Council hit by $10m-plus leaky building claims

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Claims for leaky and defective buildings are now a $10 million-plus problem for Queenstown Lakes District Council.
 
Five claims were filed against QLDC during its financial year ended June 30, four of them alleging weathertightness defects. 

Two of these claims have been settled but the remaining three total $9.9m, QLDC discloses in its draft annual report going before councillors at their meeting yesterday (Tuesday). 

QLDC is also one of two parties in the firing line of another leaky-building claim estimated at $5m-plus. 

This large claim was lodged after the council’s year-end and is not incorporated into the annual report to June 30.

Of claims referred to in the year-end report, QLDC states: “Council’s liability in relation to these claims has not been established and it is not possible to determine the likely outcome of the claims at this stage. 

“Notwithstanding this, council estimates its exposure to [these] claims to be $4m (net of insurance recoveries).” 

QLDC adds that claims received after June 30, 2009 aren’t covered by insurance – and earlier claims which are covered have an unspecified dollar limit. 

The council has made a provision – or reserve – in its accounts of $2.4m of ratepayer funds to meet the building claims lodged up to June 30. 

A year ago, QLDC’s 2010 annual report recorded three outstanding weathertightness claims totalling $4.5m – with the council’s potential exposure after insurance cover put at just $420,000. 

The new $5m-plus claim filed after June 30 this year is being brought by owners of the 75-unit Greenstone Terrace complex – builder Naylor Love is being sued along with QLDC. 

Lodged last month, the claim alleges QLDC breached its duties by issuing building consents and a code compliance certificate despite claims of Greenstone Terrace not complying with the building code when constructed in 2001-02.