, consent fees, alternative accommodation costs and storage costs, but not legal costs associated with a claim.  The actual scope of the repair costs is to be agreed and set out in the contribution agreement.  This is where there may continue to be some interesting debate as to what constitutes a repair cost and is there any “betterment”.  The legislation assumes there will be standard form contribution agreements prepared.  These forms are not yet available for review.

The legislation also includes the “government guarantee” of the remaining 50% repair costs.  A guarantee or indemnity will be issued to approved banks or financial institutions.  If a homeowner defaults, the bank can recover from the Government and Government in turn looks to the homeowner.  The form of the guarantee or indemnity is also not yet available for review.  This offer of additional security is intended to assist those who cannot get finance to fund repairs.  We have not yet seen any commentary from banks as to what they in turn will need from homeowners in order to provide finance.

The aim is to have this package available by the middle of this year.  To be eligible, owners of leaky homes should register a claim before the 10-year longstop limitation period under the Building Act 2004 runs out.  If litigation is being considered homeowners should also make sure this financial assistance option is properly assessed.  Those with claims against them might also welcome becoming involved in a compromise agreement.