Councils could get sued more often for consenting faulty buildings after a landmark leaky homes decision, an Auckland lawyer says.
A newly released Supreme Court decision says the residents and owners of leaky building Spencer on Byron in Takapuna can continue with a claim against the former North Shore City Council, now the Auckland Council.
The building is mainly a hotel but also has six penthouse apartments.
Its ownersand the body corporate, took legal action in the High Court claiming the former North Shore City Council had been negligent and was liable for the cost of repairs.
The council applied to strike out the claims, claiming councils only owed a duty of care in respect to residential buildings - not buildings of a mixed residential-commercial nature.
The Court of Appeal accepted the council's submission, while rejecting the owners' claims.
The owners appealed to the Supreme Court and in a majority decision released this week, the court found their claim should not have been struck down.
The court looked at past judgments, and found councils do have a duty of care to all building owners when inspecting buildings.
Paul Grimshaw, a lawyer from Grimshaw & Co, which specialises in leaky home litigation, says the case shows the council's duty covers all buildings they have checked.
"This case says this duty is extended to all owners of buildings – be they residential, commercial, hospitals," he says. "That's why it is so significant."
Mr Grimshaw says any owner of any building that has been built over the last 10 years now has the ability to sue the council.
"Before this case, it was limited to residential only."
Mr Grimshaw says he has acted for the owners of 6000 leaky homes and each has been taken through the courts.
Professor Rosemary Tobin from the University of Auckland, who was cited in the judgment, says the implications from the decision are yet to be seen.
Commercial building owners will only be able to sue under the Building Act of 1991 if they have already started their proceedings, because they have to be started within 10 years, Ms Tobin says. But there is still a legal grey area for commercial buildings inspected after the Building Act 2004 came into force.
"Because the issue of the 2004 act was not directly in front of the judges, they left it open. Basically, if your commercial building inspection took place after the 2004 act came into force, you'll have to wait until someone else brings a case – or bring it yourself."
Ms Tobin says councils could see more legal action brought against them from commercial business owners for buildings inspected before the 1991 act.
Auckland Council has delayed its inaugural $175 million retail bond after the Supreme Court ruling.
It says it has made provision for potential future liabilities for residential properties over weathertight issues but not commercial properties.
The council was looking to raise between $125m and $175m to fund its infrastructure plans through a fixed-rate six year bond that would have carried a coupon of about 4.3 per cent.
"It is expected that the re-launched offer will be made in the near term," it says
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