Claiming Compensation For A Leaky Home

Buying a home is a major investment, and discovering hidden leaks can be a nightmare for homebuyers. Fortunately, there are steps you can take to hold sellers accountable and claim compensation for the damages.

“Leaky home,” is a term used in New Zealand to describe a building with water ingress issues.

Homebuyers who purchase a leaky home may have legal recourse against the sellers under the Weathertight Homes Resolution Services Act 2006 (WHRS Act).

In this property blog, we will look at a recent win for a Lower Hutt homeowner is more than encouraging news for all future homebuyers. Plus, provide an overview on the general process of what to do when you discover a leak and how you may go about making a claim against a seller who sold you a leaky home.

Leaky Home Case

First let’s look at how the Lower Hutt woman won a High Court judgement of $524,925 against the odds.

In 2019, Macfarlane bought a townhouse that was later found to be a leaky home. Prior to purchasing the property, Macfarlane had received a report from Mark Sewell’s company, Informed House Inspections, which stated that the home was structurally sound with only minor maintenance issues.

However with another inspection, due to the new owner noticing paint was not sticking to the walls and rot above a sliding door – it was discovered that the timber framing was severely damaged and decayed, leading to structural failure and cracked cladding.

Despite Sewell’s assurance that it was not a leaky home, the reality was quite different and the High Court judge agreed.

Macfarlane took legal action against Sewell and his company for breaching the Fair Trading Act and ‘negligent misstatement’. More on this case can be found here.

Suspect A Leak?  Follow This Process

What should a homeowner do if they suspect a leak in their home? First, let’s qualify what is meant by the term ‘leaky home’.

A leaky home refers to a residential property that has been constructed with defective or inadequate building materials, design, or construction techniques, leading to water ingress and subsequent damage.

The term – leaky home is commonly used in New Zealand to describe homes affected by water penetration issues, particularly those built between the late 1980s and early 2000s.  There is a Wikipedia page for the Leaky Home Crisis.

1. Identify the source of the leak

The first step in proving fault and claiming compensation for a leaky home is to identify the source of the leak.

While you’ve found where there may be a leak, you need a professional building inspector or contractor to assess the damage and determine the cause of the leak and provide a report. It’s important to document any evidence of the leak, such as water stains or mould growth, and keep records of any repairs or attempts to fix the issue.

Once you have identified the source of the leak, you can begin to build your case against the seller.

2. Gather evidence of the leak and its impact

To prove fault and claim compensation for a leaky home, it’s crucial to gather as much evidence as possible.

Take photos and videos of the leak and any damage it has caused, such as water stains, mould growth, or structural damage. Keep records of any repairs or attempts to fix the issue, including receipts and invoices.

It is also important to document any communication with the seller or their representatives regarding the leak and any promises made to fix it. The more evidence you have, the stronger your case will be.

3. Review the seller’s disclosure statement

When buying a home, sellers are required to disclose any known defects or issues with the property. This includes leaks or water damage.

Review the seller’s disclosure statement carefully to see if they mentioned any issues with water or leaks. If they did not disclose the issue, this could be evidence of their fault and could strengthen your case for compensation. If they did disclose the issue, review the details to see if they made any promises to fix it or if they downplayed the severity of the issue.

4. Consult with a lawyer

If you believe you have a case for compensation due to a leaky home, it’s important to consult a lawyer who specialises in these cases. They can review your situation and provide guidance on the best course of action.

A lawyer can also help you gather evidence, negotiate with the seller or their insurance company, and represent you in court if necessary.

Don’t try to handle this type of situation alone, as it can be complex and overwhelming. Get the help you need to protect your rights and get the compensation you deserve.

5. Notifying the seller

You will want to notify the seller as soon as possible. However, as mentioned above, get legal advice beforehand. Notifying the seller promptly is required to comply with the time limits outlined in the WHRS Act.

6. Making a claim

There are many ways you can make a claim. Your first action may be to seek mediation and resolution. The buyer and seller may engage in a mediation process to resolve the dispute. Mediation aims to facilitate negotiations and reach an agreement between the parties involved.

Weathertight Homes Tribunal

If the mediation process fails to yield a resolution, the homebuyer can apply to the Weathertight Homes Tribunal (WHT) within the specified time frame. The WHT is a specialised judicial body that handles leaky building claims.

WHT proceedings

The WHT will assess the claim and determine whether the seller is liable for the defects. If the WHT finds in favour of the homebuyer, it can issue an order for the seller or third party to pay compensation or take other remedial actions.

Final Thoughts

Finding a substantial leak is disheartening and expensive to fix.  However, if it wasn’t declared before the sale, the law is on the side of the homebuyer.

Like building inspectors, sellers and their third parties must be honest with their declarations regarding the property’s condition.

In the Lower Hutt case, the building inspector and his company were sued for misinformation and breaching the Fair Trading Act.

If you buy a property and suspect a leak, act quickly and seek compensation or remedy – it is your right.