Earthquake Strengthening Policy Challenged

We understand that the Insurance Council of New Zealand is seeking judicial review of the decision by the Christchurch City Council to adopt its Earthquake Prone Dangerous and Insanitary Buildings Policy 2010. That 2010 policy required seismic strengthening of existing buildings to a target of 67% of the new building standard in certain circumstances, including where the building has suffered earthquake damage and requires repairs amounting to a significant alteration. A significant alteration might include structural costs of $50,000.00 or more or repairs worth more than 25% of the rateable value of the building.

The Insurance Council is of the view that Christchurch’s policy is unlawful and invalid. This has obvious ramifications for owners and insurers in Christchurch. Repairs are apparently being delayed pending clarification of the level of seismic strengthening required legally. If an insurer is obliged to repair to 67% of the code that will likely cost a building owner or insurer more than simply repairing to meet the building’s existing standard.

It’s possible that others might join as a party to these legal proceedings to make submissions on these issues. This might include other territorial authorities, individual building owners, other insurers or engineering professionals. The Insurance Council is pushing for the judicial review to be heard as soon as possible.

Auckland Council’s Earthquake Prone, Dangerous and Insanitary Building’s Policy was adopted in November 2011 and is to be reviewed within 5 years, perhaps earlier depending upon the recommendations of the Canterbury Earthquake Royal Commission or any legislative changes.

The earthquake prone section of the policy applies to commercial buildings or residential buildings of 2 stories or more that contain 3 or more household units. So most of the traditional residential housing stock is currently excluded. Auckland’s policy requires all these buildings included within the policy to be brought up to 34% of the current national building standard over time and encourages higher levels where possible. Council is currently adopting a staged approach to the identification of earthquake prone buildings. Work is being completed in assessing priority buildings and property owners will have 10 – 30 years to carry out seismic strengthening once identified as earthquake prone.

Building owners in Auckland and other centres will be interested to see the result of the Insurance Council’s application for judicial review. Earthquake strengthening costs are potentially a huge expense facing the industry, and if a Council’s policy can be challenged legally as going too far or too fast that has ramifications for all.

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