Challenges
to government offers to buy out earthquake damaged properties in Christchurch
were successful in the High Court, but no decision was made on the merits of
the offer. The court simply ruled that
government did not follow the correct procedure before making offers.
Following devastating
earthquakes in Christchurch during 2010 and 2011, government declared whole
suburbs as no longer habitable because of severe infrastructure damage. Eventually over 7400 properties were “red
zoned”. A government-funded buy out
scheme enabled residential property owners to cash up and move. A two-tier compensation scheme saw those with
property insurance offered the 2007 rating value for their property; those
without insurance and those owning bare land were offered 50% of rateable
value. Government budgeted some $12.5
million for compensation to those offered the 50% deal.
Property owners
aggrieved by the 50% offer banded together in a lobby group called Quake
Outcasts. Together with a property
developer owning vacant land in the red zone, they sued government challenging
the manner in which the offer was formulated and alleging a 50% offer is
discriminatory, oppressive, disproportionate and in breach of their human
rights.
Of red-zoned insured property
owners receiving the full 2007 rating offer, 98.9% have accepted. These full offers were perceived as a better
option than the market could possibly provide, Justice Pankhurst said.
As regards the 50%
offers, the court was told acceptances were received from 62.6% of uninsured
residential property owners and 72.8% of those owning vacant land. Evidence was given that government made the
50% offers after being told by the Valuer General that vacant land in the red
zone may be worth no more than ten per cent of its pre-earthquake value.
Examples were given of
some anomalies which had been dealt with administratively: six insured
red-zoned residential leaseholders leasing from their local authority were made
full 100% offers on the condition that they then freeholded their property and
surrendered it to government; 22 insured red-zoned commercial/industrial
property owners were offered 100% of the value of their buildings but 50% of
the value of the underlying land.
Justice Pankhurst did
not address the merits of offers made by government. He reviewed the process by which government
had red-zoned properties, ruling that it had not followed the statutory process
required by the Canterbury Earthquake Recovery Act 2011. Before red-zoning entire suburbs, government
should first have revoked or suspended the existing resource management zoning,
he said. To that extent, government
declaration of the red zones was unlawful.
Fowler
Developments v. CERA and Quake Outcasts v. CERA – High Court (26.08.13)
13.022