Who'll stop the rot?
Parliament passed legislation establishing the Watertight Homes Resolution Service (WHRS) in 2002...Mr McQuade and the 4060 other New Zealanders who made claims to the WHRS have to pay their own legal fees and expert witness costs. Usually that costs them tens of thousands of dollars. Even if they win - either through mediation or adjudication - there are no guarantees other parties will honour obligations...Though the changes won unanimous support from parliamentarians, National's building and construction spokesman Nick Smith predicted they would make little difference. "They are minor improvements in the right direction," he said. "But the Government is fooling itself if it believes they will solve the problem." He said Dr Smith's figures showed only 7 per cent of claims made to the WHRS had been settled. Each claim had cost claimants $96,000. But the average payout was just $68,000.

Instead of peace of mind they ended up with a nightmare.

Soon after moving in they found bad leaks around the windows and skylights. Buckets, mops and towels became compulsory every time it rained.

When the McQuades go away they have to get someone to look after the house - and mop up if it rains.

When Parliament passed legislation establishing the Watertight Homes Resolution Service in 2002, the McQuades were among the first in the door.

Four years later, their house has not been fixed. Mr McQuade estimates he has spent $50,000 on lawyers and expert witnesses. The other parties in the case, including Porirua City Council and its insurer employed barristers, forcing Mr McQuade to get his own.

"I'm heavily out of pocket. It's been extremely stressful - seven years living in a rotting house."

Recently, the parties reached a settlement. Each will put money into a pool to pay for repairs.

Mr McQuade has building consent. All he needs now is a builder. The good builders are busy and he is not prepared to have just anyone fix his house.

Though Mr McQuade expects to have the job done before the start of winter, he is far from happy. His chief complaint is about the WHRS. "It's run by lawyers. It's become a solicitors' battleground rather than a solution finder."

Mr McQuade and the 4060 other New Zealanders who made claims to the WHRS have to pay their own legal fees and expert witness costs. Usually that costs them tens of thousands of dollars.

Even if they win - either through mediation or adjudication - there are no guarantees other parties will honour obligations.

"Our retirement funds have gone to pay for someone's poor workmanship and someone's poor construction," Mr McQuade says.

In another case, a man named Peter is not waiting for the WHRS to reach a solution. He has decided to fix the problem and claim the costs later.

Peter bought his Wellington home in 2000, from a developer.

Within a year, Peter and his wife began to notice problems. Their home had two decks over living areas. Rainwater seeped through and the lounge carpet went mouldy.

Peter tried repairs but the problem kept getting worse.

In 2002 he went to the WHRS. The expert's report said the house needed to be entirely reclad. Peter found to his horror that his house had received a certificate of compliance from Wellington City Council, though the cladding was different from that specified in the building consent.

"The cladding used was only supposed to be for the carport."

So he went into mediation in the hope of getting the other parties - especially the council and the developer - to accept responsibility.

"It's the most horrendous experience I've been through."

He said lawyers for Riskpool were paid large hourly rates to bully him into accepting the lowest possible settlement while refusing to admit the council had done anything wrong. "I run a business. If we make a mistake, we admit it. But when it comes to leaky houses, everyone runs for cover."

With both mediation and adjudication making slow progress, Peter decided to act. He won an adjournment. Before his case resumes he plans to have his house reclad at an estimated cost of between $220,000 and $260,000.

He says he is no longer prepared to take chances with the health of his young family.

If the recladding work uncovers further damage, Peter intends getting that repaired as well.

Then Peter will go back to the WHRS and try to get reimbursed. He knows there are no guarantees but he is tired of the game-playing. "We're taking a huge risk."

Three years ago, Margaret Bartosh bought a unit in a block of 12 in Mana, Porirua. Several months later, she became aware of water seeping through the walls.

Other residents in her complex were experiencing similar problems, so the group went to the WHRS. After an expert assessment and a wait of six months before their case went to mediation, a settlement was reached in which the parties agreed to pay to reclad all 12 units.

One unit is finished and seven others are nearly complete. Though work on her unit has not started, Mrs Bartosh is optimistic: "We're in a very fortunate situation. At least the guys are standing up and taking responsibility."

The WHRS has been criticised on many fronts for being a slow and toothless tiger, expensive and tim-consuming, providing few guarantees for frustrated homeowners.

Auckland lawyer Paul Grimshaw believes the WHRS is a waste of time for anyone claiming less than $20,000.

"It's incredibly slow. There's been a problem in finding enough adjudicators. It's also incredibly difficult for multiplexes and body corporates to bring an action."

Mr Grimshaw said he had represented 6000 leaky-homers. He had advised 90 per cent to bypass the WHRS and head directly to the High Court. "Both take about the same amount of time and you could claim for your expert witness and legal costs in the High Court. I would prefer and respect a High Court judge more than an adjudicator."

Soon after taking on the building issues portfolio, minister Clayton Cosgrove announced a review of the WHRS. After consultation he announced changes last year.

The most significant was the establishment of a Weathertight Homes Tribunal under the Justice Ministry; a streamlining of the process for lower-value claims; giving district courts power to enforce WHRS settlements; eliminating a requirement for there to be 100 per cent approval among members before body corporates can bring cases to the WHRS; and requiring local authorities to place WHRS findings on Land Information Memorandum or LIM reports.

LEAKY Homes Action Group chairman John Gray said the changes were welcome and would give the WHRS more clout.

However, the Government's refusal to give the WHRS power to award costs was unfortunate, and he was disappointed the 10-year limit on bringing claims would remain. He said owners of homes where the problem was slow to develop would be left with no one to turn to.

Mr Grimshaw said the limit was ridiculous. "It is a travesty. It does not exist anywhere else. If I buy a house that's 11 years old, I can't sue anyone. I can't for the life of me see the rationale for that."

Mr Cosgrove said a 10-year limit had existed under the Building Act passed by the last National government and had been continued when legislation establishing the WHRS was passed in 2002.

The longer the limit, the more difficult it was proving that damage to a house resulted from a defect rather than fair wear and tear, he said.

"You've got to have a limit and the best advice I got was 10 years."

Though the changes won unanimous support from parliamentarians, National's building and construction spokesman Nick Smith predicted they would make little difference. "They are minor improvements in the right direction," he said. "But the Government is fooling itself if it believes they will solve the problem."

He said Dr Smith's figures showed only 7 per cent of claims made to the WHRS had been settled. Each claim had cost claimants $96,000. But the average payout was just $68,000.

National believed homeowners should be able to get their homes fixed, with arguments about who should pay determined later.

Dr Smith said National also opposed disallowing claims for the cost of legal representation and expert witnesses and favoured lifting of the 10-year limitation on claims.

However, he welcomed the easing of rules on multi-unit claims.

"In 2002 the original WHRS legislation was passed under urgency. Four years later the Government makes more changes and they are again passed under urgency."

However, Mr Cosgrove said Dr Smith was absent when the select committee considered the legislation and neither he nor his National colleagues proposed amendments when it was debated in the House. "Dr Smith is a very silly man. He is full of slogans. But he never proposed a solution or a policy."

Dr Smith was part of a National government that deregulated the building industry, he said. "He allowed the cowboys into the system."

Mr Cosgrove said he had consulted widely with industry representatives and affected building owners. Groups such as the Leaky Homes Action Group and Consumers Institute had supported the changes.

On claiming legal costs, Mr Cosgrove said that would have to work both ways, meaning unsuccessful homeowner claimants could end up paying the legal bills of councils, developers and other parties.

He said Mr Grimshaw's criticisms of the WHRS were a case of vested interests. "Whatever happens, the lawyers always end up getting paid."

Mr Cosgrove said despite Mr Grimshaw's criticisms, homeowners would benefit from a more robust assessment procedure, while they could also claim for both actual and potential damage - a significant advance because most damage to a leaky home is discovered only when repairs are carried out.

One big problem is unresolved - Phoenix companies, builders and developers who avoid liability for claims by going into liquidation then resume trading under new names.

Phoenix companies are an expensive problem for local authorities - especially Auckland City Council - because under the joint and several liability rule, plaintiffs collecting damages from multiple parties can get the last one standing to pick up the shares of those who fall over.

Mr Cosgrove said a solution to the problem lay outside his portfolio. Commerce Minister Lianne Dalziel was looking at the matter.

The Weathertight Homes Tribunal has already been set up, with Rotorua barrister Patricia McConnell appointed as chief adjudicator.

The remaining changes take effect from April 1.

Will the reforms result in a better deal for homeowners like Dennis McQuade and Peter who have essentially given up on the current system. Mr Cosgrove is confident. "I believe hand-over-heart the new system will work."
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