Leaking Buildings – Who is responsible?

There has been wide spread publicity recently about the problems associated with leaking buildings. This article looks at what legal rights homeowners have when faced with a water damaged home.

There is increasing concern about the number of new homes and homes built over the last 10 years, that are water damaged. The Building Industry Authority, a Government Crown agency established by the Building Act 1991 to manage the building control system, has formed a group to report on the increase in water damage to New Zealand homes.

The Weather Tightness Overview Group has identified a number of factors which contribute to the water damage problems such as:

• Preference for “Mediterranean” flat roof house styles with no eaves.
• Use of monolithic cladding systems that tend to retain moisture.
• The lack of drainage holes at the base of houses.
• Use of untreated timber.
• Inadequate or poorly constructed flashings around doors, windows or other junctions.
• A competitive building market, higher land prices and higher density housing, all contributing to smaller profit margins for builders and a tendency to “cut corners” which can result in poor workmanship.

The overall effect of the above factors is an increase in the incidence of water penetrating the exterior cladding of the house rather than evaporating or draining away. The presence of moisture causes damage particularly to untreated timber for framing. This damage results in costly repair bills and decreased house value for owners.

Owners should seek legal advice as soon as water damage is discovered. Owners do have legal rights but it must be remembered that any claims against parties relating to building work must be made within 10 years from the date of the breach, act or omission which caused the water damage.

YOUR LEGAL RIGHTS

The key to any successful legal claim against a party will be identifying the cause of the water damage. A building report from a building consultant should be obtained at an early stage as this will provide solid evidence on which to base the claim.

Once the cause has been identified by the expert, the next step will be to determine who is responsible for the damage. For example, if a lack of flashings around a window has been identified as the cause of a water leak, this could be the fault of the designer, the result of poor workmanship by the builder or a failure by the builder to follow the plans.

When a cause has been identified along with possible responsible parties, thought should then be given as to whether Court proceedings should be commenced against those parties or whether other dispute resolution processes like the Disputes Tribunal, mediation or arbitration are appropriate. The cost to fix the water damage will often be determinative of which process you use to seek payment from the responsible parties. Your solicitor will be able to advise you on the best dispute resolution process for your case.

The nature of the claim will vary depending on whether you have engaged the building contractor to build for you, or whether you are a subsequent purchaser of the house built for a previous owner.

CLAIMS AGAINST YOUR BUILDER AND OTHERS

Home owners who engage a building contractor to build their home and then discover water damage from leaks in their home, may be able to claim for “breach of contract” or for “negligence”.

A claim for breach of contract will depend on the terms of the contract between the homeowner and the builder. It must be remembered that even though some terms are not expressly stated in the contract, they can be implied into the contract, like a builder’s obligation to carry out the work to a good workmanlike standard.

Alternatively you may have a claim in negligence against the builder. The Courts have stated that a building contractor does have a duty to carry out his or her work using reasonable care and skill. If the contractor fails to meet the standard of a “reasonably competent builder” and it is believed that this was the cause of your leaking problems, then you may be able to claim the cost of remedial work from the builder.

Subcontractors

If the building contract says that the builder will be responsible for engaging and supervising subcontractors such as plumbers and electricians, and the subcontractor has been identified as responsible for leaks, you may have a claim against the builder for breach of contract. It may be also possible to claim that the subcontractor has been negligent. An electrician for example, would owe a duty to a homeowner to complete their work with reasonable care and skill even though there is no direct contractual relationship between the homeowner and the subcontractor.

It would be over to the homeowner to decide whether to claim the cost of repairing the water damage from the builder or the subcontractor or both.

Designer/Architect

Designers and Architects also have a duty to carry out their work with reasonable care and skill. It is a good idea to make sure that the designer or architect clearly identifies the scope of their work in their engagement letter. This will determine the tasks they will be responsible for, whether that be drafting of plans only or project management of the job as well.

Councils/Certifiers

The Council is responsible for issuing a Building Consent, inspecting the house and providing a Code Compliance Certificate on completion. In some areas private Certifiers undertake the inspections and issue Code Compliance Certificates. If a Council or Certifier has failed to perform its duties with reasonable care and skill, an owner may have a claim for negligence. Councils and Certifiers can avoid responsibility for any damage where the builder has attempted to conceal defects at the time of inspection, or where the defects would not have been obvious to a reasonably competent inspector or Certifier at the time they carried out the inspection or issued the final Code Compliance Certificate.

CLAIMS AS A PURCHASER OF A HOUSE

For purchasers of a house built for a previous owner, legal claims are still available.

Vendor

The standard Agreement for Sale and Purchase contains a number of warranties from the vendor. One of those warranties is that:

“Where the vendor has done or caused or permitted to be done on the property any works for which a permit or building consent was required by law such permit or consent was obtained for those works and they were completed in accordance with that permit or consent and, where appropriate, a code compliance certificate was issued for those works.”

A claim against a vendor who contracted with the builder for the construction of the house, may be made in contract for breach of the above warranty. This is where the house does not comply with the plans and specifications submitted to the Council, being the basis on which the Building Consent is issued. For instance, where the plans provide for flashings around windows and their absence has caused water damage, the vendor can be said to have breached the warranty if the Building Consent was issued on the basis that flashings were to be installed and they were not. A claim could be made that the vendor is responsible for repairing the damage and the installation of flashings.

Builder

If there has been no contract between a subsequent purchaser and the original builder of the house, the only remedy against the builder will be claim in negligence. A builder owes a subsequent purchaser a duty to construct the house with reasonable care and skill.

Subcontractor

The position is not clear as to whether subcontractors owe a duty of care to subsequent owners and therefore are open to a claim in negligence. This is yet to be tested by the Court system.

Council/Certifiers

Councils and Certifiers owe a duty to use reasonable care and skill in carrying out their work not just to the original owner of the house, but also to subsequent purchasers. A breach of this duty will result in a negligence claim.

SUMMARY

Building a home involves a number of parties. When things go wrong each party’s role in the building project needs to be examined carefully to identify whether anything they did or did not do, caused or contributed to the water damage. A way for subsequent purchasers to be getting assurance as to the weather tightness of a house they proposed to buy, is to obtain a building report prior to the purchase. The minimal amount spent on a building report now may save many thousands of dollars in repair or legal costs later where water damage is discovered after the house has been bought.

While the homeowner may have a clear claim in contract or negligence against responsible parties, negotiating a mutually acceptable solution to the leakage problems should always be the first priority. If this is not possible, your solicitor will be able to provide you with advice on the various dispute resolution processes available to you.