Council Liability for Leaky Buildings

A recent Supreme Court decision has altered the scope of a council’s liability in relation to commercial buildings in the leaky buildings saga.

Body Corporate No. 207624 v North Shore City Council (SC 58/2011) [2012] NZSC 83, held that councils owe a duty of care to all owners of buildings in regards to their relevant functions carried out under the Building Act 1991 (‘the 1991 Act’). Previous decisions had drawn a distinction between residential and commercial properties when it came to a council’s duty of care.

For many commercial building owners beset by the various causes of the leaky building crises this decision comes too late.  An owner is time barred from bringing a defects claim if more than 10 years have elapsed since the building was constructed.  Most of the leaky building crises stem from buildings built between 1996 and 2003, meaning that most of the buildings built in that era of construction are time barred from court action.

What did the Supreme Court say?

The case before the Court involved a building that was used both as a commercial property and a residential one – the majority of the rooms were motel rooms, and there were also six residential penthouse apartments. In the judgment, the Court stated that councils owe a duty of care in their inspection role to owners of premises, both original and subsequent, regardless of what the building is used for. It also stated that the same duty applied to building certifiers who were elected to carry out the work instead of a council under the 1991 Act. This judgment only relates to the 1991 Act, as a position with regards to the Building Act 2004 (‘the 2004 Act’) was not covered by the Judgment.

The decision applies not only to leaky building cases, but to everything councils do in their inspection role. However, it is expected to be heavily relied upon and tested in leaky building litigation.

Limitations on claimant criteria

There are some hurdles to benefiting from this judgment:

• This judgment applies only to building carried out while the 1991 Act was in force (prior to the 2004 Act),

• Civil proceedings may not be brought against anyone under the 1991 Act 10 years or more after the act or omission in question (for example, up to 10 years after the date of the council issued code compliance certificate, if that is the document relied upon in litigation),

• The council’s responsibility is limited to the exercise of reasonable care solely in terms of ensuring construction in accordance with the building code.

These constraints may be troublesome for claimants. At this point, proceedings relating to acts or omissions before January 2003 may be time barred, and given that parts of the 2004 Act came into force in November 2004, the window for claims under the 1991 Act is small and constantly getting smaller.

On the other side of the coin, the judgment opens up claims for past and present owners of buildings, and it does not only apply to leaky buildings.

Where to from here?

This decision has widened the scope for civil claimants with regards to a council’s duty of care in their inspection role, and will likely lead to litigation. Potential claimants need to act quickly in identifying and filing any claim, as time frames are running out. It will also be a case of waiting to see what the position is with regards to the 2004 Act, as this will be of utmost importance for owners of buildings constructed under the new Act.