Backlog of defective buildings and shoddy workmanship sparks calls for building warranties gallery video

JOSEPH JOHNSON/STUFF.CO.NZ

Sutherland and her husband, purchased a home that in the process of renovating they discovered significant cracks in the concrete foundations after having just spent five years fighting EQC and Southern Response to get repairs done on their home just sold.

You too can be a builder in post-earthquake Canterbury.

All you need is a dog, a ute and a radio.

That is the crude view of Canterbury Master Builders president Ivan Stanicich​.

Gideon Couper: "I just see a variety of repairs that would boggle your mind."
IAIN MCGREGOR/FAIRFAX NZ

Gideon Couper: "I just see a variety of repairs that would boggle your mind."

A lack of knowledge, he said, was a reason why one of the biggest blights on the Canterbury building industry has become defective earthquake repairs.

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"That lack of knowledge directly swings into the under-resourcing because the builders, for the amount of work that needed to be done, there had to be a huge amount of additional labour put in.

One of the cracks Lynley Sutherland and Tony Waddell  discovered after purchasing their new home.
SUPPLIED

One of the cracks Lynley Sutherland and Tony Waddell discovered after purchasing their new home.

"It was well-known in our industry through the insurance rebuild that a good project manager was getting approached from one builder to another forcing up his income because he was in demand and there was a lack of him," Stanicich said.

In 2015 Greater Christchurch Regeneration Minister Gerry Brownlee vowed construction "cowboys" who did shoddy repairs for the Earthquake Commission (EQC) would pay for their mistakes.

But Stanicich is skeptical of suggestions builders are solely to blame for defective repairs.

Dr Duncan Webb: ""It's essentially that mismatch between a reasonable expectation of price versus quality, and just an ...
IAIN MCGREGOR/FAIRFAX NZ

Dr Duncan Webb: ""It's essentially that mismatch between a reasonable expectation of price versus quality, and just an entirely price-driven process."

He believed most builders completed quality work.

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"EQC knew this was going to happen. They must've been stupid if they didn't.

"They say 'it's the industry's fault', well, no it's not. They had a vetting process that was very poor.

Underfloor specialist Bevan Craig says many repairs were scoped poorly in the first place.
STACY SQUIRES/FAIRFAX NZ

Underfloor specialist Bevan Craig says many repairs were scoped poorly in the first place.

"Anybody basically with a dog, a ute and a bloody radio could start up as a builder," he said.

Another issue, along with the lack of vetting, was the lack of scrutiny in an attempt to fast track repairs, Stanicich said.

"The Government also exempted a whole lot of work from requiring a consent, to have a consent you have inspections.

Lynley Sutherland and Tony Waddell purchased a home that in the process of renovating they discovered significant cracks ...
JOSEPH JOHNSON/FAIRFAX NZ

Lynley Sutherland and Tony Waddell purchased a home that in the process of renovating they discovered significant cracks in the concrete foundations.

"They made it even worse because builders weren't checking on what they were doing," Stanicich said.

He appears to be correct in identifying relaxed consenting rules as an issue.

In August last year, the Government released its findings after investigating unconsented earthquake repairs. 

Canterbury Master Builders president Ivan Stanicich is skeptical of suggestions builders are solely to blame for ...
CARYS MONTEATH/FAIRFAX NZ

Canterbury Master Builders president Ivan Stanicich is skeptical of suggestions builders are solely to blame for defective repairs

A third of those repairs were not compliant with the building code.

Foundation specialist Bevan Craig said the survey, which was based on a pool of properties pre-selected by EQC and insurers, was "the very diluted tip of a very big iceberg".

GOVT GUIDELINES THE 'REAL DEFECT'

Craig believes incorrect scopes, schedules of work to be done on a property, completed by insurers were a problem.

85 per cent of underfloor repairs he looked at in Canterbury had been scoped poorly in the first place.

Therefore the "real defect" started at the Ministry of Business, Innovation and Employment's level, he said.

A joint statement issued by EQC and the EQC Action Group in March confirmed EQC and its contractors could not rely solely on MBIE guidelines when repairing a home in Canterbury.

The statement clarified that sole reliance on MBIE guidelines – which many believe are to blame for so many substandard under-floor repairs – was not enough to fulfil EQC's legal obligations.

Another reason poor underfloor work was being completed was because the Government signed a contract with Fletcher EQR ridding it of responsibility for poor repair work, Craig said.

The agreement between EQC and Fletcher Construction, signed in 2011, stated Fletcher was not responsible for the design of any works, the construction of any works or work of any contractor or consultant.

Since then EQC had fielded more than 10,400 complaints and concerns about poor repair work by contractors by the start of the current financial year.

It still had 6,900 of those inquiries to resolve, although not all of these would result in remedial work.

By May 2016, the amount recorded as being spent on re-revisiting initial repairs was more than $7 million.

It was "too early" to know what the final figure would be, but the final cost could be in the region of $60 million to $70 million.

But some results of thousands of defective repair jobs are out of view.

As of September 16, the Government-owned natural disaster insurer had started, or was planning to start, 481 underfloor remedial jobs.

An additional 1141 properties were yet to be reviewed.

Builder and underfloor specialist Gideon Couper said he had seen repair work completed post-earthquake which "would boggle your mind".

"I can politely say that I see a large amount of poor quality housing that's on the ground, full of borer, rotten, with poor quality concrete and at the same time a variety of repairs that stretches your imagination.

"I just see a variety of repairs that would boggle your mind," Couper said.

MBIE DEFENDS APPROACH

MBIE did not consider inadequate scoping in Canterbury was the result of the department's guidance.

"Any work done, whether it is to repair or build new, will have requirements for it to be within certain tolerances.

"Depending on the specific circumstances, MBIE recommends re-levelling floor slabs if the slope exceeds one in 200.

"This means a slope not exceeding five millimetres in height per meter across the floor. This is within normal tolerances for new construction in New Zealand," a spokesman said.

Scopes for repairs were an agreement between homeowners and insurers, he said.

"The MBIE Canterbury guidance clearly states that by following it, repairs or rebuild designs will meet the Building Code.

"The guidance is not designed to address insurance entitlements, and we have clarified this previously.  Insurance entitlement is a matter between homeowners and their insurance companies."

MBIE guidance, produced to assist with the rebuild,  provided "good practice assessment, repair and rebuild advice using sound engineering principles".

"There was little existing guidance and information at the time to assist designers and builders undertake repairs or rebuilds on liquefaction-prone land.

"It was developed using the best technical expertise available, including world leading international experts, and published in a timely manner to enable the rebuild to progress as quickly as possible.

"It has been updated regularly as new information or issues have arisen," the spokesman said.

'BIGGER THAN LEAKY HOMES'

Another experienced building industry source, who asked not to be named, said the defective repair issue was "huge".

"The way I summarise it is, at probably no time in history, in European history, has so many private individuals been screwed over by a Government who said they were going to fix their asset and instead ruined their asset.

"You and I, the taxpayer, are paying for it to be done and done again, and sometimes again, and again," they said.

"It's huge. It's so big, it's bigger than the leaky home crisis - thousands and thousands of homes have been ruined."

NEW HOME NIGHTMARE

Christchurch homeowners Lynley Sutherland and Tony Waddell thought their post-earthquake nightmare was over when they purchased a new home last week, after spending five years dealing with EQC and Crown-owned insurer Southern Response over their previous property.

They were wrong.

"When we shifted the wall we found the expansion joins had opened significantly. 

"On taking up the floating floor we found cracks in the floor that had been filled with anchor fix," Sutherland said.

But some cracks had not been fixed at all.

The previous owners, she believed, had sold the property in "good faith" and were unaware of the cracks around the house.

Sutherland said she told EQC that contractors, who were completing renovations at her newly purchased home, were willing to fix the defects, but only after they were inspected.

"All we wanted was an inspection so they would agree to cash settle this for us.

"But EQC won't," she said.

But after inquiries from Stuff EQC changed its tune and visited the property on Friday.

"EQC will assess this claim, together with what damage that may have been caused by previous earthquake events, and are working to resolve their claim," a spokesman said.

However, the insurer stopped short of admitting its repairs were substandard, saying it would not know this until further investigation.

"The representative for the previous owner had visually inspected the repairs to the concrete flooring when they were completed two years ago and was satisfied with that work. 

"EQC is inspecting the house to determine what damage is earthquake-related and may review the building report that we assume the customer had carried out when they purchased the property," the spokesman said.

If there were issues with the repairs, or the damage was new and earthquake-related, the couple would be offered a cash settlement.

CORNER CUTTING FOR PROFIT

Insurance lawyer Dr Duncan Webb has been asked to present on November 16 to Parliament's Finance and Expenditure Select Committee after launching a petition for an inquiry into defective repairs.

Because post-earthquake repairs were insurer or EQC-led, Webb said, the incentives for builders to do quality work were low.

"If you own your own home and you think 'I want to, you know, do some renovations, I want to put a new bedroom on' you're going to have oversight and you're going to have very careful decisions about the tradeoff between price and quality.

"The builder's going to have you breathing down his neck . . . If he doesn't get it right you'll be asking him what's gone on?

"For the insurer-led repairs, of course, the insurer is not going to be following up.

"Their only real concern is to get this job done for the most cost-effective price," Webb said.

Builders carrying out the repairs felt what Webb called "price pressure", but not "quality pressure".

"They tender for jobs on the lowest price, they have to cut corners to make profit.

"Some of them cut corners, which were dishonest, said they'd done work when they didn't, that's by far and away the minority though.

"Most of them just did work, which they were required to, but they knew was not a good job," Webb said.

The result was a "flood of complaints" to insurers saying repairs were not up to the required quality, or worse - did not meet building code.

"It's essentially that mismatch between a reasonable expectation of price versus quality, and just an entirely price-driven process," Webb said.

But how do you fix the problem?

Webb suggested control needed to be given back to homeowners.

"Then homeowners can make those decisions and in fact that's what happened in the past sort of two or three years.

"The insurers thought they would be winning if they took control of everything -  in fact the risks expanded the costs expanded and this long tail of defects has arisen," Webb said.

EQC: VETTING IS FINE

An EQC spokesman refused to accept incentives for its contractors to complete quality repair work were low.

"Market prices for project supervision or project management work were established in consultation with the building industry.

"The contractors agreed to accept each repair and works order in the knowledge they are contractually obliged to complete a job to the required standards," he said.

It also defended its vetting process, pointing out call back rates for supposed defective work were within industry norms.

Contractors were accredited and audits were carried out by an EQC Quality Assurance team.

EQC's general approach was to explain a repair strategy with customers and formulate an approach based on the individual circumstances of their claim.

"Customers are able to provide information to EQC which can be used to determine the scope and approach of the repair.

"Whenever customers want a more expensive strategy, or to complete additional works at the same time, the customer is offered a cash settlement for earthquake damage and they can contribute more money to complete the non-EQC works as and when they choose."

MANDATORY WARRANTIES THE ANSWER

Stanicich supported exploring the idea of mandatory warranties to protect against building flaws, saying he would see "no problem" with it.

In May Housing Minister Nick Smith said the Government was looking at a mandatory guarantee to protect homeowners.

"If I was doing any repair or new build the cost of warranty goes into your project cost, to me any licensed building practitioner should, through his licence, have a warranty as a minimum. 

"If it was your home I think you would expect there to be a warranty on what's being done," he said.

"We are there to do the job properly."

Smith said the Government was looking at lifting some of the burden off councils, which were often the only entity to be sued if building faults arose. 

But Stanicich said councils still played an important role, providing a "fresh set of eyes" to check work.

"That warranty to me does make a lot of sense, but I then would be pretty much insisting that the council would still do what they've been doing."

As qualified carpenter, Stanicich said he would see no issue with offering a warranty for something as small as changing a door lock.

Webb said mandatory warranties already existed and could be found in the Building Act.

"There's nothing wrong with them and, in fact, they are pretty bloody good.

"I don't think the existence of a warranty will reduce the liabilities of council," Webb said.

The Consumer Guarantees Act also already provided some protections for homeowners, he said.

BOTCHED JOBS COST MILLIONS

- EQC had fielded more than 10,400 complaints and concerns about poor repair work by contractors by the start of the current financial year.

- It still had 6,900 of those inquiries to resolve, although not all of these would result in remedial work.

- By May 2016, the amount recorded as being spent on re-revisiting initial repairs was more than $7 million.

- It was "too early" to know what the final figure would be, but the final cost could be in the region of $60 million to $70 million.

- As of September 16, the Government-owned natural disaster insurer had started, or was planning to start, 481 underfloor remedial jobs.

- An additional 1141 properties were yet to be reviewed.

 - Sunday Star Times

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