Landmark EQC settlement agrees it must repair homes to 'when new' state

Thursday 28th April 2016

The Earthquake Commission has cut a deal with 98 Canterbury homeowners that affirms the government entity's responsibility to repair earthquake-damaged property to a 'when new' state, as well as covering repairs for undamaged parts of a property and clarifying its position on cash settlement calculations.

In a joint statement between EQC and the EQC Action Group, both parties agreed EQC would repair earthquake damage to a condition substantially the same as 'when new'. The property owners dropped their bid for a declaratory judgment on the extent of EQC's liability for the earthquake damage to their houses.

EQC said its position has always been to repair houses to a 'when new' state. However, the homeowners said EQC had used phrases such as 'pre-earthquake standard' and 'like for like.'

“This created the impression that the standard EQC had to meet was something less than as when new," the group's deputy chair Craig Edwards said. "This settlement clarifies that the standard required is higher."

The 'when new' state has particular implications for repairs to floors. EQC has used the Ministry of Business, Innovation and Employment's guidelines on re-levelling damaged floors, which provide that floors less than 50mm out of level did not have to be repaired by EQC. Under the settlement, EQC can no longer use those guidelines to determine if a floor needs to be re-levelled; floors must be returned to a condition substantially the same as when new.

The statement also clarified that if repairs on an earthquake damaged part of a house meant work had to be done on an undamaged part of the house, such as removing undamaged wiring to repair wall linings or removing undamaged floorboards to repair foundations, EQC would cover the cost of that work.

Edwards said EQC has refused to undertake repairs when it would be required under building regulations to significantly upgrade items such as wiring and had paid homeowners for the work excluding the cost of required upgrades, leaving homeowners with "a substantial bill" to complete repairs on their homes.

Another of the group's concerns was a clause in the Earthquake Commission Act giving EQC the option to replace or repair damaged property rather than making a cash settlement with homeowners, without binding it to "exactly or completely" replace or reinstate the property, "only as circumstances permit and in a reasonably sufficient manner." The group said EQC had considered the clause modified the repair standard provided.

The group said the parties had agreed the clause does not apply when EQC makes cash settlements with homeowners, but only when it chooses to repair or replace the damage, and this means some of those paid out by EQC may be able to challenge the way EQC has calculated their payment.

“There has been widespread concern EQC was scoping repair work that did not meet the standard under the Act," Edwards said. "EQC has been using the same scope of works whether it elected to do the work or pay the homeowner. In most cases a different scope will be required if EQC elects to cash settle."

EQC said it had always been its position that cash payments must be to the replacement value of the property, and the standard of repair it used was the same whether people received cash settlements or EQC repaired their homes.

BusinessDesk.co.nz

Comments from our readers

No comments yet