Goodwill Payments for Earthquake Damage
The status of on-sold over-cap properties in Christchurch has recently been in the media spotlight following the Government announcement that it will make goodwill payments to a group of homeowners where;
- Current owners purchased their property before 15 August 2019;
- The property has since been found to have incomplete or inadequate repairs due to unassessed damage or defective repair;
- The cost of repair is more than the EQC cap of $100,000 plus GST; and
- The private insurer will not cover the cost of repairs.
The Government’s relief under this policy is to replacement value which means it will be to the actual cost of the required repairs. However, the scope of relief is limited. It does not cover properties purchased after 15 August 2019 and homeowners must register for the payment with EQC by no later than 14 August 2020.
Insurance companies also appear to be closing their doors to on-sold over-cap homeowners and most are not accepting liability where repairs have been initially assessed as under-cap and managed through EQC. In limited situations (depending on the policy) an assignment of an over-cap insurance claim is permissible but the Courts have held the standard of repair is to an indemnity value only.
Where does this leave new homeowners who have taken an assignment of a completed and ‘signed off’ EQC claim after 15 August 2019 and significant earthquake damage or defective repairs are subsequently discovered? Without a paddle! If you do not qualify for the goodwill payment your recourse through EQC is limited to $100,000 plus GST (which may be reduced by payments and repairs already completed with previous owners). We are finding the majority of defective repairs or missed damage relate to structural elements such as the foundation. The repair costs to these elements can easily exceed the EQC cap leaving the shortfall in the repair costs with the homeowner.
Homeowners, insurers and banks all rely on EQC documentation as evidence that a property has been fully repaired. Unfortunately, this documentation cannot be taken at face value. Claims are being reopened for missed earthquake damage and/or defective repairs even when the documentation is completed. In some cases non-invasive building inspections have also been conducted that have missed large underlying issues.
We are urging purchasers to perform comprehensive due diligence when looking to buy an earthquake repaired property. These enquiries should include your own independent advice from a suitability qualified professional confirming all earthquake damage is fully repaired and the property is structurally sound. It is also imperative you consult your lawyer before making an offer to purchase. While this extensive due diligence will cost you initially, it will save you if structural defects surface in the months or years following your purchase.
The avenues for recourse are closing, just as the epoxy fill fails and the defective repairs surface. Moving forward, the liability and risk of earthquake damaged homes will sit with the new homeowner. Buyer beware!