Buyers beware of gap in records
The lack of public records in Christchurch detailing a property's condition could result in unsuspecting house hunters buying quake-damaged homes written off by insurers, property experts fear.
Such properties are beginning to appear on the market and although they are being sold with full disclosure, that may not be the case further down the track.
Lawyers and real estate agents fear because there is no public record of insurance companies' decisions to write off some properties, in five or 10 years' time, the properties could be sold to buyers unaware of their true condition.
Property lawyer Richard Lang said at the moment it was common practice for buyers to do due diligence on a house's insurance and Earthquake Commission claims so they could gauge the extent of quake damage to the property, but as claims were settled, it became more difficult for buyers to gather that information.
With no public records kept of insurance companies' decisions on individual properties, buyers would have to rely largely on the seller's word about the extent of any damage and what repairs had been done, or go to the expense of getting a building inspection report and possibly even hiring a structural engineer.
"It is going to become a real issue because you might assume the repairs were completed but in many cases you don't know," Lang said.
"The first person who buys off the original insured party may well do due diligence on what happened but when they on-sell in five years' time, are they even going to be in a position to provide that information to the next buyer? Probably not.
"Once these claims are settled, it's going to get harder and harder for the purchaser to be confident they know everything about the property unless they get extensive pre-purchase checks.
"You can get a LIM [Land Information Memorandum] from the council and that will have a record of any building consent issued but the council won't have any information around how an insurance claim was settled. There is a real arguable need for some public record to be kept of what has happened with insurance claims," Lang said.
However, he acknowledged it would be difficult to set up such a record because each case was different and the settlements reached between property owners and their insurers were private.
Another conveyancing lawyer said the information supplied on LIMs was so limited it was almost useless.
A real estate agent said that without a public record of homes that had been written off by insurers, the risk of damaged properties, which were coming on to the market now for land-only value, being sold later without full disclosure was too high.
But Andrew Logan, deputy chairman of the New Zealand Law Society's property law section, said market forces were likely to provide future home buyers with some protection because insurance companies would not provide cover on a house that had been written off.
Christchurch City Council customer and business support manager Tracey Weston said legally the council was only bound to disclose in LIMs the information that it held on a property.
For example, the LIMs included information about whether properties had been issued with a red, yellow or green sticker after the quakes.
"If we hold it, we can disclose it; if we don't hold it, we can't," Weston said.
Building consents issued by the council were shown on the LIM but the council could only disclose that a consent was related to the earthquakes if the applicant had noted it as such in their consent application.