17 December 2010

Leaky homes: North Shore City v. Sunset & Byron

Local councils must accept responsibility for negligent inspection of leaky homes, ruled the Supreme Court.

North Shore City, now part of Auckland City, failed in a concentrated attack against a legal principle holding it liable for repair costs when a negligent council inspection fails to identify that a residential building under construction might in the future leak.

This legal principle arose from a 1990s court case against Invercargill City Council.

North Shore’s primary argument was that liability applied only to the construction of “modest” stand-alone residential dwellings, not high-rise apartments and not multi-unit dwellings.

The Supreme Court ruled there was no good reason to depart from the 1990s rule. Home-owners should expect the rule would apply and not be retrospectively overturned. Councils owe a duty to take care when inspecting homes in the course of construction.

It did not matter that the leaky residential building is a stand-alone house or part of a block of apartments.

Not only is the first buyer entitled to sue, but also subsequent purchasers who have to bear the cost of repairs.

The multi-million cost of repairing leaky homes will fall on ratepayers to the extent that a local authority did not have insurance cover for its losses or was not able to recover a contribution from architects, engineers or builders held partly to blame in particular cases.

North Shore City v. Sunset Terraces & Byron Avenue – Supreme Court (17.12.10)

01.11.003