KEY POINTS:
Councils are angry at being hit for the full cost of the leaky building crisis, saying they should be taking only a small portion of the blame.
And they are warning of big rate hikes to cover the bill, particularly following a $250,900 High Court ruling against the Waitakere City Council.
A leaky building specialist also says councils are doing their best to limit costs by settling most cases outside court.
Philip O'Sullivan, of leaky building consultants Prendos, said the crisis had left councils battered and bruised.
Echoing the councils' concerns, Irene Clarke, senior policy analyst for the environment and regulation at Local Government New Zealand, which represents 85 territorial authorities, said it was unfair they were being left to foot the costs.
Full costs are unknown, but estimates are as high as $5 billion to $10 billion. The court judgment said a council witness put the number of leaky homes at 40,000.
Irene Clarke said ratepayers would, ultimately, bear the burden. "Ratepayers should not be made to pay for damages incurred by failures of a system or by defaulting builders."
Rotting homes are also behind a sharp rise in legal claims against the Auckland City Council. These have more than tripled from $57 million to nearly $200 million in 12 months.
As the number of leaky building claims mount, councils are increasingly calling on their shared-risk insurance scheme managed by Wellington-based RiskPool.
Although courts are finding councils owe a small portion of settlements, many builders and others involved in putting up leaky homes have collapsed, leaving councils to bear the full costs. Ms Clarke said that situation was extremely unfair.
"In most decisions, the territorial authority has been found liable for about 20 per cent or less in terms of causative contribution to weathertightness defects.
"However, if the other parties have not been able to pay the balance of 80 per cent, the territorial authority and any other solvent parties are required to pay up to 100 per cent," she said.
"Often the territorial authority is the only solvent party. As time elapses between the construction of the building under claim and the determination of the claim, more respondents are no longer trading and territorial authorities are facing more claims as the sole respondent.
"This has direct financial implications for territorial authorities and all ratepayers." Local Government NZ had tried but failed to get the law changed to limit council liability.
The outcry came after a landmark decision from Justice David Baragwanath in the High Court at Auckland awarded $250,900 to Hobsonville homeowner Colleen Dicks.
The Waitakere council was to pay 20 per cent and builder Hobson Swan Construction and its director, Robert McDonald, were to cover the rest.
But the company is in liquidation, making the council liable for the full amount.
Mr O'Sullivan said that with costs Waitakere would end up paying far more than the $250,900 awarded.
Auckland City Council finance general manager Andrew McKenzie said last night he had asked for a report on the Hobsonville case.
Mr McKenzie said he would not know what effect, if any, the case would have on ratepayers. Last year, the leaky building issue had had a "minor" effect on rates.
