Leaky Buildings

[Wayne]

not leaky but has 'water ingress issues' - LOL

[Maccachic]

Marketing machine in full force LOL

[klauster]

What is the difference between leaky and water ingress?

That is the question for profies - Technical spoken is there a difference between leaks and water ingress?

[Maccachic]

There could be if it was related to subfloor ingress, flooding etc.

[klauster]

Ground water, floods, cumulative water from condensation - thanks, that makes sense

[eri]

going out on a limb here

but "leaky" in nz seems to have come to mean, lots of little leaks all over the building, often requiring new cladding, windows etc.

in the case above, if i understand it correctly

1 floor has major problems where the tower comes up out of the larger area base

so the building mangers, owners etc have been able to argue a difference and generally keep it out of the news

i don't think any buyer could be caught unaware due to recent changes in the legislation where the agent MUST clearly state that remedial action is being planned

so owners and tenants of the tower probably won't be affected by the eventual repairs that WILL take place

but the leak is within the building envelope so all owners MUST pay for the repair

the building will be repaired and life will go on

but the costs to repair could very likely make buying there, for anything above the CV, a very poor investment 1-2%? for 10 years???

[SlyAnimal]

Leaky buildings are fine, so long as you know it's leaky before you buy. I know not everyone will agree with that, as there's definitely more risk, but I think it's about managing the risk vs reward.

What will probably happen, is the BC will sue the developers, they'll issue a special levy to cover their legal costs (Since it's always someone's fault that the building is leaky)
Legal proceedings may take quite a while, and even when resolved, it will take even longer to complete repairs.

If you don't win/settle for enough to cover the repairs, then there will likely be a special BC levy to cover the costs of repairs (Probably in a single instalment)


When you buy the apartment, you need to factor in the potential cost of repairs + lost income (if you'll need tenants to vacate at all, or even just the fact tenants don't like to pay premium rental rates in buildings with no natural light because they are covered in scaffolding).

Banks often won't let you use a leaky building as security, so ensure you have other security options available, or that you can find a more flexible lender.

Owners of leaky buildings often need to sell. They have mortgages, and thus can't afford to fork out the cost of repairs + absorb the lost rental income. Also there's a knee jerk reaction with leaky buildings, people simply don't want to touch them, as they're scared it'll burst into flames or something. Take advantage of this, drive their price down low.

Leaky buildings have their prices drop significantly, and then they often stay that way for a few years. If you can, try to buy when payment has already been made for most of the work, but before a code compliance certificate has been issued. Then the price will be low, because of historical market prices + the fact that it's leaky so there aren't as many buyers (Since they probably can't use it as security until they have a code compliance certificate), but all/most of the work has already been done, so it's not your problem any more.

[NomoneyNotalk]

Hi there,

My wife used to work for body corporate company, so i have heard many stories regarding leaky buildings. The biggest cost for a leaky building is not the repair cost. In some buildings they actually hire a lawyer to sue the builder to get them to fix the leaky problem, and the lawyer charges some ridiculous amount which is then added to the body corporate levy. And in most cases the lawsuit is endless and can keep going for years with no clear resolutions.

So anyway before investors buy a property they would like to know how much return they are getting from it (Rent minus expenses). As the body corp levy goes up, the return on investment goes down, therefore the investor would be willing to pay less for the property , and down goes the price.

If you know the building has leaky problem, walk away from it. You are lucky to know before u buy it.

I am new to this forum, so apologies for newby questions or if there is already a thread (i have looked).

Thinking about buying an apartment in auckland. One building i'm interested in has been diagnosed with leaky problems (not fully leaky but there will be quite a big cost of repair). I'm wondering how the body corporate will go about raising the extra (I assume) funds needed to pay for the repairs. Is this something i can find out in the body corporate rules perhaps? If so, are these publically available and where can they usually be found? Do body corporates have financial statements?

The reason being is that there is a big difference to being hit with a one off $20k levy or 20 annual $1k levies. I do know I should be staying away from leaky buildings but am interested all the same.

Thanks in advance for your help.

[newbrew]

going out on a limb here

but "leaky" in nz seems to have come to mean, lots of little leaks all over the building, often requiring new cladding, windows etc.

in the case above, if i understand it correctly

1 floor has major problems where the tower comes up out of the larger area base

so the building mangers, owners etc have been able to argue a difference and generally keep it out of the news

i don't think any buyer could be caught unaware due to recent changes in the legislation where the agent MUST clearly state that remedial action is being planned

so owners and tenants of the tower probably won't be affected by the eventual repairs that WILL take place

but the leak is within the building envelope so all owners MUST pay for the repair

the building will be repaired and life will go on

but the costs to repair could very likely make buying there, for anything above the CV, a very poor investment 1-2%? for 10 years???

Yep eri, that's exactly what I'm talking about.

[newbrew]

Hi there,

My wife used to work for body corporate company, so i have heard many stories regarding leaky buildings. The biggest cost for a leaky building is not the repair cost. In some buildings they actually hire a lawyer to sue the builder to get them to fix the leaky problem, and the lawyer charges some ridiculous amount which is then added to the body corporate levy. And in most cases the lawsuit is endless and can keep going for years with no clear resolutions.

So anyway before investors buy a property they would like to know how much return they are getting from it (Rent minus expenses). As the body corp levy goes up, the return on investment goes down, therefore the investor would be willing to pay less for the property , and down goes the price.

If you know the building has leaky problem, walk away from it. You are lucky to know before u buy it.

Thanks, good advice.

[newbrew]

Thanks to everyone else for your help as well, much appreciated and any further comments welcome. Looking to be hard to find a non-leaky apartment building in Auckland haha

[SlyAnimal]

Lots of non leaky apartments in Auckland. Just the leaky ones are the ones which, at first glance (before you realise they're leaky), appear the most attractive because of the lower cost to buy.

Difficuility in getting finance for a leaky building is the biggest barrier to purchasing them. As other than this, they are just as viable (or perhaps more so), than other apartments (Although you have to do your research).

In general with apartments, you need to be really careful when you're looking, as there are some substantial differences between buildings (BC fees / rentability / leaky / price / future saleability) which significantly effect your potential returns on them.

[eri]

But lawyers for the council argued that the Johnsons failed to take reasonable steps before buying the house, such as a pre-purchase building report, a legal term known as "contributory negligence".

The Johnsons' lawyer said the couple should have been able to rely on the code of compliance certificate.

Evidence was given at the High Court hearing that the Johnsons were aware of possible "weathertightness problems" but did not seek expert advice on whether the home was leaky before making an offer.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10865319

[Wayne]

An interesting case. I wonder if they can have a go at the previous owner - they apparently re-clad without consent.

[eri]

In December, one of the country's biggest builders, Brookfield Multiplex Constructions (NZ), went to liquidators Anthony McCullagh and Stephen Lawrence of PKF in a move that frustrated those seeking compensation for leaky buildings including Orewa's Nautilus, which it built.

http://www.nzherald.co.nz/residentia...ectid=10864093