Queenstown is facing its biggest leaky homes fiasco to date with a multi-million dollar lawsuit brought by the owners of troubled Greenstone Terrace.
The body corporate and owners of the 75-apartment complex on Frankton Road are suing Queenstown Lakes District Council and prominent nationwide building company Naylor Love over long-standing weathertightness issues.
If successful, ratepayers may need to fork out for the estimated $5 million-plus claim because QLDC is unsure whether it will have full insurance cover for it.
Acting for the body corporate is one of the country’s top leaky homes lawyers Grant Shand, whose firm Grimshaw & Co won a landmark case in the Supreme Court over a North Shore weathertightness claim last year.
“The issue is coming to Queenstown now primarily because its construction period was a bit later than in Auckland and Wellington,” Shand says.
“It has similar construction methods to those used in other complexes throughout New Zealand that are known to cause problems.
“I’d say this is one of the early complex cases in Queenstown and I expect there’ll be a lot more.”
In Grimshaw’s winning case against appeals by the North Shore City Council last year, the Supreme Court upheld the duty of councils to inspect buildings and ruled that a person who buys a leaky home can sue the council for negligence even if a previous owner sued the council over the same issue, as long as loss caused by negligence can be proven.
It also ruled that body corporates are entitled to sue over damage to common property.
Shand adds: “[The North Shore case] essentially confirmed councils’ liability. So other cases since then will just follow the law.”
According to papers lodged at the High Court in Invercargill, the body corporate alleges QLDC breached its duties because it issued building consents and a code compliance certificate despite not complying with the Building Code when the units were constructed in 2001-02.
It’s alleged that Naylor Love, which built the units, was negligent because the buildings suffered water damage soon after construction and require remedial work. Greenstone Terrace will need to be reclad and the roofs need replacing, court papers say.
Owners are seeking damages including: Remedial work, lost rental income, professional fees, alternative accommodation, relocation and storage costs, repair funding costs, stigma, and each want $25,000 for stress and anxiety caused by the predicament.
Shand “doubts” whether QLDC will have insurance cover for the Greenstone claim.
QLDC finance boss Stewart Burns says the council’s still determining what sort of cover it has, if any, because more information is needed.
This financial year, QLDC has allocated $500,000 in its annual report as an “estimate” for potential liability, outside its insurance cover.
Because case law is constantly evolving around the issue, Burns is unsure of QLDC’s potential exposure to more claims. It’s already dealing with another lawsuit brought by the owners of The Point.
“Cover has diminished over time,” he admits.
“It’s obviously a concern but I’m hopeful that these aren’t the tip of the iceberg, that perhaps [Greenstone and The Point] may be the iceberg.”
Naylor Love managing director Don Stock says the legal action came as a “total surprise” because the company hadn’t heard from the owners in about eight years and there’s no history of dispute.
“To the best of our knowledge we don’t believe it’s a leaky building issue and are trying to gather further details.
“We will absolutely be defending it.”
Shand, who’s working with local firm Berry & Co, urges other people owning monolithic cladding homes built within the past 10 years to lodge a free claim with the Department of Building and Housing.