The Financial Assistance Package — an opportunity?

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A claim is eligible if water has penetrated the dwelling because of some aspect of the design or construction, the dwelling is damaged as a result of water penetrating from the outside in, and the dwelling was built (or altered if applicable) in the 10 years immediately before the claim is lodged.
To qualify for the FAP, a home owner must satisfy a number of specific criteria. For example, they must not have entered into a prior settlement for resolving the leaky building defects, a repair plan must be agreed to between the home owner and the Department of Building and Housing and, to be eligible for the council 25%, the council must owe a duty of care to a person in the position of the home owner in respect of the damage.

These are but a few of the detailed (and, it is suggested, vague) qualifying criteria. Of particular interest (or concern) is that in respect of the 25% contribution from the council, the eligibility criteria has been structured in such a way that the council has an almost unfettered discretion as to whether it will participate in the FAP scheme or not.
Nonetheless, despite the inherent uncertainties with the scheme, the FAP is still the first time leaky building home owners have been offered some form of real financial assistance to get their homes repaired, and it seems it will provide financial relief (at least for some).

As to the uncertainties, these will no doubt be worked out over time, and the scheme should aid in partially resolving New Zealand’s leaky building crisis.
While home owners clearly need to fully understand the FAP scheme, non-council respondents also need to understand the scheme as it potentially provides these parties with an opportunity to settle a leaky building claim for less than what they may otherwise be able to achieve in an adjudication or court.

As is often the case in leaky building litigation, those involved in construction are sued in negligence as joint tortfeasors under section 17 of the Law Reform Act 1936.
The net result of this is that each liable joint tortfeasor is responsible for all the loss claimed by a home owner so long as they can be proved to have caused or contributed to that loss. 
This principle is the origin of the phrase “last man standing”, which is often used in the same breath as leaky buildings.

In a situation where, say, a home owner opts into the FAP scheme and receives a 50% contribution from the Government and the council, the home owner can still pursue the other remaining parties through adjudication or the court for the remaining 50%.
In this economic climate, there are often only one, or perhaps two, remaining parties, such as the builder and architect, that remain solvent or in existence.

In pursuing thse parties, the home owner may well succeed in obtaining judgment against them for the remaining 50%. This is despite the fact that, had the matter proceeded to adjudication or court, the council may have been found liable for a far larger proportion of the loss than the 25% on the joint tortfeasor principle.
The FAP scheme provides an early opportunity for non-council respondents to join with the council and Government, and settle the matter where only a remaining 50% of the claim is at stake.

In certain circumstances, the one bar to a home owner’s eligibility for the 50% is the inability for a home owner to meet the additional 50% of the repair costs.
Again, the non-council respondents can step in to ensure that they meet this final eligibility requirement through their settlement contribution and, thus, immediately extinguish 50% of the claim.

While the FAP scheme offers non-council respondents with a potential opportunity to settle leaky building claims more economically, as noted, the FAP scheme presents significant uncertainties. Each case therefore needs to be considered on its own merits because in some instances it may be more beneficial for a non-council respondent to see the matter through to adjudication or court.

Legal advice should be sought before making a final decision on whether to participate in the FAP scheme.

Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by Legal Vision to anyone who relies on the information contained in this article.