Government’s Financial Assistance Package falls well short

A recent report on National Radio confirmed that the government’s Financial Assistance Package (“FAP”) to leaky home owners has failed to make even a small dent in the number of leaky homes.

The FAP was established in 2011 as a repair scheme enabling leaky home owners to access funds from the government and participating territorial authorities to fix their homes.  Eligible claimants are entitled to 25% from the government (which the courts have held has no liability in the leaky building area) and 25% from the territorial authority (i.e. council) if it had certified the building’s compliance.  When the government announced the FAP in 2010, it estimated that the Crown’s share of costs would be around $1b over five years, based on an estimated 70% of affected home owners within the ten year liability limit taking up this package;  yet in October last year the Crown contributions to repairs to the end of 2012 were forecast to be $7.785m, not including administrative costs.  National Radio also reported that:

  • barely 87 homes had been fixed;
  • while another 364 homes had repair plans approved to repair their homes, even if all these proceeded, the total cost for the government and participating territorial authorities would only be $22m;
  • a further 3,000 homeowners are eligible but have not yet elected to pursue the scheme, (which has only two more years to run).   Even if all these homeowners chose to participate, the estimated total repair costs could be around $100m.

A MBIE evaluation of the FAP in October 2013 concluded that the FAP was making a very limited impact upon the many thousands of leaky buildings estimated to exist.  As at February 2013 “the proportion of dwellings within the FAP process is 1.6% of estimated failures and 6.4% of all claims lodged”, even using an estimate of failures that may be 50% less than the actual number of affected houses.

It is accepted that the FAP was never going to amount to a complete fix for all affected homeowners, but it is difficult to view it as anything other than a failure.  Anecdotal evidence suggests that:

  • the process involved in obtaining financial contribution from the Crown and territorial authorities is endlessly bureaucratic, and paper-driven;
  • claims advisors, who assist homeowners through the package, (but cannot give them any technical or legal advice), are based in Auckland, while the technical advisors, whose approval must be sought to repair plans, are based in Wellington;
  • while the intention of the scheme is to repair homes, some of MBIE’s decisions don’t seem to have been made with this intention.  We know of at least one situation where the council has informed the homeowner that it will not issue a building consent for anything less than a full reclad, but, because the WHRS assessor’s report (completed a number of years earlier) concluded that targeted repairs were possible, the FAP contribution will only be based on targeted repairs, even though this will not appropriately remediate the property, and the territorial authority will not issue a building consent for targeted repairs.
  • the scheme is virtually impossible to access without relevant building expertise, thereby increasing the cost of accessing it.

Where a homeowner’s property was certified by a building certifier (all now insolvent) the Crown’s contribution of 25% is the only option for compensation.  But, in most cases where the homeowner’s property was negligently certified by a territorial authority, there seems little economic sense in a homeowner accepting 50% of a repair costs (or even less, if MBIE’s advisors take an aggressive view of betterment, i.e. repair costs MBIE deems exceed the scope necessary to remediate the dwelling) when litigation routinely achieves recovery of between 80% to 100% of remedial costs.  The MBIE review refers to reasons why homeowners choose not to participate in litigation (cost, they may not wish to sue their builder or architect, go through the stress, or play the “blame game”) but unless a homeowner with a solid claim against a territorial authority is prepared to bear 50%, or more, of the cost of remediating their house, litigation will unfortunately still be their best option for extracting themselves from the leaky building nightmare.