If there’s anything the past week in Auckland has shown us, it’s to expect the unexpected. Or perhaps now, expect the worst and hope for the… summer we have been robbed of?
The storm has been devastating. That is an understatement. You can blame the mayor, the politicians, the Council, or others, but the bottom line is we need to learn a few lessons here. Other than the need to keep our gutters and drains cleaned, we need to consider the effect on our properties, insurance, tenancies, and employment.
Hundreds of properties are now damaged throughout Auckland (and others) due to flooding and landslides, some beyond repair. If you are purchasing a new property, you need to proceed with caution. So here are a few things to watch for:
For a YouTube clip on 10 things to watch for when purchasing property, please click here.
Some interviewed on the news said their houses had been regularly flooded as many as 8 times over the last 7 years. Unfortunately, this will likely mean that flood cover for this property will be removed by the insurer. Lloyd London has recently identified New Zealand as the second riskiest country to insure, second only to Bangladesh which has a very high rate of floods. This is serious and will undoubtedly affect the “insurability” of houses. Your due diligence of the property should include checking whether the property can be covered for flooding, as an exclusion for flooding may have catastrophic consequences if a flood was to occur again.
If your house has recently been affected by the storm and you need to get insurance cover to repair the property, you need to proceed with extra caution. There have been several published articles on this. The main advice has been to take lots of photos and not commence any works until you get approval. Sometimes prior approval is not possible for emergency remedial work and insurance companies often accept this. However, this is where good record keeping is imperative including photos, videos, quotes, assessments, and invoices. You need to lodge the insurance claim ASAP which can often be done online or over the phone nowadays. The insurance company will normally assign a cost assessor to work with you to get the quotes and repair approvals. All building works over $30,000 are legally required to have a written contract. Please seek legal advice before signing contracts with the contractors or the insurance company. Sometimes the insurance company will offer a fixed lump sum pay-out when the repair works may take months/years and if you agree you will be taking a risk that this will be enough to cover all repair costs. Again, you will need proper legal advice.
How has the flooding or landslide affected tenancies? Bearing in mind the recent Healthy homes standards include the obligation on landlords to regularly maintain the drains and gutters, but also provide a safe and warm house for tenants. Is the landlord at fault if the property floods? It is hard to say as the answer will likely involve a case-by-case approach of facts. At the minimum, if you are a landlord and your property is in a flood prone area, you should consider what steps you may be able to take to protect your tenants and your property. Perhaps offer sandbags or further drain works to divert water?
The recent State of Emergency would arguably be a “force majeure” (otherwise known as “an act of God”) to a contract. However, you would need to look at the contract terms to see what the force majeure will mean to that contract. The standard ADLS standard terms for sale and purchase of real estate does not allow extensions of time or settlement for a State of Emergency, as there is no specific clause to cover this. It was recently modified to include extensions of time where Covid 19/Pandemic resulted in lockdowns, there is nothing to cover floods or emergency meaning there would be no contractual basis to extend condition dates or settlement dates even though people could not travel to or from the property. This may result in changes to the contracts in the future, but the current agreements may be caught out.
Good faith obligations prevail in employment relationships. Difficulties arose recently when employees were unable to travel to/from work. In addition to this, the Ministry of Education suddenly shut down all schools and ECE centres affecting the ability of many parents to work. This again raises many legal questions of what your entitlements/obligations are. Firstly, you would need to look at the Health and Safety at Work Act 2015, secondly the employment agreement, thirdly the Employment Relations Act 2000, and lastly the obligation of good faith. An employer’s obligations as PCBU under the Health and Safety at Work Act 2015 to protect its staff and others would be paramount in these circumstances.
We have taken care to ensure that the information given is accurate, however it is intended for general guidance only and it should not be relied upon in individual cases. Professional advice should always be sought before any decision or action is taken.