Rescue scheme needs overhaul, expert says

Tim Rainey says the FAP would work if it operates in a similar way to an insurance claim. Photo / NZ Herald

A specialist in leaky building litigation says the Government's $1 billion rescue scheme should be revamped.

Tim Rainey, of Rainey Law on Shortland St, called for big changes to the Financial Assistance Package (FAP) where homeowners get money to fix their places.

Officials running the scheme, ushered in two years ago, must rethink it, Rainey says.

"They should go back to the start and seek an industry-driven response to this problem, rather than a response which the former Department of Building and Housing cooked up in conjunction with key councils and sought to impose on homeowners.

"People who have already been treated badly by councils and the Crown deserve better," he said, after low take-up levels were revealed.

The fact that the Ministry of Business, Innovation and Employment had approved only $10.39 million worth of repair contracts for 249 dwellings when the total cost of repairs was estimated to be around $41.56 million illustrated the nub of the problem, Rainey said.

"That tells you that the average percentage recovery for homeowners from the FAP is exactly 25 per cent. No wonder people are deciding not to take up their FAP option.

"It is even sillier when you think of the net position of the Crown taking into account GST and other taxes. The $41.56 million will be a GST inclusive amount. So when those repairs are completed and paid for by the homeowners, the Crown will receive $5.42 million in GST. If you add to that the PAYE and income tax paid by the builders undertaking the work - labour being the biggest component of the repair cost - I suspect that the FAP is a fiscal neutral policy for the Crown because it receives at least as much in revenue as it pays out in FAP contributions," Rainey said.

"My argument has always been that the FAP would work if it were more generous and if it operated in a similar way to an insurance claim."