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Is the Council liable for leaky homes?

By Andrew Steele - 28 Jan 2011

The Supreme Court has released its long-awaited decision on leaky homes.  This newsletter summarises the law around leaky homes and the effect of recent decisions.

The Building Act requires councils to inspect homes when they are being built and on completion, to certify that they comply with the Building Code. The Code requires homes to not leak, among other things.

Therefore, councils owe homeowners a duty to make sure that the inspections are accurate and houses comply with the building code.  If this duty is breached, councils may be sued.

The Supreme Court decided:
  • Because councils are generally relied on by the public, particular homeowners do not have to rely on the council personally for the council to owe them a duty to undertake careful inspections and considered certification.
  • Councils' duties extend to apartments and large-scale projects, not just houses.
  • Councils owe homeowners a duty of care even if professional architects, designers and engineers have been employed. Purchasers do not know the scope of those professionals' roles, nor rely on them in buying the property. Yet they do know about and generally rely on the council's role.
  • Councils owe duties to subsequent owners and investor-owners who do not occupy the house, as well as initial purchasers and owner/occupiers.
  • Councils that have not issued code compliance certificates still owe duties to homeowners to undertake careful inspections and therefore may be sued.
  • The Supreme Court has affirmed the present legal position of councils.
What this means for home-owners

These decisions should encourage homeowners.

When leaks are found in a house, the parties involved in its construction may be hard to find or have no financial worth. Often the builder may not be trading; the architect may have no money; the developer may be overseas and the engineering company may have been put into liquidation.

However, the council is the one party who is both present and of sufficient means to ensure any Judgment obtained against it will be paid.

The Supreme Court has confirmed that if a building is signalled to the council to be a residential dwelling, then the council is under a duty to take reasonable care in inspecting its construction and in certifying its code compliance. This is the law regardless of who owns the home, what they do with it, who constructed it or what type of home it is.

If you require any further information, or have any questions about how the Court decision could affect you, please contact Andrew Steele or your usual contact at Martelli McKegg on 09 379 7333.


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