Over 600 ‘on-sold’ houses with EQC
More than 660 Christchurch ‘‘onsold’’ homeowners who bought after the earthquakes have had quake damage re-repairs assessed at over the Earthquake Commission’s (EQC) liability cap, with the law unclear on who pays.
EQC Minister Megan Woods said it was ‘‘potentially a very large liability to the Crown’’ on top of the $270 million of taxpayer money already spent on fixing faulty repairs.
An ‘‘on-sold’’ home is one that was repaired by EQC and then sold to a new owner who later finds unscoped quake damage or substandard repairs.
EQC has a liability cap of up to $100,000 plus GST, so any part of a repair bill that goes over that figure would normally go to private insurers. But the new owners did not have insurance on the house at the time of the quake, so private insurers argue they are not liable for the damage.
If the unscoped damage is to the foundations, it can mean repairs costing hundreds of thousands of dollars are needed, leaving the new homeowners with a property worth less than their mortgage.
It is yet to be established who is financially responsible in this situation, with the Government hoping to fund declaratory court cases to clarify who has to pay.
EQC has revealed 664 on-sold homeowners have come to it with re-repair issues that have then gone over-cap when reassessed. It is not known how many homes with undiscovered damage are still out there.
EQC chief executive Sid Miller said he felt for people in the ‘‘very difficult position’’ of owning an onsold home, and ‘‘absolutely’’ apologised for the position they found themselves in.
He said where substandard repairs had been done, or unscoped damage was found, EQC would ‘‘sort those repairs out, albeit we’re bound by the overcap position’’.
EQC had made provisions for remedying failed repairs, but had not made provisions for if it was found liable for any over-cap costs, as it was ‘‘something the minister is looking at’’, Miller said.
Woods said there were 664 families ‘‘trapped in limbo’’ because the botched EQC repairs on their homes pushed them over-cap, but their insurance company would not pay.
She said EQC and insurance companies were ‘‘both pointing the finger at each other’’. The Government was looking at test cases to clarify the law and settle where liability was so people could get on with their lives.
Woods said she had asked for urgent advice from EQC on how much the Crown could be up for if it was determined liable.
‘‘This is potentially a very large liability to the Crown.’’
Miller said the average rerepair cost for work above foundation level was about $20,000, and costs for foundation repairs averaged about $40,000. He said the number of re-repair claims coming in had been dropping off over the past three years.
‘‘This is potentially a very large liability to the Crown.’’
EQC Minister Megan Woods
Information obtained by The Press under the Official Information Act shows that of 16,404 second-time-around claims for repairs, EQC has accepted 11,051, and 1099 have gone over-cap and require a private insurance top-up.
The biggest year for re-repair claims was 2016, when just over 10,000 were lodged.
Homeowners with private insurance pay their insurer an EQC levy, which is passed on to EQC and goes into a Natural Disaster Fund. The fund is used to buy reinsurance (which is insurance for insurers) and to pay the excess to reinsurers if a natural disaster happens. EQC’s current reinsurance excess is $1.75 billion.
Woods said the Crown ‘‘guarantees EQC’s costs so the taxpayer would be liable if it’s determined EQC is liable but does not have the funds available’’.