Government to pay for failed repairs to earthquake-hit Canterbury homes

Thursday, 15 August 2019

Caught out: Mike Stewart and Julia McEntyre on how they got trapped with an 'on-sold' - an unrepaired property. (Video first published in February 2018)

Owners of poorly assessed or repaired earthquake-damaged Canterbury homes remain 'wary about opening the champagne', despite a new $300 million safety net.

The Government announced on Thursday it will pay for repairs to 'on-sold over-cap' homes – those bought since the quakes and later found to have missed or poorly repaired quake damage that will exceed the Earthquake Commission's (EQC) liability cap to remedy.

It is thought repairing up to 1000 homes could cost the Government $300 million. The scheme is available to those who bought their house between September 4, 2010, and August 15, 2019.

Mike Stewart and partner Julia McEntyre are stuck with an on-sold home.

EQC Minister Grant Robertson said the payments would provide relief for homeowners 'who had run out of options'. The payments will be managed by EQC.

**READ MORE:

Thousands of Canterbury homes were damaged by earthquakes in 2010 and 2011. (File photo)

* Buried trouble: Christchurch's next insurance battle over the 'on-solds'

* Test case for on-sold homes with botched repairs still nine months away**

EQC claimant Georgie Hanafin in her home with botched repairs.

Greater Christchurch Regeneration Minister Megan Woods said the on-sold over-cap issue had been 'an absolute nightmare' for those affected, and this would give homeowners who had been 'trapped in limbo' a way to move on with their lives.

Mike Stewart and Julia McEntyre are stuck with an $800,000 mortgage after the sale of their Linwood bungalow fell through in 2015 because botched repairs completed for a previous owner came to light. They had already bought a bigger house and have been trying to pay off both for the last four years.

The Government will pay for repairs to those homeowners who had bought since the Christchurch earthquakes and later found that damage had been poorly repaired or missed. They have been left stranded until now.

Stewart said the announcement was fantastic news but they were still planning to take EQC to court (they are part of the group case that was to be used as a test case for on-sold issues). The trial is set to start in about two weeks.

He said if they used the new scheme and disagreed with EQC's offer, they could end up wasting years reaching an agreement.

Greater Christchurch Regeneration Minister Megan Woods says the on-sold over-cap issue has been 'an absolute nightmare' for those affected.

The last four years had been about trying to not spend money and the mortgage 'brings tears to your eyes', Stewart said.

On-sold homeowner Georgie Hanafin said she wanted to be optimistic but struggled with the idea of dealing with EQC, which she described as like an abusive relationship.

EQC Minister Grant Robertson says up to 1000 Christchurch homes were on-sold over-caps.

She had been battling to come to an agreement over the cost of the damage to her house, and felt that would not change.

'I've got my engineer's reports, they've got their engineer's reports, but we still have to come together and agree on a repair methodology and costings.'

She said she had not ruled out taking legal action against EQC.

Earthquake advocate Ali Jones, who is the owner of an on-sold herself, said affected homeowners would be 'wary about opening the champagne' after years of EQC dealings.

Those affected have 12 months to make a claim to EQC. Only those whose faulty repairs had not exceed EQC's liability cap are eligible.

If homeowners are unable to reach an agreement with EQC, they can take the issue to court or use other services available, such as the Greater Christchurch Claims Resolution Service.

The scheme does not let builders or assessors off for faulty workmanship or assessments. When reaching agreement with EQC, homeowners assign their rights to sue to the commission.

About 100 homeowners have filed cases to the courts over on-sold over-cap issues.

The on-solds over-cap issue was expected to be resolved through a precedent-setting case in the courts, with Shine Lawyers putting forward a test case due to go to trial later in August.

A government spokesman said it had become clear a test case would have taken too long and may not have provided the clarity needed.

An unsuccessful appeal in the Supreme Court, in which Ruiren Xu and Diamantina Trust tried to overturn a previous decision that IAG did not need to pay replacement value on their Christchurch home that they bought after the earthquakes, showed the courts were unlikely to hold private insurers liable for on-sold over-caps.

This meant the burden would likely have fallen on the Government through EQC (which had missed damage or overseen inadequate repairs), or on the homeowners, many of whom were not in a position to fund fixing their houses.

The Insurance Council of New Zealand is urging property buyers to do thorough due diligence before buying a property. It is also urging owners to put any payments received from the Government towards properly fixing their homes.

'The fact the Government is making an ex-gratia payment to repair on-sold properties should not be seen as a green light to buy houses without due care,' chief executive Tim Grafton said.

HOW DID WE GET HERE?

- An 'on-sold' home is one that was sold since the Canterbury earthquakes, and later found to have missed or incorrectly repaired damage that needed to be fixed.

- More than $450 million of taxpayer money has already been spent fixing faulty quake repairs.

- Latest figures show more than 20,000 second-time-around claims for repairs have been lodged with EQC.

- Private insurers argue they are not liable for the damage because the new owners did not have insurance on the house at the time the quakes happened.