Court rules on leaky commercial buildings
THIS MONTH the Supreme Court released a decision which means non-residential property owners can claim against a council if the property is a leaky building.
The Supreme Court’s decision concerned a high-rise building known as Spencer on Byron which had been built during 2000-2001. The building is located in central Takapuna and the North Shore City Council inspected the building works during construction and issued a series of code compliance certificates under the Building Act 1991.
The units in Spencer on Byron were not occupied by the owners, but rather were run as a hotel with 249 rooms and six penthouse suites. Owners of the rooms and suites had an obligation to lease the units to a hotel manager for a minimum of 10 years.
When the building started showing signs of damage from water leakage a question arose about whether the owners of the units in the building could sue distinction had been based on policy grounds which included a view that those entering into commercial ventures had a greater ability to carry out due diligence and assess the risks of a property and could better manage those risks than individual homeowners.
In a four to one majority decision, the Supreme Court found that with the enactment of the Building Act 1991, councils assumed authority to regulate the construction of buildings through inspection and certification. The Supreme Court said there should be no reason for a distinction to be drawn, as per the Building Act, between residential and non-residential buildings. It should be noted that there is now a Building Act 2004, but this act largely mirrors the earlier 1991 act in terms of councils’ role in the building process.
What the decision in Spencer on Byron means is that owners of non-residential property can now claim against the council that inspected and certified the construction of the building. The owner will still need to identify and prove that the council breached its duty of care, and this will require identification of specific examples of the council’s negligence on the facts of each case.
Non-residential properties include not only high-rise commercial buildings, but also schools and mixed-use buildings.
The Supreme Court’s decision has the effect of reallocating some of the costs associated with weathertight issues for nonresidential property from the owner and other involved parties (for example, the builder if they were negligent) to the council and, ultimately, to ratepayers.
The North Shore City Council (NSCC) was abolished in November 2010. Its replacement, the Auckland Council, has assumed the NSCC’s liabilities as part of the supercity merger.