Unit owners blindsided by quake fix costs

GREG NINNESS
Last updated 05:00 04/11/2012

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Owners of home units and apartments built before 1976 could be faced with expensive earthquake strengthening bills or the spectre of falling property values, soaring insurance premiums and even the risk of forced demolition.

The current earthquake standard for buildings was set in 1976. Most buildings built prior to that would need to meet a minimum 34 per cent of the new building standard or they could be declared earthquake prone.

Local councils can require earthquake-prone buildings to be strengthened or demolished but it is widely assumed that this rule does not apply to residential dwellings.

However, Vicki Toan, a lawyer with law firm Glaister Ennor, said a clause in the Building Act meant the rule applies to buildings of two or more storeys that contain three or more dwellings.

Many multi-unit residential dwellings built before 1976 would be affected, including older purpose-built apartment buildings, former commercial buildings such as offices and warehouses which had been converted to apartments and many of the multi-storey blocks of suburban home units built in the 1960s and early to mid-1970s.

Standalone homes and single storey, multi-unit blocks built before 1976 would not be affected.

"Essentially that leaves [most] homeowners to look after themselves," Toan said.

That could come as a shock to owners of many multi-unit dwellings and the body corporate managers who oversee them.

Older concrete buildings were more likely to need strengthening than newer wooden-framed ones and the costs involved could vary hugely.

Alan Turner, the commercial building surveying operations manager with Cove Kinloch, said there were many factors that affected a building's seismic performance, which meant strengthening some would be relatively straightforward and comparatively inexpensive while others would need extensive modifications.

In the worst cases, the cost of earthquake strengthening could exceed a building's value, making it uneconomic to carry out the work, meaning it would likely be demolished.

"If the cost is beyond what the building's worth it just becomes a development site," Turner said.

There are signs that owners of affected buildings are already feeling the pressure.

Real Estate Institute chief executive Helen O'Sullivan said insurance premiums for many older apartment blocks which have not been strengthened have risen substantially as insurers factored in the risk of substantial damage in the event of an earthquake.

In many cases insurers were requiring older buildings to be strengthened to almost double the legal minimum - to more than 60 per cent of the new building standard - to insure a property at a reasonable cost.

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The body corporate committees

of older apartment buildings should be looking at the earthquake standards of their building and whether they should be strengthened and incorporating that into their long- term maintenance plans and their associated budgets when setting body corporate levies, she said.

There are signs that potential buyers of older home units and apartments are already becoming cautious because of the possibility of having to pay for earthquake strengthening work or face much higher insurance premiums.

Martin Dunn, the director of real estate agency City Sales which specialises in selling Auckland apartments, said there is a "disquiet" among potential buyers and vendors of older apartments because of the issue.

"Buyers are already aware of this and are asking us about earthquake proofing," he said.

But in some cases vendors of older apartments are reluctant to discuss their building's seismic standard with their agent.

City Sales had been forced to alter its pre-contract disclosure statement to include a clause which states that if a building was built before 1976, potential buyers should make their own inquiries about its seismic standard status.

- Sunday Star Times

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