The Unconditional Blog

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26

Greater disclosure of leaky homes advocated

Posted on: August 24th, 2009 | Filed in Architecture & Construction

istock_000000248264xsmallA timely piece in today’s NZ Herald brings to light the advocacy of greater transparency of potential issues surrounding leaky homes. Steve Koerber – an agent with Barfoot & Thompson shares his view that greater information should be provided to protect wouldbe purchasers, especially new immigrants.

In principle more transparency is to be championed, however identification of leaky homes and equally identification of non-leaky homes is not an exact science by any means.

Whilst the technology of detection has improved enormously over the past few years; without wholesale removal of cladding materials the extent of damage cannot be accessed. In fact the use of the term leaky homes is a degree of a misnomer – the fact is the leaking or egress of water is not in of itself the problem (houses have had leaks for years), it is the inadequate ventilation and appropriateness of construction materials and systems to protect buildings which ultimately lead to the structural damage to properties which is the problem.

As to the role of agents highlighting the impact of “leaky homes” – it is only recently that a few properties have been marketed as being leaky homes and are deliberately targeted to developers looking to take on such a project. Clearly every buyer wants to know for certain that the house they are proposing to buy is not a leaky home, however real estate agents act as selling agents for the seller and whilst they will always seek the most complete information on a property they can, they are not building inspectors, nor surveyors and therefore cannot be expected to provide any form of cast iron guarantee on a property beyond what the owner of the property shares with them.

Just as car buyers will judge the value of a pre-purchase inspection so should it be with a property.

A quick search on the website today reveals that there are only 13 listings that use the keyword of “leaky home” from amongst the 51,176 homes and lifestyle properties that are being marketed as for sale.

Of these 13, seven are properties with leaky home issues identified: a 4 bedroom house in Coastville, two townhouses in Henderson Valley, another townhouse in Mt Eden, a 3 bedroom townhouse in Mangere, a 4 bedroom property in Birkenhead described as “Stylish leaky home” and a 3 bedroom apartment in Auckland city.

On the other hand there are 6 properties which all claim to be in one form or another not likely to be prone to “leaky home” syndrome.

Properties listed on realestate.co.nz marketed as unlikely to be impacted by leaky home syndrome

Whilst the industry and the government may wish to see more transparency to provide protection to consumers on an issues such as this, it is very difficult and potentially very risky to make hard and fast statements one way or another. The best solution as advocated by Steve Koerber may be the implementation of a regulated inspection report for properties built since 1991.

Article Discussion

  1. Tania Mayo Tania Mayo says:

    The implementation of a regulated inspection report for properties built since 1991 is all very well, but it does not address the issue of all the other badly built or designed homes built since the 1970’s that also present the same problems, or the art deco and spanish bungalows of an earlier era that are also reknown for problems. Builders, Architects and home owners who have gone to great lengths and expense to correct problems and present the potential buyer with a sound house often never get to even tell prospective buyers that the house has had all that work done. One glance at the style or materials is all it takes for the browsing potential buyer to shudder and move on from what is seen as a ticking time bomb rather than a well built warm dry and safe home. I look forward to the day when each vendor, as part of the listing for sale process, goes to the expense of getting a Warrant of Fitness report on their home and a LIM report so that prospective buyers know exactly what they are getting and agents know exactly what they are pricing and selling.

  2. Steve Taylor says:

    Maybe on the next issue of the S&P agreement there should be a tick box for an inspection report. This would simplify things and highlight the option to buyers.

    If real estate agents were doing there job in a transparent way they would advice immegrants, as we do, that a lot of kiwi homes are absolutley freezing in the winter if not wrapped all round with insulation. Even then some rooms away from the usual single heat source will be cold.

    Everyone can be a bit stupid and a Kiwi buying a UK home may end up with wood rot, subsidence, rising damp, woodworm (borer) etc. We have also found that immegrants are the ones to ask for inspection reports as that is the norm in the UK, because of the above problems and more.

  3. Ross Brader says:

    The new Real Estate Agents Authority may sort some of this out from November 17th. I found the following from the draft version of the “Code of Professional Conduct and Client Care” on the http://www.reaa.govt.nz website

    4.5 A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Further, where it appears likely, on the basis of the licensee’s knowledge and experience of the real estate market that land may be subject to hidden or underlying defects, the licensee must either:

    (a) obtain confirmation from the client that the land in question is not subject to defect; or
    (b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.
    4.6 A licensee must not continue to act for a client who directs that information of the type referred to in rule 4.5 be withheld.

    Explanatory note
    Rules 4.5 and 4.6 seek to balance legitimate interests of buyers to have relevant information about the land in question (an issue that has become more compelling as a result of weathertightness issues) against the limits of a
    licensee’s ability to know all details about the land, the licensee’s legitimate obligation to be fair and truthful, and the ethical and moral obligations of a seller.

  4. Mainlander says:

    Taking a slightly lighter look at this, in the old dart rsising damp has always been an issue, chat to folks from Cornwall about the inspections that involve intrusive probes being drilled and placed in their home for 3-6 mths, in the US its Radon……..and let me tell you that is a serious one.
    Its real timely that this was mentioned here today in light of my latest blog post….a post that had been in the draft folder for over 2 wks. Serendipity?
    Steves comment above about a field on a form actually has some real merit. After the interrogation tonight on an offer from an Englishmen, Steve, I know exactly where you are coming from.

  5. Ross,

    Excellent insight, the key question is – does the use of the word “land” genuinely limit responsbility to just land or does this necessarily apply to the buildings on the land as improvements to the land?

    I am conscious that this may require legal interpretation, however having said that, I would have thought that on something as critical as the code of professional conduct they would have endeavoured to avoid misunderstanding.

  6. Thanks for coverage here Alistair.

    In the course of my normal daily business today I spoke with a building inspector who was beside himself with stress wondering whether or not he could cope with continuing his home inspection business. He has been dragged into 3 separate court cases and has been forced to defend himself regarding reports he has written about leaky/potentially homes.

    This is a side of this whole drama that most people don’t see. If Government took responsibility for the mistakes they allowed, people like this inspector would not be contemplating quitting an industry that is apparently losing more & more inspectors. It’s too tough for some to operate effectively and speak the truth, and the lengthy disclaimers on their reports are getting longer and are bordering on the ridiculous.

    Tania’s comment above is absolutely spot on. A building WOF must be made mandatory before a home can be listed for sale (I advocate 1991 – 2003 homes as a start).

    Ross is correct that the REAA code will help. My concern however is that it is a great way for Government to pass the buck to real estate salespeople for ensuring that buyers are protected.

    Under the proposed code (funny that it’s Govt that has drafted it), if a buyer is found to be misled and buys a leaky home in future, the salesperson/agent will be fined. Yes I suppose you could call this progress.

    Who cares that the buyer’s life might be in tatters? Their dream home leaking. I suppose they’ll be happy once they piece their lives back together following the court case/disciplinary hearing that orders the salesperson/agent to cough up and pay for repairs or whatever.

    Obviously Government doesn’t see it the way I do. Stating my case again, Government needs to protect consumers by instigating a mandatory WOF (thanks Tania for that terminology) so that the above scenario isn’t possible. A side effect will be a quicker clean up/fix up of the existing yet-to-be-uncovered leaky homes spread throughout NZ.

    As John Gray stated today in the NZ Herald, he felt my intentions were noble but ill founded and impractical because “Unfortunately the Government does not have any appetite to get close to the problem nor to regulate anything”.

    In other words, Government is running scared and won’t take responsibility for the mess that has been created. John Gray is totally correct.

    In my wildest dreams I wish Maurice Williamson would log onto this blog and respond with his version of how to protect home buyers and fix leaky homes at the same time. Who knows what he’d say…I don’t think he knows himself. Time will tell.

  7. Tania Mayo Tania Mayo says:

    Brilliant discussion happening here overnight! I agree Steve, oh that Maurice Williamson were privy to it! At the end of the day the onus of responsibility for leaky and other badly built homes needs to fall squarely on the shoulders of the builder and architect. These professionals need to take greater care in the materials and methods they use in construction and better inform clients as to the suitability of the style of building for the site and conditions. I have watched some pretty stylish new homes go up along our local west coast beach. I can see some major problems with them too. The prevailing westerly wind and rain and salt spray are going to create major havoc due to things such as no eaves, and roof sloping the wrong way. Not to mention cracking of exterior plaster walls due to movement from being on sand/cliff top and facing strong winds! And then there are the flashings – or lack of them…
    What responsibility to we sales people have for all that I ask?

  8. Govt allowed the buildings to be designed, built and then made a mistake by allowing councils to give them code compliance certificates.

    When I make a mistake, even if my mistake was made years ago and not discovered until recently, I suffer the consequences of making the mistake. It’s a natural law.

    Govt must take responsibility and stop passing the buck. John Gray agrees. Doesn’t everyone agree?

  9. Tania Mayo Tania Mayo says:

    I don’t! Government are not the professionals when it comes to design and build. The buck stops with builders and architects!

  10. Injustice anywhere is a threat to justice everywhere.

  11. Tania

    The government cannot abdicate their ultimate responsibility (that relates to local and central government) – they are democratically elected represntatives that establish the boundaries / principles cast in law upon which professionals need to act or face the consequences.

  12. Tania Mayo Tania Mayo says:

    If all professional bodies self regulated more rigorously and aimed for a high quality of service we wouldn’t need a government that had to reduce us to a nanny state. If government, local and national was allowed to focus on the bigger picture our taxes wouldn’t have to be so high. That in itself would be a good reaslon to self regulate!

  13. Ross Brader says:

    Alastair – I put in a submission to the Practice code saying that they should replace the word land with land/buildings.
    Anybody can make a similar submission by reading the code at http://www.reaa.govt.nz/assets/REAA-Draft-Code-FINAL-090807.pdf and making a submission at http://www.reaa.govt.nz/consultation-response-form/

    But hurry – you only have until the 28th of August to do so!

  14. Ross Brader says:

    Tania – wasn’t it the Labour government at the urging of the Greens that banned the use of boric/arsenic treated timber framing?

  15. I quizzed a salesperson about their understanding of how a Govt building inspection report would effect them listing a potential leaky home. They said they thought that an inspection should be mandatory, but perhaps not Govt controlled.

    Their concern with a Govt report was that Govt would be liable if the house passed its test today, but was found to be faulty the next time an inspection is done, perhaps a few years later.

    That got me thinking. If I bought an at-risk home today on the basis of a good Govt backed report, that would mean that at the time of my purchase the house would be as per the report. In my case the house would need to be virtually perfect. How about you?

    If my new home developed a leak soon thereafter it would be up to me to fix that leak. If I didn’t discover the leak for 6 months and my bedroom wall was invaded by 50% moisture – tough! I knew the risks! If I owned an old villa and the roof leaked, nobody else would fix it for me, nor pay for it to be fixed. Buying an old villa is simply less risky. They were better built than our at-risk homes.

    I would also expect that, because I bought an official “at risk” home, Govt would not cover me for any further leaks/damage/failures etc, etc. As the buyer, I would assume complete responsibility for my purchase. I’d sign away my right to litigate against anyone because I had been warned of the dangers. As a consumer, I had been well and truly protected! (Wouldn’t a chance be a fine thing?)

    I can hear the roars of protest from everyone who owns an at-risk home (approx 1991 to 2003 built). But Steve, you’re making my home un-saleable. You’re ruining my retirement. How dare you degrade my home, there’s nothing wrong with it. Yes, it’s a terribly emotive issue this, isn’t it.

    I sympathise with owners of at-risk homes. PriceWaterhouseCoopers probably has you lumped into their $11.5billion leaky home problem pile. They know that if you’re home isn’t leaking now, it could in the future, and they’ve made allowance for you.

    I sympathise also with people who bought at-risk homes whom have lost all or most of their life savings. If the Govt report I am advocating was in place years ago, so many lives would be so different today. Yes, at-risk homeowners would have suffered financially when they sold. But at-risk homes would have sold for their intrinsic value, not an inflated value.

    Govt is fortunate in that it can make amends. Govt has the power to protect consumers from this point on. But does Govt have the will, or the guts, to do it?

    Definition of “intrinsic” = by or in itself, rather than because of its associations or consequences.

  16. Tania Mayo Tania Mayo says:

    Steve K – I’m in full agreement.
    Ross B – Shows how little politians know about safe building practices and why those involved in the building industry need to be working to best practice standards. Where the government should be and is involved is in the funding of things like the building research institute.

  17. 12 point plan – how it works:

    1. New legislation makes it illegal to list an at-risk property or sell an at-risk property without a comprehensive Department of Building & Housing (DBH) appointed building inspection report.

    2. The report must be attached to the listing agreement and the sale and purchase agreement.

    3. The DBH designs a comprehensive building inspection checklist/form to cater for all at-risk homes.
    4. Inspectors who wish to carry out pre-listing inspections must be certified by the DBH to do so.

    5. Checklist will include full moisture tests. When unacceptable moisture is found, invasive testing will be mandatory.

    6. Before listing, sellers will be able to make repairs, then obtain an updated report, then list their property for sale with the new report attached.

    7. Sellers may also choose to sell “as-is”, but with report attached.

    8. Not surprisingly, at-risk homes will now sell for their intrinsic value. They will not sell for inflated values based on hidden or underlying defects.

    9. Buyers will assume full responsibility for any future defects and maintenance. Buyers will accept this because they were fully informed of risks (in report) before purchasing.

    10. Government, councils, builders, architects, salespeople will have no further liability for leaky issues after an at-risk property is sold. These properties will be treated like all other NZ buildings.

    11. Government will pay 50% for initial inspection report. Seller will pay 50% for initial inspection report and 100% for any subsequent reports or updated reports.

    12. It will be impossible for Real Estate licensees to mislead consumers about at-risk properties. Consumers will be fully protected, not partially protected.

  18. Steve

    Reads well – however the first line is where the problem will start with respect.

    What defines / who defines an at-risk property?

    In some way or other every property is at risk – flood, fire, decay?

  19. Glad you asked Alistair. That’s exactly the question that needed to be asked here!

    I’ve made a submission to the REAA highlighting that the draft code of conduct tries but fails to adequately protect consumers from buying leaky (or at-risk) properties.

    The draft code is under review now, but when it was public it stated:

    4.5 A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Further, where it appears likely,
    on the basis of the licensee’s knowledge and experience of the real estate market(1) that land may be subject to hidden or underlying defects, the licensee must either:
    (a) obtain confirmation from the client that the land in question is not subject
    to defect; or
    (b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.
    4.6 A licensee must not continue to act for a client who directs that information of the type referred to in rule 4.5 be withheld.

    Explanatory note
    Rules 4.5 and 4.6 seek to balance legitimate interests of buyers to have relevant information about the land in question (an issue that has become more compelling as a result of weathertightness issues) against the limits of a licensee’s ability to know all details about the land, the licensee’s legitimate obligation to be fair and truthful, and the ethical and moral obligations of a seller.

    So Alistair, your question regarding what defines/who defines an at-risk property is very pertinent.

    Assuming the draft code is not changed (to be confirmed/published 17 Nov 09) according to the Government (ala REAA), licensees, based on their knowledge and experience of the real estate market, must ensure that a customer is informed of any significant potential risk.

    The answer to your question is that licensees (currently salespeople) will be required to define an at-risk property.

    Yes – this is laughable! It is the Government via the DBH that should be responsible for defining them! If they don’t, they will continue to put consumers at risk.

    Further, as per 4.5a above, if a seller confirms that a property doesn’t have a defect (eg: doesn’t have a leak!!) then the salesperson/licensee can carry on and sell the property unconditionally without the purchaser obtaining a building inspection report. Because the seller said no defects, the licensee is not required to ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.

    The killer here is if the seller tells a lie or is simply unaware of defects/leaks. At B&T we have a check box on our listing agreements that all sellers must sign. It asks them if they are aware of any past or present water penetration issues. It is too easy for a seller to lie and tick the NO box. A YES tick is actually quite rare. This system provides good protection for B&T and for licensees/salespeople, but what about the poor consumer?

    Back to the definition of at-risk. Because I’m keen to see the leaky home crisis fixed more quickly than seems likely under current legislation, I believe the DBH must define at-risk homes based on their vast experience of dealing with leaky homes. It would be simple for the DBH. Something like…built between 1991 – 2003 with any plaster used in the construction. That does it for me!

    This will seem harsh to some (most) owners, but a 1993 built brick house with a tiny 2 sqm patch of plaster covered by 2 metre eaves will usually pass my proposed mandatory DBH building inspection with flying colours. The value of such a well constructed house won’t be diminished by close scrutiny designed to protect consumers.

    On the other hand, a 1993 monoclad, untreated timber framed, plaster home with no eaves and a flat roof will probably have its value effected by the introduction of my proposed legislation. (How many owners of a home like this will tick the NO box when asked about defects??)

    Is it better that we keep living a lie? Does the Housing Minister live in an at-risk home? From where I’m standing, it seems he might! For consumer’s sake, I hope the members of the new REAA don’t and I hope we get some much needed change to tidy this mess up.

  20. Hi Steve,
    I happen to be half way through a response to your email and forgive me for not replying earlier and now popping up here! I was just doing some research and happened upon this blog courtesy of Google! We are simply bogged down dealing with all of the pressing issues that we are advocating around that now go well beyond leaky homes – Building Act Review and Unit Titles Bill to name just a few pieces of legislation that will affect home owners and buyers.

    Just to touch briefly on some of the key issues of the thread above;

    1. Government Pre-purchase inspection – the Government simply won’t go near it, and whilst we think that it is an essential part of the due diligence that purchasers ought to do when buying, we have real concerns about the lack of suitably qualified and competent inspectors that have the appropriate level of professional indemnity insurance in place. It is fair to say that the vast majority of pre-purchase inspection reports we see are not worth the paper they are written on. Of grave concern is the proliferation of ‘Thermographers’ who have got themselves a thermal imaging camera and are out there doing business and don’t have a clue what they are looking for or how to operate the camera properly! One recent report we have seen gave the subject house the ‘all clear’ and yet it turns out that it is so badly damaged the new owners are going to have to spend over $700K to remediate it. Thanks primarily to the previous owner and original builder who colluded to cover up the defects and the thermal imaging was a waste of time in terms indentifying the rotten timber hidden behind the walls. What was even worse is that the company concerned charged over $2000 when the going rate is around $800. The only way around this sort of problem is going to be to engage a properly qualified Building Surveyor but they are few and far between and even then we have doubts as to whether or not they would even uncover the serious defects that might be covered up by an unscrupulous vendor.

    2. I’m sorry but I must challenge your definition of risk – we are dealing with defective homes with build dates between 1988 and 2009 – yes 2009! The ‘youngest’ house on our books is just 6 months old and is leaking like a sieve. Another contemporary house that we know of and is seriously leaky cost $3.9m to build and is just 18 months old – built by a so-called master builder and overseen by an architect and signed off with a Code Compliance Certificate issued by the Council. The irony is that it is likely to come up for mortgagee sale fairly soon and without the usual protections in the S&P agreement (struck under mortgagee sale protocols) and the lack of perceived risk any prospective purchaser will think they are getting a bargain at around the $2m mark I bet and yet they will be buying into a nightmare. Because of the 6 to 15 year latency of these sorts of problems manifesting themselves or being discovered by ‘accident’ we simply cannot say with any confidence that the changes to the Building Act in 2004 has resulted in houses being built without defects – we are currently working with over 150 owners with defective houses that were issued with Code Compliance Certificates issued post 2004.

    3. Following on from the discussion of perceived risk, there are many a plaster home that is performing more than adequately and we must not forget that monolithic plaster claddings have been around since the 1920’s and many of those older homes are performing well. The issue is the abandonment of good old fashioned building practices, spiralling down of skills in the industry and the staggering lack of thought about moisture management in terms of good mechanical flashings of windows and doors together with good roofing practices in terms of good diverter flashings and falls. This is not an exhaustive list by any means, but what I am concerned about is the misconception that all plaster homes (or plaster look homes) are leaky – yes they need to be treated with suspicion, but buyers MUST NOT drop their guard given that many people are buying into leaky home nightmares where the houses are more ‘traditional’ in design and have pitched roofs, eaves and in some cases weatherboard cladding (my own leaky home included) or brick cladding and are perceived to be low or no risk – remember also we have the emergent problems with seriously defective homes from a structural point of view. Essentially our warning is that EVERY home must be subjected to due diligence – LIM Report, Council Property File review, comparison of as-built to what was consented/permitted in the first instance and of course a pre-purchase survey including electrical warrant of fitness for older homes and geotech reports for those that have at risk topography (i.e. cliff-top or re-claimed land) – and of course a valuation that actually takes into account the matters uncovered in all of the previous discovery processes. By the way – did you know that in Auckland City alone there are 23,000 residential dwellings that have been built since 1991 and they do not have Code Compliance Certificates – I wonder how many of those homes have changed hands multiple times without anyone knowing that that the dwelling is potentially non-compliant.

    4. Your wish to have every house ‘perfect’ is of course a pipe-dream and whilst I too would like to see the building industry aspire to such a goal it seems that the industry is resigned to the fact that every house will leak at some time in its lifetime and even if they standards in the industry were as high as we would like them to be it is acknowledged that at least 1% will fail. So looking forward it is a matter therefore of how that 1% will be addressed and that is the very solemn challenge we have in sitting around the table in the review of the Building Act. But the legacy that we as a nation are left with, and what you and I are confronted with every other day, is born out of the ‘perfect storm’ where the standards had generally spiralled so low in almost every facet of the construction process and building products (including un-treated timber), inappropriate designs (complex roofs and integrated balcony decks), over reliance on silicone rather than good old fashioned flashings and the drive for thermal efficiency (no drying) has blighted our housing stock and destroyed wealth beyond any natural disaster we might choose to contemplate.

    5. We have some views on how the future might look, and what role HOBANZ will play in protecting the consumer across a broad range of risk associated with the home ownership proposition.

    Anyway, that is where I shall leave it for now as I need to get back to my research!
    Regards,
    John Gray

  21. John

    Thanks for sharing this response with readers of this blog. I for one was not fully aware of HOBANZ – now having reviewing the site and read your letter feel better informed. I think your organisation could do with a wider audience – let me see what I can do to assist.

  22. Thanks John,

    Really appreciate your input and advice.

    I see where you’re coming from regarding the Govt not wanting to get involved in pre-purchase inspections. Politically it’s a no-no for sure. Deep down I wonder if John Key would really be comfortable that it’s far too easy for people like you and me to buy a defective home in his beloved NZ.

    As you’ve intimated, you’re approach and research is wide and far reaching. Mine is purely focused on protecting buyers and preventing the future wealth evaporation that is bound to occur due to our current laws.

    A narrow focus that I’ll continue to pursue via the Building Minister & REAA. Have you or anyone ever investigated the possibility of a Royal Commission into the leaky building crisis?

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