Why are Gore ratepayers paying for a leaky apartment building in Napier?

Wednesday, 6 December 2023

The apartments on Humber St, Ahuriri, Napier. (File photo)

Gore’s ratepayers have to stump up for a leaky apartment building more than 1200 kilometres away.

And it looks likely that other councils around the country will also have to pay up over the building.

The Gore District Council will pay more than $60,000 regarding a leaky waterfront apartment development in Napier, because an insurer has incurred more in claims than it has collected from its members.

The need for the payment arises from a ruling from the Supreme Court about the development, which has been the subject of a long legal battle between the Napier City Council and the Local Government Mutual Funds Trustee, known as RiskPool.

The GDC was a member of RiskPool, which provided protection to councils for the likes of water tight building cases and other building developments that result in claims being lodged against local authorities.

Since 2009 RiskPool included a clause that meant it did not pay out on weather-tightness claims, or claims with a weather-tightness component.

A letter from Riskpool to the council, which was tabled at an audit and risk committee meeting on Tuesday, says it has incurred more in claims and expenses (before allowing for claims provisions) than has been received as contributions and calls from members, and its board has resolved to make a call on members to pay a contribution to fund the deficits.

Gore District Council interim chief executive Stephen Parry said the request for payment was “not the type of Christmas present that the Council was expecting”.

The amount of the call for the GDC will be $60,656.

A report from interim chief executive Stephen Parry, which was tabled at the meeting, says ‘’being in this mutual liability ‘Club’ means that each member has to pay a bit more in the event of claims exceed reserves’’.

“This is not the type of Christmas present that the council was expecting,’’ the report says.

At the meeting, he likened the council’s relationship with RiskPool as marriage vows “for better or worse, and this is the worse,’’ he said.

In response to questioning from Councillor Richard McPhail, he said the GDC had never laid a claim with RiskPool.

Mayor Ben Bell asked if the council was still a member.

Parry said if he recalled correctly, the council had opted out of RiskPool in about 2018, but it still had a liability for claims that were made when it was a member. This was one of those cases, and he would check to see if there were any more, he said.

The Humber St apartments in Napier were under repair in 2018. They were completed in 2007 but were later found to have a raft of issues, including structural steel corrosion and a leaky roof. (File photo)

RiskPool was now being wound up, he said.

The committee resolved to pay the additional contribution, and it would be included in next year’s budget for recovery, given that it was an unexpected and non-budgeted item.

In 2019, the Napier City Council, which was insured with RiskPool, paid $12.3 million to settle a claim made by 51 owners of units in the Waterfront Apartments, which were found to be leaky buildings.

The owners, who had originally sought $20m from the council, claimed the council was negligent as a building regulator for its role in issuing building consents, inspections during construction, and issuing code compliance certificates.

The buildings had numerous faults. Some related to weather tightness – or leaky building – issues; others were not attributable to weather tightness defects.

After paying out the apartment owners the council sought cover from RiskPool, but RiskPool said it was not liable for weather tightness claims, or claims with a weather tightness component.

A long legal battle ensued, and in August, the Supreme Court ruled in favour of the council.

The portion of the original $12m settlement not related to weather tightness issues was $4.4.

Stuff approached RiskPool to ask which other councils have been called upon to pay contributions, and how much they were, but chief executive Charlie Howe said dealings between Riskpool and its members were confidential to those parties, and it was not able to provide the information.

RiskPool’s website says it offered public liability and professional indemnity cover to its member councils from July 1997 to June 2017 and at its peak, it was providing cover to 82 out of a possible 85 district, unitary and regional councils.

*This article has been amended from an earlier version that said the Gore District Council was a current member of RiskPool. Updated December 7, 4.10pm.