The grandeur of the mountains reflected in the windows of this Wanaka house disguise a mouldering truth. This is the leaky home at the centre of a $250,000 court battle - a case that epitomises the new Government’s challenge in assigning liability for residential construction.

This month, the Weathertight Homes Tribunal ruled that Queenstown Lakes District Council, as the building consent authority, must share a small portion of the $245,000 damages with the builder, the engineer, the tiler and the cladding supplier.

It come as the National-Act coalition agreement commits to?exploring long term builder’s insurance in the place of council building consents. It would move liability for problems away from councils - but that assumes any insurance firm will be willing to take on the risk of insuring builders for anything that might go wrong.

Malcolm Fleming, the chief executive of NZ Certified Builders, is dubious. ※The difficulty is, there’s not really appetite from the insurance market to take on responsibility for an individual builder’s workmanship,§ he says.

It comes as economics consultants NZIER publish a quarterly report heavily focused on problems in the construction sector. Business shutdowns in the sector are at the highest level in 20 years, the report says.

※Profitability remains weak and weak construction demand is reflected in a continued decline in architects’ pipeline of housing, commercial and government construction work for the coming years,§ it adds. ※The number of building permits issued has been declining for the past 12 months.§

The owner of the Wanaka home, Andy Wilton, is also its structural engineer. He’s feeling bruised and with the last legal cogs still turning, he’s not yet willing to discuss the tribunal’s ruling - beyond acknowledging that this is an extraordinarily apt instance of the liability problem the government is trying to solve.

His friend, builder Deane Fluit, who’s been ordered to pay a smallish $52,000 share of the damages, is a little more outspoken. He says the problems in the residential building industry are wider-reaching.

※The problems in the whole building industry are because they’ve brought in the Licensed Building Practitioners scheme, they’ve watered down the apprenticeships, and they keep asking us to pay more because we’re getting more and more disputes. Insurance is just the ambulance at the bottom of the cliff.

※If you go back to the leaky building crisis in 1998, insurance companies wrote themselves out of it. You can’t get insurance for leaky homes. So to me, insurance is not the answer to these problems.§

Tribunal adjudicator Kevin Kilgour’s ruling lays out somewhat of a litany of errors. Problems with the Peninsula Bay home emerged in 2012 〞 the year after Wilton moved in with his wife Fiona and their children. There was cracking in the plaster and paint finish of the external cladding.

They first noticed leaks inside the house the following year, but it was not until 2019 that the cladding and paint supplier Hempel (Wattyl) NZ Ltd attempted repairs. These failed, and the Wiltons lodged a leaky home claim.

Wilton is also an experienced structural engineer who had done the engineering design for the house. Given the two men’s experience in the industry, the ruling remarks on Wilton’s ※extraordinary§ decision to hire his friend to build the house without a written contract.

Then the cladding installer, Tony Hardaker, failed to install the Wattyl product according to its specifications, using the wrong adhesive and attaching the panels to wet masonry in cold temperatures.

Fluit’s ※multiple failures and omissions§ included failing to read the cladding’s specifications and not properly overseeing Hardaker’s work. He should also have warned Wilton about the potential impact on weathertightness when Wilton didn’t specify cladding ※control joints§ in his design.

The Queenstown Lakes District Council had been negligent for failing to identify defects in the cladding’s installation, and the departure from the product’s and building consent’s specifications. The house’s situation in a high-wind zone should have been a red flag to the council to keep special watch for weathertightness risks.

The list goes on - indeed, the biggest share of the liability is assigned to Hempel Ltd for providing unsatisfactory cladding specifications, insufficient training, and botching the attempted repair job. Even Wilton, as structural engineer, bears a small share of the liability.

But as with previous leaky home cases, one of the biggest questions is over the liability for the council, as the building consent authority. Often, councils are the last liable party left standing, carrying the can when builders and developers go bust.

In this case, Queenstown Lakes District Council issued a code compliance certificate for the house in 2012. More than 10 years later, the town’s ratepayers are still footing the bill for the ensuing court action. The tribunal ruled that the council knew or ought to have known there were many weathertightness issues confronting the construction of the home.

In previous precedent-setting cases, the former North Shore City Council and Auckland City Council were found liable for signing off on leaky homes.

Announcing the policy to rely less on council building consents, in September, Act leader David Seymour said allowing builders to opt out would increase affordability and innovation. Building consenting had failed to stop the leaky building catastrophe, he said, so a better solution was needed. ※It’s no silver bullet to have a council inspection,§ he said.

※These inspections leave rate payers on the hook, leave massive amounts of bureaucracy and delay on people that are trying to build in more affordable or innovative, warmer and drier ways with better materials.§

Insurance instead

Act’s coalition agreement with the National Party says the government will ※explore allowing home builders to opt out of needing a building consent provided they have long-term insurance for the building work§.

It’s no clear promise of a future without building consents, but it certainly keeps that option on the table.

Auckland University of Technology professor of construction management John Tookey says a system reliant on the builder’s insurance could increase the speed of housing rollout.

The current system of building consents lays the liability of construction at the feet of local government, he says, which means financial liability for the ratepayer.

※The issue of building consents is all about whether or not the building is fit, so that requires council inspections and all of that,§ he said. ※Do you really want council taking on board liability? Probably not actually, because ultimately the ratepayer is on the hook.§

The building consent system means local authorities like Auckland Council check building plans are up to code before allowing construction to begin.

Like builder Deane Fluit, Tookey points out that building consents didn’t prevent the leaky homes crisis of the 1990s and early 2000s, as it had been 1993 changes to the building code itself that had allowed for the problem.?Buildings that would later prove leaky were awarded consent.

Revision to the act in 2004 added further controls: practitioner licensing and accreditation of consent authorities.

※The revised act in now puts the onus on councils to consent things, which is in effect a process of checking the performance and behaviour of chartered and certified building professionals like structural engineers,§ Tookey says.

Many building professionals maintain indemnity insurance to keep their certification. ※As a chartered engineer, all of your work has to be peer-reviewed across the board.

※If you do a design for a structure, you check it , you do all the calculations, you pass it to a peer＃ then it gets taken to council and they check it again. if you’ve got two chartered engineers both with indemnity insurance, why does it then need to go to council?§

A spokesperson from Engineering NZ indicates the profession is open to change. The association wants a consents process that results in high-quality buildings, he says, regardless of the policy levers used.?

※That includes a conversation about the roles of regulation and insurance, and while this may mean insurers require more extensive quality assurance before insuring new builds, it may also have the potential to result in better builds and more resilient building system,§ he says.

※We’re looking forward to a conversation with the Government and others in the building and construction sector about how such a policy might work.§