Homeowners Advisory Group Calls For EQC Earthquake Information to be included on LIM's

The Christchurch based Homeowners Advisory Group (HOAG), is applauding the move from the Auckland council to include “home fitness” information on property Land Information Memorandums (LIM’s).

The group is calling on the Government – both local and central – to do the same for Canterbury homes, including EQC damage and repair information on all properties, using the same mechanism.

HOAG works with other groups including the Wellbeing group, alongside the Greater Claims Resolution Service in Christchurch, which is currently dealing with a significant number of “on sold” properties; houses that were sold as repaired but later found to have failed repairs or unassessed/wrongly assessed damage.

Chair of HOAG, Tom McBrearty, says the online “homefit” tool, which is designed to support people in their decision to buy a house – the biggest decision and spend most people make, should be applied to the LIM’s in Canterbury.

“This issue has been raised regularly over the last 7 or so years and nothing has been done,” he says. “In 2016 there were ¹plans for the matter to be addressed and it went no-where. People deserve to know more about the house they are buying as far as what earthquake damage it suffered and EQC working with the local council, supported by central government, should be able to easily supply information about whether a house was “over cap” or not.”

A house was put “over cap” by EQC if the damage exceeded $100,000 plus GST, meaning the claim was then handed to the private insurer.

“With such a significant number of people buying properties that have been repaired, it is often very difficult to assess what damage there was several years on so to know that there was in excess of $100k worth of damage at least provides an indication of the amount of damage,” he says. “Currently there is nothing on a property record and although we hear the old adage “buyer beware”, we believe putting this information on a LIM is an easy and very effective way to raise a flag that a prospective buyer may not otherwise have.”

The HOAG will be raising this issue with the Christchurch City Council, the GCCRS chair committee and the relevant Minister’s in the coming weeks as concern grows around properties being sold without information that homeowners need to make an informed decision.

“If the “homefit” tool can be adapted to help Cantabrians see whether a house was over cap or not, that would make a huge difference to the lack of clarity we have around this issue,” McBrearty says.

ENDS

¹Feb 2016 meeting and workshops in Christchurch, including MBIE, CERA, EQC, private insurers and Christchurch City Council, among others. See below:

February 2016

Background Information - Residential Rebuild Issues & Objectives Workshop – 10 Feb 2016 (note - the section on Property Information and Quality of Repairs has been moved up the list as it is more relevant to this media release. It was towards the end of the original document).

Introduction

In partnership with Christchurch City Council and other local authorities and agencies, the Ministry for Business, Innovation and Employment (MBIE) will continue to broker solutions for emerging residential repair and rebuild issues, monitor the pace and rate of insurance settlements and participate in the governance of the Residential Advisory Service (RAS) and operational delivery of RAS services.

These recovery roles align well with MBIE’s broader roles, such as advising on housing affordability and the built environment; and ensuring regulatory systems are performing to a high standard.

This workshop, and a follow-up workshop on 17 February 2016, are being held to provide an opportunity for key stakeholders to collectively:

review and discuss the current state of the residential rebuild in Greater Christchurch
identify significant issues that continue to impact the residential rebuild
discuss objectives for a MBIE-facilitated residential rebuild work programme
discuss and confirm specific actions area and roles and responsibilities within the work programme.

This paper has been developed as background reading for workshop participants. The information below is intended to provide context for the workshop discussions about the ‘current state’ of the residential rebuild in greater Christchurch.

Property Information and Quality of Repairs

Nearly 170,000 dwellings in greater Christchurch suffered some form of earthquake damage. Concerns have been raised about a lack of readily accessible public records about such damage – especially where significantly damaged dwellings have been cash settled and owners intend to self-manage repairs and/or subsequently sell the building ‘as is where is’.

Insurers, real estate agents, community advocates and others have requested action to ensure that prospective purchasers and/or people seeking to insure a dwelling in greater Christchurch have ready access to a public record of any significant earthquake damage to the dwelling.

The concern is that, as residential property changes hands over time it will become increasingly difficult to obtain and/or gain ready access to information about significant earthquake damage and/or unconsented repairs to dwellings for property purchase or insurance due diligence checks. There is also an opportunity for important information to be concealed or withheld by unscrupulous vendors (albeit that no one is forcing anyone to make a property purchase in the absence of access to such information). In turn this will create potential for financial losses and/or insurability problems for future owners of the dwellings.

Repair quality concerns are also being addressed. These include the deficiencies with ‘jack and pack’ floor levelling identified by the initial MBIE report into the Building Code compliance of earthquake repairs and subsequent, well-publicised conclusions that more than 6500 home repairs could need remedial work.

MBIE has been clear that greater vigilance is needed by Project Management Offices (PMOs) and contractors, to check that work is being carried out in accordance with their guidelines and repair specification, and that only staff experienced or trained for particular repair work, are doing that work.

MBIE has also recommended that insurers and/or their PMOs review all completed repair work that has been exempted from a building consent, targeting houses where the repair works involved jacking and packing, to ensure Building Code compliance.

Community Wellbeing

CERA Wellbeing Survey responses indicate positive signs of recovery, but also areas where progress is needed. The majority of respondents to the September 2015 survey rated their quality of life positively; however, confidence in recovery decisions and satisfaction with the opportunities to influence these decisions had fallen.

The impact of living in a damaged environment is the greatest stressor. Those with unresolved insurance claims, living in temporary accommodation, with a health condition or disability, renting, or in low-income households continue to experience a slower recovery across many wellbeing measures (eg, disproportionate levels of stress and poor emotional wellbeing).

Overall people’s wellbeing remains fairly stable. The proportion of residents reporting a high overall quality of life has stabilised at 77%. However, for those with unresolved insurance issues, only 49% reported a high overall quality of life.

The survey included the WHO-5 questionnaire – a self-rated scale of emotional wellbeing. In September 2015, 58% of those with unresolved insurance claims recorded a WHO-5 score indicating low emotional wellbeing, compared with 47% in the wider the population.

The proportion of residents reporting that they feel stressed always or most of the time has also stabilised at 20%. However, for those with unresolved insurance issues 35% report feeling stress always or most of the time.

Residential insurance, repair and rebuild progress

New Zealand has relatively high levels of insurance for residential buildings, in particular for natural disaster cover. Maintaining such high levels of affordable, readily available insurance cover is a critically important mechanism to individuals for wealth protection, to financiers for risk management, and to communities for timely reinstatement of quality housing stock after a disaster.

The Transition Recovery Plan Greater Christchurch Earthquake Recovery: Transition to Regeneration is clear that timely and effective resolution of outstanding residential insurance issues/claims and completion of residential reinstatement and replacement work will have a significant positive impact on recovery and the overall wellbeing of people in Greater Christchurch.

Data collated by MBIE for the fourth quarter of 2015 provides information about progress with residential insurance settlements and repair and rebuild work as at 31 December 2015. At the end of this quarter, there were 8,737 reported unsettled dwelling claims.

Earthquake Commission (EQC) insurance settlements

EQC has settled 98.6% of under-cap dwelling claims through EQC (of 142,366)

EQC settled 753 under-cap claims during the quarter (compared to 3,430 for the quarter ending 30 September 2015). The remaining 2,345 unsettled under-cap dwelling claims were evenly distributed between the Canterbury Home Repair Programme and scheduled external settlements, which reflects the distribution observed at the end of September 2015.

Private insurance settlements (including Southern Response)

There were 6,392 unsettled over-cap claims.

75% of dwelling claims had been settled and forecast 92.5% of all dwelling claims are expected to be settled by the end of 2016 (a decrease from 96.6% from the previous quarter[1]

Private insurers received 356 new claims transferred from EQC during the quarter, making a total of 1,425 new over-cap claims since the end of December 2014.

During the quarter, 1,431 properties were settled (679 completed repairs/rebuilds and 752 external settlements). In total, 72% of all settled over-cap claims to date are external settlements compared with 28% completed managed repairs and rebuild.

56% (5,295 properties) of private insurers’ PMO-managed repair and rebuilds have been completed to date.

Cash settlements and support for people self-managing repairs.

There continues to be limited visibility of when, if, or the extent to which externally settled properties will be remediated. The remediation of cash settled properties may be impacted by homeowners’ ability to self-manage a repair or rebuild.

The September 2015 CERA Community Wellbeing Survey included questions about cash settlements. The following is a summary of some key findings:

In September 2015, 56% of respondents who had made an insurance claim on the property they own and usually live in and who have received an offer from their insurer, had received a cash settlement offer

Of that 56%, 71% had completed or started their repairs or rebuild and 22% intended to in the future. Of the 22% who were intending to repair or rebuild but had not started, “not being a priority at this time” or “being too busy” were given as reasons for having not started for 29% of respondents (down from 57% in April)

Still planning repairs or rebuild or deciding on the extent of the repairs or scope of the rebuild they want to undertake was reported by 31% and 27% of respondents respectively

Availability and cost of tradespeople were a concern for 18% and 11% of respondents

Finding the building and repair process too confusing wasn’t a strong theme, with only 4% reporting this as a reason for not yet start their repair or rebuild. [2]

Additionally, discussions between CERA, MBIE, and the building sector have highlighted the view that although cash-settled owners should have a clear understanding of the works required on their property due to the information gathering during the cash settlement process, the decision making process is still complex for some property owners and there are still some aspects and repercussions of their action, or inaction, that they need to understand, such as:

the full process going forward and the associated obligations and liabilities within it
when and how to access and select suitable specialists e.g. quantity surveyors, engineers etc.
information needed at each stage of the process and how to access such information
insurance cover going forward
discussing their situation with their bank.

Multi-unit dwellings

As at 31 December 2015, 72% of the 2,124 multi-units identified by private insurers are still to be settled.

Issues of complexity, apportionment of costs, and requirements for multi-party decision-making mean that multi-units remaining in managed repair programmes continue to represent the tail of private insurers’ forecasts. Multi-unit building insurers and insured parties are increasingly looking to cash settlement options to avoid settlement delays.

Multi-units being cash settled out of managed repair ‘pipelines’, could result in some major/complex remediation projects being self- or group-managed by owners.

The Residential Advisory Service (RAS)

RAS commenced in May 2013. RAS provides free, impartial help to residential property owners who are facing challenges in getting their earthquake damaged home repaired or rebuilt. The service aims to help owners understand the process they are going through and to make progress with repairs or rebuild.

Where appropriate, owners meet with an Independent RAS Advisor. Technical aspects may also be referred to the RAS independent technical panel. For particularly complex cases a multi-party meeting may be used to clarify issues and help find a solution.

Since commencement RAS has:

has received 13,038 Contacts (as at 15 January 2016)
registered 3,288 meetings with an independent advisor
closed 2,612 cases
had an average of 24 new cases enter the service each week.

Exit survey results (as at 12 January 2016) indicate that RAS is an effective service, as evidenced by:

91% of people agreed or strongly agreed that they felt listened to and understood
Overall satisfaction with RAS (very satisfied or satisfied) – 78%
81% would very likely or likely recommend RAS to others
83% of RAS customers reported that they either strongly agreed or agreed that their situation was impacting on their well being
57% of customers who accessed RAS noted (agreed or strongly agreed) that their wellbeing has improved through using RAS.

During the period September to November 2015, the top issues (by number) raised with RAS were:

Scope of work
Repair strategies
Cash settlement
Delays
Standard/quality of repair
Foundations
Rebuild vs Repair.

Housing: Prices, Supply and Demand

In Christchurch City, annual house price growth in the September 2015 quarter was 3% (no change from the June quarter), while for both Waimakariri and Selwyn districts it was 2% (down from 3%). Price growth in Christchurch city (3%) was higher than in the Wellington area (2%) but continued to be well below that of Auckland (23%) and the national increase of 12.6%.

As of September 2015, Greater Christchurch had an estimated undersupply of accommodation of 6,000 households, down from 8,000 in the June 2015 quarter. The fall was largely due to the completion of repaired and rebuilt housing, which increased supply. Demand for accommodation from displaced residents and the temporary workforce continues to contribute to the current undersupply.

Overall demand for accommodation is expected to meet supply by mid-2017 (i.e. once enough new houses have been built and over-cap repairs and rebuilds have progressed sufficiently to reduce the demand from displaced residents).

Rental stock in greater Christchurch grew by 1,497 rentals in the year to September 2015, a return to the average growth recorded before the earthquakes. As a result of this more plentiful supply and reduced demand from displaced residents, the rate of increase in average rental prices slowed over the period.

Average rental prices came off the peak of $436 per week in February 2015 to a lower level of $396 per week in September 2015.

The volume of private bonds lodged in greater Christchurch was lowest at 878 in December 2012. This has increased over time to 1,446 lodged in September 2015. In September, 52% of bonds lodged were for lower-cost rentals (less than $400 a week), up from 45% in June 2015.

The proportion of bonds for lower-cost rentals, however, continues to be significantly below pre-quake levels. This means there are fewer housing options for low-income households. The supply of lower-cost rentals was higher in September 2015 (750) than June 2015 (708), reflecting the start of a busier rental market as summer approaches.

At the end of September 2015, 205 applicants for social housing were on the Christchurch City Council waitlist and 551 were on the Social Housing Register administered by the Ministry of Social Development (MSD).

There is a target of 700 (net) additional social housing units in Christchurch by the end of 2016. This target is expected to be achieved well ahead of time (possibly as early as March 2016), which will help address the demand as shown on the MSD register and Council waitlists.

Due to the completion of the bulk of under-cap repairs, the total number of households on the register for the Canterbury Earthquake Temporary Accommodation Service (CETAS) villages has passed its peak. Some significant demand is expected to continue due to the over-cap work which has a longer displacement period. Village occupancy rates were at 86% at the end of September 2015.

Other Relevant Information

The Housing Accord

The Christchurch Housing Accord between the Christchurch City Council (the Council) and the Government aims to increase the immediate and longer term supply and affordability of homes in Christchurch.

The long term goal is to restore a well-functioning, private sector-led housing market in Christchurch with sufficient supply at the lower end of the market to ensure adequate access to housing for those with lower incomes. The Accord also aims to support the sustainable provision of social housing in Christchurch by increasing the quantity of social housing units and better matching the nature of the stock to demand.

Data indicates continued strong building activity and that overall supply remains on track to meet demand by mid-2017. The Canterbury/Westland Region housing affordability continues to improve – 9.7% improvement over 12 months to December 2015, compared to an 8.7% improvement nationally.[3]

Limitation Acts

Questions have emerged about the application of the Limitation Acts (1950 and 2010). These are statutory mechanisms to encourage people to make claims promptly, and give some certainty and finality to potential defendants. It helps reduce the unfairness that can arise to a defendant in civil proceedings who must attempt to defend a case where the evidence may be old or the relevant events took place many years in the past.

These Acts both provide that if a person wishes to bring a cause of action, they have six years to do so. If a person attempts to lodge proceedings in Court and it is beyond the six year period, the defendant may run the voluntary defence that the plaintiff has had more than six years to make their claim and, as a result, the proceedings should be struck out by the Court.

There is a range of possible interpretations on when a limitation defence may be used in regards to the Christchurch earthquakes.

[1] Forecasts will be revised as work progresses and if further claims are transferred from EQC.

[2] However, if people are not yet prioritising their repair or are still planning their repairs or rebuilds, they may not be at the stage to know about the availability and cost of tradespeople. Additionally, they may not yet have engaged with any aspect of the building and repair process to be able to ascertain their level of understanding.

[3] Massey University Home Affordability Report, Quarterly Survey December 2015