Owners of leaky homes will get a better deal when a range of new reforms comes into force next week, Ministers Chris Carter, Rick Barker and Clayton Cosgrove said today.

The key reforms are an enhanced dispute resolution service and a new independent Weathertight Homes Tribunal, established under the Weathertight Homes Resolution Services Act 2006. In addition, a pilot financial assistance scheme will also start operating on April 2, 2007.

The enhancements to Weathertight Homes Resolution Services (WHRS) include a streamlined claims process, beefed up assessment reports where claimants can claim for potential as well as actual non-weathertight damage, time-limited mediation and a new fast-track option for claims under $20,000.

"These reforms will mean faster resolution of claims so homeowners can get compensation from the liable parties, and get their homes fixed," said Building and Construction Minister Clayton Cosgrove.

"People will also be encouraged to repair their homes and then claim back costs through the enhanced claims process."

The government's two-year financial assistance pilot will provide access to bridging finance for WHRS claimants who meet the criteria. Claimants will be able to apply to the Housing New Zealand Corporation (HNZC) for a guarantee of support for a private loan, or as a last resort, a direct loan from the Corporation at market rates.

"People who cannot fund repairs themselves or access finance from a private lender will be able to apply for the money needed to fix their home first and argue liability second," said Housing Minister Chris Carter.

"This scheme has been set up as a pilot to assess the level of need and to gather important information, such as to what extent lack of access to finance is a reason for claimants not repairing their homes early. The pilot will be evaluated over a two year period, with progress reports to Ministers every six months."

The third key reform is the establishment of the Weathertight Homes Tribunal, which also starts operating from 2 April.

"The new Tribunal will provide completely independent adjudication for leaky home claims. It will draw on the expertise of the Ministry of Justice which will be providing administrative support to the Tribunal," said Minister for Courts Rick Barker.

The new Tribunal will have enhanced powers to settle claims faster. Rick Barker explained that these powers included calling all parties together in a preliminary conference to set the ground rules, enforcing time limits for each stage of the adjudication process and for mediation, not allowing delaying tactics, and ordering parties to appear. The Tribunal will also have new offence provisions when parties fail to appear when summoned or disobey an order of the Tribunal, and it will take a more investigative approach.

The Tribunal will have offices in Auckland and Wellington, and will hold hearings in other regions as required.

"Last year the Government made a commitment to owners of leaky homes to have a new improved service up and running by April 2007, and this commitment has been honoured. The new service, the financial assistance pilot and the independent Tribunal are now a reality and as a package they will benefit homeowners at every step of the claim process," Mr Cosgrove said.

• Enquiries on the new reforms can be made by calling the Department of Building and Housing on 0800 324 477.
• From Monday 2 April 2007, the Weathertight Homes Tribunal can be contacted directly on 0800 777 757 or
• online at www.justice.govt.nz/wht and
• enquiries on the financial assistance pilot can also be made by calling the Housing New Zealand Corporation on 0800 801 601.

Background Information:

Enhanced dispute resolution process

What are the key measures in the WHRS Act 2006 that become operational on April 2 2007?
Key measures in the Act include: the establishment of a new Weathertight Homes Tribunal; a more comprehensive assessment and broadened definition of damage that can be claimed for; changes to voting thresholds to make it easier to make multi-unit claims; a new streamlined lower-value claims process; the requirement that territorial authorities place WHRS notices of existing and new claims on Land Information Memorandum reports; and better advice and guidance for claimants.

How will the Act help owners of leaky homes?
The main benefits for homeowners include: the ability to claim for potential as well as actual damage; more comprehensive assessment reports of damage and what is required to fix it; improved information and guidance for claimants; faster and more effective resolution of claims; anticipated lower legal and evidential costs, and reduced barriers to claims by bodies corporate and owners of homes in multi-unit complexes.

Who can apply to get the new beefed up assessment reports?
New WHRS claimants and claimants yet to be decided eligible will be able to get these new beefed up assessment reports (that can be used as expert evidence). Claimants who have already received assessment reports will be able to apply to the new Weathertight Homes Tribunal to have their claim widened to include any potential damage, for which a further report may be required.

Weathertight Homes Tribunal

How do people use the new Weathertight Homes Tribunal?
Affected homeowners first apply to the Department of Building and Housing (DBH) to have their home assessed and claim eligibility decided under the WHRS Act 2006. If an owner's claim is found eligible and the repairs required are assessed at over $20,000 (or the repairs already made cost over $20,000), the claimant may then apply to the Tribunal for adjudication. Claims for $20,000 or less follow a more streamlined process within the DBH. If a settlement is not reached this way, a claimant with a lower-value claim may then apply to the Tribunal for adjudication. The outcome of adjudication by the Tribunal will be a published decision as to who is responsible for the leaks, who should pay, and how much - it is legally binding on all parties.

What happens to people already in the claim process?
Existing claimants who have not yet reached the adjudication stage under the old system will be going to the new Tribunal if they opt for adjudication. However, existing claimants who are already in adjudication can continue in the old system (under the WHRS Act 2002) or can chose to apply to the new Tribunal for adjudication under the WHRS Act 2006.

Pilot financial assistance scheme

What is the Government trying to achieve with the financial assistance pilot?
The pilot is designed to provide WHRS claimants who cannot fund early repairs themselves or access finance from a private lender, with the opportunity to repair their homes earlier (before disputes are resolved). Interest paid on the bridging finance may then be claimed back as part of the overall claim.
Early repair of homes has a number of benefits. It can result in reduced health risks, better information on the exact cost of repair, and it prevents further deterioration of the property (therefore the potential for contributory negligence claims). Early repair also puts homeowners in a much improved situation when it comes to reselling their homes.

How will the pilot scheme work?
Those applying for lending assistance need to have an eligible WHRS claim. They will be encouraged to approach their own lender in the first instance. If they are unable to obtain finance from their current lender, then Housing New Zealand Corporation (HNZC) could act as a guarantor for the loan from another lender. If this is not possible, then HNZC has the discretion to offer claimants a direct loan, at market rates, in order for them to under take repairs. It has been allocated $7.1 million capital funding in Budget 2006 to make available for direct loans.

What can the money be used for?
The loan can only be used to make the home weathertight. It does not cover other alterations or furnishings that would have been replaced anyway due to wear and tear. It can, however, be used for professional fees related to obtaining the loan or fixing the claimants' home, or for a lawyer to draw up the contract with the builder. Other examples include; valuer reports, engineering reports and legal advice on the loan documentation.

What are the eligibility criteria for lending assistance?

• The borrower has been declined assistance from their lender.
• Applicants have a current eligible WHRS claim.
• The borrower is a New Zealand citizen or a permanent resident, and owns only one home.
• The borrower has a Full Assessment Report or certified equivalent. There are three ways to get a full assessment if you are a claimant pre 1 April 2007 - apply to the DBH which may deem your pre 1 April assessment to be a full assessment; apply to the Weathertight Homes Tribunal for wider remedies and the Tribunal may order an additional assessment be completed; or some claimants will have commissioned their own reports which, upon review by DBH, will be considered sufficiently comprehensive to qualify as full assessment.
• The maximum loan is $225,000 including a 10 percent provision for professional fees and, depending on certain conditions, a 20 percent contingency amount for unexpected costs.
• The borrower must satisfy the lenders' debt serviceability criteria which are consistent with having sufficient cash flow to meet the repayments. In lending terms this will be either a loan-to-value servicing ratio of 95 percent or a debt-to-income servicing ratio of 45 percent.
• A loan-to-value ratio of not more than 120 percent for standalone buildings and 90 percent for multi-units. This means the borrower could borrow up to 120% of the value of the valuation on the property.
• Trusts will need to satisfy additional eligibility criteria before receiving lending assistance:
  • the trustees must make an application as a home owner
  • the trust's assets include only one home
  • the trustees are New Zealand citizens or permanent residents
  • the home is occupied by at least one beneficiary of the trust

Is there flexibility in how the criteria is applied?
Yes, if an application does not meet standard eligibility criteria, it can be considered on a case-by-case basis. It is estimated that around 90 percent of all claimants will fall under the $225,000 lending cap, but HNZC has limited discretion to lend beyond the cap in special circumstances.
Housing New Zealand may also agree to allow the interest on loans to be capitalised in extraordinary circumstances. This means interest is not paid during the course of the loan but is added to the loan total. At the end of the loan period, the borrower then pays back the initial loan plus all accumulated interest.

Will the pilot scheme help all WHRS claimants?
No, the scheme won't help those who are able to borrow privately to pay for their house repairs. Homeowners will also have to make a judgement call about whether early repair of their home suits their financial circumstances. Housing New Zealand will be careful to avoid putting borrowers in the undesirable position of carrying interest-bearing debt that they are unable to manage. If homeowners are unable to meet loan repayments, they will likely be advised to pursue their claim first and then conduct repairs after settlement.

Will the eligibility and lending criteria be reviewed during the two-year pilot?
Ministers will be advised of the progress of the pilot every six months. Should it become apparent that the lending criteria need adjustment, then any changes will be presented to Ministers for their consideration and decision. The pilot is intended to run for two years starting in April 2007. It will be evaluated and, at that stage, Government will make a decision on the next steps.

Has the intended target audience for this pilot been consulted, and how many will benefit?
Yes. The DBH and Ministers have held a number of discussions with representatives of the Leaky Homes Action Group during the development of the lending assistance policy. The number of people assisted will depend on the size and duration of direct loans issued, as well as the number of guarantees provided by HNZC. The pilot will be regularly evaluated to test demand.

How can people get information about the pilot financial assistance scheme?

• People who don't have an eligible WHRS claim should ring the Department of Building and Housing on 0800 3244 77.
• Those who already have an eligible WHRS claim should contact their claims advisor.
• Enquiries to HNZC can also be made by calling 0800 801 601.