Council swamped by leaky buildings

The country's biggest city council has cried "enough" on leaky building claims and is searching for an alternative to defending them.

The Auckland City Council is understood to be liable for more than $5 million from 70 cases settled so far, though details of most payouts are cloaked in secrecy.

A further 1000 claims in Auckland City's patch are lodged with the weathertight homes resolution service alone, and the council expects to be named as a respondent in most.

Other homeowners are going through the courts and while they are fewer in number, their claims tend to be much greater.

Auckland City has paid $2 million settling 20 court cases, and is named in a further 50 before the courts.

"There's no question that if we project forward with what we know about we are into many millions," says the council's acting chief executive, David Rankin.

The council is understood to be liable for up to half of a near-$2 million payout to 26 owners in the West End Apartments in Grey Lynn following confidential mediation.

In the latest settlement, it was found liable for $120,000 of a $700,000 award to seven owners in the Ponsonby Gardens complex. It spent $320,000 defending the case, engaging prominent QC Rodney Harrison, insurance experts Heaney and Co and expert witnesses.

The weathertight service is processing more than 2000 claims from Kaitaia to Invercargill. North Shore City Council said last month it was involved in 50 active claims, totalling about $3.3 million. It expects to pay a third.

A total of 280 claims with the weathertight service are from the North Shore.

Mr Rankin said councils could be held liable for faulty building consents, missed defects and for issuing code compliance certificates on buildings which breached the code.

While liability is often shared, councils are most likely to foot the bill under the law of joint and several liability as they cannot hide.

"It's not uncommon for the council to be out of pocket if other parties have been liquidated or we can't find the builder," said Mr Rankin.

"We are often the only party around with resources."

Local Government NZ chief executive Eugene Bowen said the liability law was a major concern. " It's the last man standing who pays - and councils can't disappear."

Councils have failed in several attempts to spread liability for leaking buildings to the Government by having the Building Industry Authority (BIA) included as a party.

The BIA (now absorbed into the Housing Department) administers the building code but insists responsibility for enforcement rests with councils.

"The Hunn report [into leaky buildings] talked very clearly about systemic failure," said Mr Bowen. "It's our view that there is a liability here [for the BIA]. The Government's view is different."

Mr Bowen said local government was continuing to lobby the Government for improvements.

Mr Rankin said Auckland City had no specific ideas for alternative approaches to defending the claims. Councillors had become increasingly worried about the cost of settlements after a run of decisions.

Ratepayers were footing much of the bill, because insurers imposed a prohibitive excess.

Officials had been asked to look at cost-effective alternatives which would also respond to the difficulties facing home owners.