Agents and Leaky Buildings – Walking that straight ole line
Where does an agent/licensee draw the line between wanting to please and fulfill their obligation to their Vendor, and the need to provide information and protect their purchaser in a transaction? I certainly don’t have the definitive answer to this question and would love input from industry players and home buyers and sellers. If you have a comment, please feel free…..
This question was posed to me recently,
OK so the REAA Code of Conduct says:
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.(1) For example, houses built within a particular period of time, and of particular materials, are or may be at risk of weathertightness problems. A licensee could reasonably be expected to know of this risk (whether or not a seller directly discloses any weathertightness problems). While a customer is expected to inquire into risks regarding a property and to undertake the necessary inspections and seek advice, the licensee must not simply rely on caveat emptor.
So as a salesperson what exactly do you say if the seller says the property doesn’t have any defects. Let’s say you have a buyer who just arrived from the UK and knows nothing about our leaky home problem – do you say to them “this home was built in a time frame when homes are known to leak, is most likely built from untreated framing and doesn’t have a cavity system. Oh and by the way it is predicted that 80% of homes built in that era are likely to have leak damage within 15 years of completion” – Monolithic Home Owner
When I received this question, I had the answer straight away but I wanted to give myself space to consider the angles and options. The Real Estate Agents Act 2008 has changed the footprint of expected behaviour in some areas of an agent/licensees real estate work, but in other areas, it has only defined more clearly what the expectation is. Personally, I don’t do anything differently under the new regime except fill out more paper work. My answer prior to the ushering in of the new Act to this particular question is the same now as it would have been two years ago. I have sold texture coated homes in the 1990-2004 era and my company is actively marketing homes built in this era currently, so it is a great question to raise and one that is being dealt with by licensees on a daily basis all around NZ.
When is a problem a problem?
When does a leak become a Syndrome? Is it fair that a perfectly good home that isn’t leaking be tarred with the same brush as a neighbouring home that leaks profusely? All buildings have the potential to leak if not maintained. When does the potential to leak become greater than the fact that the house doesn’t leak?
Some interesting questions….
Fact and Opinion
I feel it is important to define fact from opinion. A potential leak is not a leak
There seems to be much emotion and subjectivity mixed with the facts surrounding this issue. An example from the quote above, “it is predicted that 80% of homes built in that era are likely to have leak damage within 15 years of completion”. This is not fact it is opinion. It implies that owners of homes in this era are a helpless audience and have no active role in maintaining and protecting their own investment. This in reality differs from owner to owner.
There are houses of this era I drive past every day that are showing the signs of cladding problems – cracking in sheeting joints, big water bubbles in the paint layer, silicon peeling from the window frames. Some of these homes haven’t been touched by the owners for years. Potential water issues? Definitely! I have to resist the urge to knock on the door and say to the owner, “get your house sorted out buddy or its going to hurt you!”. Other owners, meanwhile, work to actively maintain their investment, regularly check for problems and get them fixed smartly.
I’m certainly not wanting to downplay the issue because I believe that it is a serious problem and I also believe that it won’t go away any time soon. It is an issue that needs to be treated with respect, and the owners of homes that have leaking issues need to be treated with care and compassion. I have seen first hand, the stress that envelopes people living in a home that has water, rot, and mould issues.
But I have found that dealing with houses from this era on a daily practical level has given me a chance to overcome for myself, the hype, emotion, and sense of powerlessness that surrounds the words Leaky Building Syndrome. I have had the opportunity to view many examples of homes that have leaked, and others that appear perfectly maintained and showing no signs of leaking what-so-ever. I have come to the opinion that every house is unique and needs to be treated as such rather than branded. It isn’t just construction technique or the type of cladding system, it can be architectural design, placement on the site, the skill and care of the builder, the skill and care of the paint applicator, the care and maintenance of the owner, and the level of site exposure to wind and weather patterns that can allow the ingress of water.
Interestingly, in talking with experienced builders and tradesmen in the area, I have come to understand that there are other potential problems with these homes. There are many buildings that have problems in this era not from water coming in, but water not being able to escape out. Many of these houses are so well sealed and insulated that moisture can’t escape if the homes are not well ventilated by the owners. Moisture moves through the gib and condenses at the coldest point, the inner wall of the p0ly block cladding. With no way to escape it then gets absorbed by the untreated timber that is sitting up against the poly causing it to begin rotting from the inside out. A dry air ventilation system like DVS or Moisture Master will help with this issue if it is caught in time. Making sure that your home is well ventilated (using exhaust fans when showering, rangehoods when cooking) and eliminating the use of unflued gas heaters and other moisture contributants may help keep your home dryer. But it doesn’t deal with the issue of untreated timber framing.
I haven’t been able to find much literature in NZ regarding this particular issue, but I found this and this interesting reading.
What do I say to buyers?
When marketing a texture coated property of this era, I make known to buyers that some properties in this era have leaking issues. I also strongly suggest that they find out the facts for themselves. I inform them that it is important to pay for an exhaustive builders report with moisture meter testing on any home they are looking to buy. I also suggest that it is a good idea to check the Council records.
I try always to keep in mind that I am not an expert in the construction industry, and thus, have no place making statements about the soundness or otherwise about a particular property. I am there to market the home for sale and secure an unconditional offer, not defend the house when it is bagged by visiting buyers.
Agency protocols
Luckily I work for a reputable agency. Having given much thought to this issue, my company has put protocols in place which seek to ensure that the correct disclosures are made and both licensees and buyers are protected. When an agency agreement is signed with a vendor at the time of listing, the paperwork asks for disclosures from vendors about their property. Any disclosures made are in writing and are shared with all staff who may be involved in the selling or marketing of the property.
It is a part of our office policy that every sale and purchase contract that is written up should have a builders report clause added. If the buyer then decides not to carry through with the builders report that is on their own head. If there were any issues down the track, the contract would then be used as evidence that a builders report was offered. Along with the sale and purchase agreement, another form is filled out by the licensee and buyer that gives the licensee the chance to provide any disclosures regarding known defects in writing to the buyer.
We also have a transaction sheet that is filled out on every property sale. On this sheet, conversations are recorded with specific focus on the offer of builders reports and LIM reports to buyers along with any other statements that are made about the house including things like potential capital gains suggested, potential rental returns mentioned, boundaries, and building soundness etc.
The idea being that the licensees in our company have some measure of protection and evidence if ever a question was raised about the details of a transaction. Having these office protocols also makes licensees very conscious of what they are saying and doing when they are marketing a property.
Helping Monolithic homesellers
On the other side of the coin, agencies are employed to market and sell property. We have a duty to the homeowner to attempt to achieve the satisfactory sale of the homeowners property. What steps can practically taken by owners of monolithic homes built in the 1990-2004 era that are looking to sell?
BEFORE PUTTING YOUR HOUSE ON THE MARKET
Did you do enough homework when you bought your home? Did you get a builders report or check the Council Records? If not, start there.
Start with an physical examination of your home by an expert.
Pay for an exhaustive building report on your property to be conducted by someone who has the skill and experience to know what they are talking about. This report has to include moisture meter testing and should be conducted by someone with training in the equipment. A visual inspection of your property is not enough. Don’t bury your head in the sand or hope that no issues will be found when a prospective purchaser has a builders report for themselves. In this way, you will have a view of your home that is facts based. If issues are raised, get them dealt with by an expert who will provide you with a written guarantee or warranty of their work, who has a good history of similar work, and who has their own public indemnity insurance. If major work is required, make sure the correct paper work is filled out and you receive the Council tick off at the end with an E2 Code of Compliance or whatever else is needed.
Once any remedial work has been completed. Have another building inspection completed. Yes, a second one! This is an independent assessment of the work completed, and if not showing any major issues, a tool for helping to sell your home. Make this builders report available to your real estate professional to pass on to potential purchasers.
Pay for a LIM report
If you don’t know what is on the council files for your property, find out before you put your home on the market. This is a good exercise not only for peace of mind, this information is a good tool to help your real estate professional sell your home. Land Information Memorandum (LIM) reports have become more important as a part of a buyer’s due diligence when buying a property, many solicitors insist upon their clients getting a LIM report. Most home owners I have come across don’t want to pay for this report themselves and consider this to be something that buyers should pay for as part of their homework.
Information is Power
The ideal situation would be for all homesellers to apply and pay for a Building Inspection and a LIM on their property prior to selling, and to make full copies of this available to purchasers. Homeowners do themselves a double favour by paying for these reports themselves. Not only are you demonstrating a willingness to be open and transparent, you are providing some important selling tools to your real estate agent/licensee. This will impart greater confidence in the soundness of your property to prospective purchasers and will make the selling process quicker and easier. You may also find that you will secure a higher selling price as a result. I have seen many situations where multiple offers have been presented on a property with the highest offer being subject to the most buyer conditions and, therefore, eliminated from the running with unconditional offers being accepted at price points sometimes tens of thousands of dollars less. Making your LIM and builders reports available may speed up the information and due diligence process for these buyers.
There is so much more to this topic, but this is a start. Not sure if I have answered the question completely.
Please feel free to comment whether you agree or disagree with my take on the subject…
Again, I am not an expert in this matter. Talk to a building surveyor or professional who has training and expertise in this issue before making any purchasing or selling decisions.
Required Reading
Department of Building and Housing
http://unconditional.co.nz/blog/greater-disclosure-of-leaky-homes-advocated/
http://unconditional.co.nz/dith/2010/03/22/making-leaky-building-claims/
Some Local Wellington Companies that conduct moisture meter testing
New Zealand House Inspection Company
Total Home Inspection Services
March 06 2010 | General Real Estate and Home Buyers and Home Sellers | 10 Comments »
