Queenstown ratepayers will be left picking up the $162.9 million tab for what’s projected to be one of the largest single leaky-building claims in New Zealand.
In its submission to the Ministry of Business, Innovation and Employment’s (MBIE) review of the building consent system, Queenstown’s council says the rates impact of the Wensley Developments Ltd’s Oaks Shores claim would be another $9.56m of debt servicing over the next 30 years.
That would increase rates by an average of 9.6%, costing $305 per property, every year, for three decades.
City Hall’s submission urges MBIE to include risk, liability and insurance in its review of the system and ‘‘strongly refutes’’ the joint and several liability in play at present is the ‘‘most equitable’’.
‘‘Council’s experience and position substantially differ from the policy position paper,’’ the submission says.
‘‘Currently, ratepayers bear a disproportionate liability burden, with building act consent authorities (BCA) often being the only party left to compensate home owners when building defects arise …’’
Seeking for the liability framework to change to one of ‘‘proportionate liability’’, the council says that would reflect the roles and responsibilities of those involved, and encourage building practitioners to actively manage the risk.
‘‘This should be accompanied by a system of compulsory home warranty guarantee … and/or insurance products.
‘‘The homeowner interest would then be protected and there would no longer [be] an impediment to moving to proportional liability.’’
If, however, the joint and several liability approach was to remain, the BCA liability should be capped, council says, at 20%.
The submission says the increased risk liability at present does cause the BCA function to be “more cautious and more demanding”, which has a negative impact on BCA performance and creates higher compliance costs.
Council says it’s experienced an increase in the number and quantum of claims against it by property owners relating to weathertightness and other building defects, and a “material increase in the operational expenditure by council to defend and resolve such claims”.
The “aggregate of all expenditure” in the 2021-’22 year to defend and/or resolve those claims, including costs, was about $40m – largely funded by an increase in council debt.
That’s resulted in an annual rates increase of about 1.6% for the 2022-’23 year “and beyond”.
The submission says the effect of the Oaks Shores case also includes a loss in borrowing capacity, which will ‘‘inevitably’’ lead to a reduction in investment in its community assets.
