EQC cuts costs with lower standards

SIMON MUNRO AND JOHN GODDARD
Last updated 13:58 31/07/2013

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OPINION: The Earthquake Commission (EQC) has been accused of inaccurately assessing the floor levels of thousands of houses after hiring unqualified surveyors using inadequate measuring methods.

In response, EQC has defended the assessments and said they complied with all building and housing guidelines.

While it is true that floor levels out by 50 millimetres or less meet the standard in the latest guidelines, EQC's statement raises the question of whether it is entitled merely to meet this minimum standard.

The guidance document, "Repairing and rebuilding houses affected by the Canterbury earthquakes", was put out by the Ministry of Business Innovation and Employment (MBIE) in December. It is available at dbh.govt.nz.

The guide lowers the tolerances for uneven floors from the the 2010 guide. The change may be justified on the basis of new research, as the guide itself suggests. However, the research relied on by the Ministry of Business Innovation and Employment (a survey by the Engineering Advisory Group in 2011 and a review of building standards) is not mentioned in the guide.

The reasoning behind the guide appears to be that new buildings can have floor levels varying by up to 50mm, so anything less does not need fixing as it is substantially the same as new. Many have taken issue with the idea that new buildings would be so out of level, but even if that is the case for badly built new houses, is it appropriate that EQC apply a "bad new house" standard to houses built much better?

Certainly the guide itself would suggest not. The guide's criteria for floor levels (including the 50mm threshold) are there to "provide guidance", not be "absolutes". This suggests EQC's reliance on the guide is inappropriate when the guide itself cautions against this.

The guide also says some insurance policies may require a higher standard. This would include EQC cover.

As EQC is relying on this guide to determine its obligations, it is not playing by the right rules.

It is the Earthquake Commission Act 1993, not any building code guidance, which governs EQC and the standard it must meet.

The standard of repair outlined in the act requires EQC to replace or reinstate buildings to a condition substantially the same as new, modified as needed to meet the law. The costs of doing this must be reasonably incurred.

The act also says that when exact or complete reinstatement is not possible - such as where materials or methods have changed or products are no longer available or no longer compliant with building standards - then EQC need only do what is possible in a reasonably sufficient manner.

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In relation to floor levels, however, the standard is quite clear. Circumstances will almost certainly allow reinstatement as new. Guides with a lower minimum standard cannot alter that.

The key point is this: Guide criteria are not legally enforceable building standards. The law expressly says a guide is just that and EQC must still consider each case - individual assessments are required.

The MBIE guide should not be used to judge whether a house has earthquake damage. That is, EQC cannot say that foundations are undamaged simply because they are only out of level by less than 50mm.

This does not mean a house which already had uneven floors must be upgraded at EQC's cost if it had no earthquake damage. But if the damage made an existing problem worse, EQC must reinstate them to as new condition. This is the case whether the floors are more or less than 50mm out of level.

The MBIE guide also cannot be used to determine the state of a house when it was new. EQC is bound by its founding legislation to reinstate an earthquake- damaged house to "its" condition when new, not the condition of a generic new house. That is not to say that the MBIE guide is of no use. Where people have settled for a cash payout and are arranging repairs themselves, they need only meet the 50mm threshold, and meet the building code.

Similarly, the local council may find the guide relevant in issuing building consent (although it must ensure work complies with the building code, which the guide does not alter).

It is obvious that EQC's apparent reliance on the MBIE guide will reduce the massive repair costs it faces. However, this could prove a false saving as it could be challenged in court. If such a challenge succeeded, EQC may have to remedy completed repairs not up to required standard, which would cost it even more.

Simon Munro is a senior associate and John Goddard a solicitor at law firm Anthony Harper in Christchurch. This article is not a substitute for professional advice.

- © Fairfax NZ News

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