Investors sue Govt and council over leaks

A sign sits in the bushes in front of Pepperwood Mews. Photo / Brett Phibbs

Property investors saddled with rotten units in West Auckland are suing Housing New Zealand and the Auckland Council and condemning public-private partnerships.

But Housing NZ has distanced itself from the abandoned 32-unit Pepperwood Mews in Kelston and says it has no ongoing liability for problems at the seven-year-old complex.

Owners are acting because they have run out of options, and want to warn others against PPPs, which they say are deeply flawed.

The complex has been abandoned for two years after Housing NZ said it could not place tenants there when it was deemed unsafe after severe leaks were found.

A statement of claim filed in the High Court at Auckland by the Pepperwood Mews body corporate says that in 2002-03, Housing NZ and developers Prime Group hatched plans for what has now become Pepperwood.

About August 2003, Housing NZ struck an agreement with Prime for the design and construction of the big complex.

Investors were drawn to buy units, the claim says, because they were marketed as a "blue chip" investment.

The complex was leased as state housing but evacuated when severe structural defects were found.

Kevin Mara, Housing NZ's general manager of assets, said last year that his organisation did not accept any liability for the structural or weathertightness problems.

"We don't own the building, we don't own the land, we didn't design or build the building. Our involvement has been to lease 32 units in the complex from private owners."

But John Gray, president of the Home Owners and Buyers Association, complained to Housing Minister Phil Heatley, saying Housing NZ under Labour had "significant involvement".

The association's Roger Levie said Housing NZ and the council were negligent and breached their duty of care to the owners. He cited the December Supreme Court ruling which rejected North Shore City Council's argument that it was not responsible for problems at Takapuna's 14-unit Byron Ave townhouses and the 21-unit Sunset Terraces in Mairangi Bay.

Mr Levie said the law was now crystal clear: investors who bought units to rent were owed the same care as people who bought units to live in themselves.

The claim was filed about the same time Mr Heatley and Westpac's David McLean praised PPPs, which they want examined as the best way to vastly expand state housing.