Banks clamp down on loans for leak-prone homes

By ANDREW LAXON, KEVIN TAYLOR and PAULA OLIVER

Banks are starting to demand building inspections on leak-prone modern homes before they will agree to lend money for mortgages.

Tens of thousands of homes built in the past decade could be affected by the tough new rules, which could restrict mortgage lending and slow house sales if widely adopted.

Kiwibank has a new policy requiring inspections of all "Mediterranean style" homes built in the past 10 years with no eaves and using polystyrene or concrete sheeting walls with a plaster finish.

The BNZ is now insisting on assurances that all homes built since 1996 - when untreated timber was introduced - have been inspected and cleared of leak problems.

The ANZ is preparing a report on the issue, and the ASB is reviewing its policy and calling for inspections of apartments and terraced housing case by case.

WestpacTrust says it is watching the situation.

National, the country's biggest mortgage lender, says it has no plans to require inspections at this stage but will wait and see how the leaky building crisis develops.

New Zealanders borrow about $68 billion in mortgages each year. The BNZ lends about $10 billion, and state-owned newcomer Kiwibank lends just over $100 million.

If the ANZ and ASB introduce similar restrictions, about $16 billion worth of mortgages could be affected.

But some banks have expressed reservations about relying on building reports in case they do not detect leaks and expose the bank to legal action from customers.

Insurers are also scaling back cover for industry professionals, leaving hundreds of owners without guarantees on their new houses.

Certified Builders Association chief executive Garry Shuttleworth said his organisation, which represents 800 businesses, had been forced to drop its new guarantee scheme in July because the insurer, Allianz, refused to cover leaks.

The association hoped to bring back the guarantee with a new insurer in the next two months, and have retrospective cover for homes built by members since July.

But the new leakproof cover would probably cost home buyers twice as much - up from about $600 to $1200 - to cover the callout fees of 220 building inspectors, who would check houses nationwide.

Mr Shuttleworth said the collapse of A1 Certifiers of Papakura - which closed this week because it could not get insurance cover any more - was typical of a growing trend.

He said Allianz, which had since pulled out of building industry cover in New Zealand and Australia, warned him months ago that more insurers would cancel professional indemnity cover for architects and engineers, as well as for building certifiers and inspectors.

Auckland building inspectors the Weekend Herald contacted say business has grown by 40 per cent in the past three months - mostly from super-cautious buyers who are checking homes of any age.

At least one inspector says he has been working seven days a week to keep up with the demand for written reports, which cost an average $250.

Chris Underwood, of Able House Inspections, said he had inspected 39 homes last week and charged $8000. Normally he took $3000 a week.

Real Estate Institute vice-president Howard Morley denied the crisis had affected the market, but several agents confirmed that it had, especially in Auckland.

Some owners are struggling to sell, and at least one Wellington firm is close to refusing to handle monolithic clad homes.

Framing manufacturers say more people are insisting on chemically treated timber.

The Frame and Truss Manufacturers Association reports a surge in demand from zero to between 10 and 20 per cent of orders since the problem became widely known.

Business manager Simon Archer said he was concerned that customers did not realise that treated timber - which could add at least $3000 to the price of a house - was not the whole answer.

Timber giants Carter Holt Harvey and Fletcher Challenge Forests have also advised homeowners against a "kneejerk reaction" of adopting treated timber as the solution.

Scott Fuller, chief executive of Carter Holt Harvey Innovision (the company's wood products sales and marketing business), said treated timber would slow rot but not stop it.

A spokesman for Prime Minister Helen Clark said a Crown Law opinion on Government liability would go to the Cabinet on Monday

He said the Government was not liable, but was working towards finding a resolution.

* If you have information about leaking buildings,
email the Herald or fax (09) 373-6421.

Further reading
Feature: Leaky buildings

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