Hon Clayton Cosgrove
Minister for Building Issues
Hon Rick Barker
Minister for Courts

25 July 2006 Media Statement

More steps to improve leaky homes service

Further measures to strengthen the Weathertight Homes Resolution Service (WHRS), enhance consumer protection, hold building industry professionals to account and get leaky homes disputes settled faster through mediation and adjudication have been announced by the Building Issues Minister Clayton Cosgrove and the Courts Minister Rick Barker today.

"In May this year, I announced a shake-up of the WHRS to stop gaming of the system, encourage adjudicators to take a more investigative approach and to provide better assessments, support and information for claimants," said Mr Cosgrove. "Government has now determined how we are going to deliver on these improvements."

The measures, which will benefit claimants and potential homebuyers, include:

- Requiring territorial authorities to place WHRS notices on affected property files, and to make that information available on Land Information Memorandum (LIM) reports

- Changing the voting thresholds to make it easier for a class action approach to be taken by owners of units within apartment blocks

- Setting statutory time limits on mediation

- Enhancing the power and authority of adjudicators, including new offence provisions for failure to comply with a witness summons and intentionally disrupting proceedings

- Establishing a new specialist Weathertight Homes Tribunal administered by the Ministry of Justice (assessment and mediation remain with the Department of Building and Housing)

"Placing a mandatory flag on the LIM report increases consumer protection by informing homebuyers whether a house has been subject to a claim," Mr Cosgrove said.

"The establishment of a voting threshold will mean that a small number of 'holdouts' in multi-unit complexes cannot stop a class action claim being filed. And limiting mediation to 20 working days for low-value and general claims, and 40 working days for multi-unit complexes will reduce delaying tactics and provide clear incentives for parties to act in good faith."

Mr Barker said enhanced powers for adjudicators would also help reduce gaming, and enable them to take an active, investigative approach when hearing cases.

"The administration of the new specialist tribunal by the Ministry of Justice is a natural fit and means claimants can be assured of the new tribunal's independence," Mr Barker said.

Mr Cosgrove said work will now start on drafting a Bill to give effect to these changes and he expects these measures to take effect from early next year, once legislation is passed.

"These measures are part of the Labour-led government's suite of changes to transform the building and construction industry, including the licensing of building practitioners, the review of the Building Code, a new product certification regime, the auditing and accrediting of Building Consent Authorities, a major consumer education initiative and investigating a home warranty insurance scheme, all designed to ensure that New Zealanders' homes are built right the first time," Mr Cosgrove said.

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Media Backgrounder

What is the background to this announcement?
In May 2006, the government announced a major shake-up of the Weathertight Homes Resolution Service (WHRS) to stop gaming of the system, hold those responsible to account and ultimately get leaky homes fixed faster. Government has now determined how this will occur, plus some new additional measures.
The WHRS enhancements aim to ensure that owners of so-called leaky homes are better supported to fix their home as early and effectively as possible.

How many claims are lodged with the WHRS?
There are currently 2957 claims lodged with the WHRS. Of these, 698 are in assessment, 1643 are 'on hold' at the claimant's request, 368 are in mediation, 207 are in adjudication, and 41 are in both mediation and adjudication.

What are the measures the government has approved?
Government has approved changing the voting thresholds to make it easier for a class action approach to be taken by owners of units within apartment blocks. Around 70 percent of claimants with the WHRS are unit-title apartment owners. The government has also set time limits on mediation. Adjudicators have the power to vary the timeframe on a case-by-case basis to provide flexibility.
Additional measures approved include requiring territorial authorities to place WHRS notices on property files and make that information available on Land Information Memorandum (LIM) reports. A decision has also been taken to relocate the dispute adjudication function from the Department of Building and Housing to the Ministry of Justice, which will administer the new specialist Weathertight Homes Tribunal. As signalled in the May 2006 announcement, adjudicators will take a more investigative approach, and be given enhanced powers.

What are the new offence provisions open to adjudicators?
Any party or parties who intentionally disrupt dispute proceedings or do not comply with a witness summons may face financial penalties imposed by the adjudicator. The level of the penalties is yet to be determined.

How will these changes benefit existing and potential homeowners?
Better assessments and information for consumers on whether houses have been subject to a claim; less obstacles for owners in multi-unit complexes to take a class-action approach to help resolve their disputes; faster mediation with reduced delaying tactics and adjudicators taking a more active, investigative approach to settle cases faster.

What was wrong with the old approach to adjudication?
The 2005 review of the WHRS identified a need for a more active, investigative approach to adjudication. The Tribunal will help enable adjudicators to achieve this, and placing it within the Ministry of Justice is a natural fit for the authority and independence of a judicial function. Removing adjudication from the Department of Building and Housing will also strengthen the role of WHRS advisors, by removing any perceived conflict of interest in the provision of both an advisory and an adjudication role by the Department.

What options will be available to claimants?
Homeowners are free to choose among dispute resolution options, including the courts and the WHRS. The WHRS remains an alternative process to the general courts and is expected to be faster and less costly than the equivalent courts procedures.
Claimants will have the same access to mediation, and adjudication as before, as well the option of direct negotiation for low value claims.

Will existing claims at adjudication have to start again from scratch?
No. Claimants with cases in adjudication at the time the new Tribunal is established will be able to continue with their existing adjudicator or, if they wish, apply to have their case transferred to the new Tribunal. No costs or delays are expected from any transfers.

What factors contributed to the leaky homes problem?
In the early 1990s, building industry deregulation encouraged 'cowboys' into the building industry – those who strapped on a tool belt and called themselves a builder – and the deliberate destruction of the apprenticeship system, all contributed to the leaky homes problem.

What are the proposed voting thresholds for multi-unit complexes?
To prevent 'hold out' situations, voting thresholds for bringing a class action claim for common property will be reduced from 100 percent to 80 percent of eligible voters in the body corporate. For an assessment to be completed 75 percent of owners of the units in the complex - rather than 100 percent - will be required to authorise invasive testing.

What is the definition of "low-value", "general" and "multi-unit" claims?
The threshold for 'low value' claims is yet to be determined, but they will have an expedited mediation and negotiation process with referral to adjudication on the papers (without the need for a further hearing) if settlement is not reached. 'General' claims refer to stand-alone properties and 'multi-unit' claims refer to multi unit apartment claims.

ENDS

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