Leaky homes case may stop landlords suing councils

Landlords who together own about 600,000 rented houses, units and apartments might not be able to sue councils if their places leak in future.

John Gray, president of the Home Owners and Buyers Association, said the outcome of a big court case which started this week could ban landlords from holding councils accountable for weathertightness issues.

Yesterday, the Court of Appeal began hearing two major leaky building cases which are appeals on High Court decisions about two North Shore multi-unit properties.

They are the 12-unit Byron Ave apartments overlooking the Takapuna wetland area north of Barrys Point Rd, and the 21-unit Sunset Terraces in Mairangi Bay.

Both complexes suffered severe leaks and owners fought marathon battles through the courts to win big awards, shunning the state system that would have put them before the Weathertight Homes Tribunal.

North Shore City Council was expected to foot the bills in both cases after the owners won millions in the High Court at Auckland.

Yesterday, David Goddard, QC, began challenging those decisions in a move by Heaney & Co, who act for the council's insurers, RiskPool.

He is arguing strongly against any council payout to landlords who bought places in the two complexes to rent to tenants. This is because some of the units can be deemed commercial rather than residential - rented for commercial gain rather than being used as a traditional owner/occupied residential property.

Gray is worried that councils have already argued successfully in other court cases against having any duty of care to owners of commercial buildings.

"This is because the construction of a commercial building in all of the contracts that are put in place between the parties to the construction are far more sophisticated and the owners are in a far better position to protect themselves," Gray said.

Goddard is also arguing that developers, architects, engineers and other property professionals were the parties who unit buyers should have been able to rely on and trust, rather than North Shore council.

The cases are being heard together because they concern the same issues.

Lawyers from Grimshaw & Co are acting for the multi-unit property owners via the body corporates.

Last May, Justice Paul Heath ruled against Shore developers Robert and Kay Barton over the leaky Sunset Terraces, where a $1.9 million recladding was needed and $800,000 has already been spent on a patchup. The Bartons say they have no money to pay.

Then last July, Justice Geoffrey Venning said the $2 million-plus he awarded to owners of the leaky 12-unit Byron Ave estate in Takapuna would most likely be paid by North Shore City. The project was by architect/developer Stephen Smythe.

Gray said the prospect of the High Court decisions being overturned was "appalling" for landlords, many of whom rely on rental income for their financial survival.

"Most have mortgages to pay and those who have leaky or defective buildings also face huge repair costs. They can't sell their homes and they can't afford to repair them without some income," he said.

If the councils win this week, it could mean one person who owns their house and lives in it could sue the council with some degree of confidence yet the owner of a neighbouring house would not be able to sue.

"It is a farcical prospect," Gray said.

Andrew King, vice-president of the New Zealand Property Investors' Federation, said he was shocked to hear about the legal wrangle.

The Shore apartments were clearly residential and landlords all around New Zealand would be extremely concerned if the appeal succeeded, he said.