REAA CONTINUING EDUCATION 2013
TOPIC 2
THE LEGAL AND PHYSICAL DESCRIPTION
AND REPRESENTATION OF REAL ESTATE
REAA Continuing Education 2013
CONTENTS
Topic 2: Property Structures
Section 1: Building law
1
4
Section 2: Compliance documentation
28
Section 3: Main structures and components of buildings
40
Section 4: Land and building-related issues
78
Section 5: Weathertightness
80
Section 6: Risk management
103
Appendix A - Glossary
107
Appendix B – Glossary of acronyms
112
Appendix C – REAA (Professional Conduct and Client Care Rules) 2012
114
Note: Version 4, published 8 April 2013.
REAA Continuing Education 2013
TOPIC 2: PROPERTY STRUCTURES
REAA Continuing Education 2013
Topic 2: Property structures
INTRODUCTION
We begin this topic with a brief overview of building law and compliance
documentation. We will then discuss the main structures and components of
common building types and examine some of the problems that can arise. We will
also consider the most common professional and technical reports that are available
to help property consumers make fully informed decisions.
This topic is divided into five main sections:
Section 1: Building law
For the purposes of this programme, we will focus on two specific aspects of building
law – documents, such as Building Consents and Code Compliance Certificates, and
the uses to which buildings may be put, such as running a business from home,
granny flats, as well as alterations and changes of use.
Section 2: Compliance documentation
Here, we will discuss the main compliance documents, including PIMs and LIMs,
compliance schedules and building warrants of fitness.
Section 3: Main structures and components of common building types
This section covers the main structures and components common in all buildings,
such as foundations, walls, roofing, doors and windows. We look at the various types
commonly used, and discuss some of the key problems that may arise.
Section 4: Land and building-related issues
We consider three common problems that affect land and buildings – asbestos, leadbased paint and land contamination.
Section 5: Weathertightness
The problems associated with buildings which are not weathertight have been
highlighted for a number of years, and continue to affect property owners and
prospective purchasers. We consider the main factors, and discuss your disclosure
obligations.
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Section 6: Risk management
Here we reiterate the risk management principles discussed in Topic 1, and add
further material relevant to this topic.
It is not our intention to try and teach you the work of a qualified
building inspector, but rather give you some insights into what
you need to be aware of when appraising or marketing a building
or part of a building. You are not responsible for identifying or
exposing hidden or underlying defects, however, you are
responsible for disclosing defects that you know, or should know
about. Part of the obligation of a real estate licensee is to have a
greater level of knowledge and understanding of building issues
than a layperson.
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SECTION 1: BUILDING LAW
At the start of the development process, the property owner may first need to apply
for a resource consent under the Resource Management Act 1991. A resource
consent is necessary if an owner wishes to use or undertake an activity on their site
that does not conform to the district plan for the area. District plans categorise
activities according to a hierarchical structure. This structure ranges from activities
that are automatically permitted as of right to those which are expressly prohibited.
Permitted activities do not need a resource consent.
Gaining resource consent under the Resource Management Act 1991, or being a
permitted activity, does not exempt one from building consent under the Building
Act 1994. Whilst permission is not required for minor building work (exemptions are
outlined in Schedule 1 of the Building Act 2004), major development or redevelopment including structural change always does. Permission must be sought under the
provisions of the Building Act 2004.
The Building Act
The Building Act 2004 defines a building, (among other things) as:
…a temporary or permanent movable or immovable structure (including a
structure intended for occupation by people, animals, machinery, or chattels).
The Building Act also refers to fences as defined by the Fencing of Swimming Pools
Act, vehicles that are immovable and occupied, and other structures. However, for
the purposes of this work, we will only refer to the definition above.
The Building Act and accompanying regulations apply to all buildings in New Zealand.
The Act was originally drafted in 1991 and replaced in 2004 with a further Act of the
same name and including subsequent amendments. It controls all aspects of building
work, including the construction, demolition and alteration of buildings. The Act
refers to the New Zealand Building Code, which we discuss below.
The New Zealand Building Code
The Building Code describes the minimum performance standards that all new
building work must meet. The Code was introduced as a schedule to the Building
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Regulations 1992. The Code is updated regularly. It does not include design and
construction information, but does prescribe the performance requirements that
must be met.
For example, clause E2 External Moisture, provides (in part)
EXTRACT: New Zealand Building Code
Clause E2—External moisture
Provisions
Limits on application
Objective
E2.1 The objective of this provision is to safeguard
people from illness or injury that could result from
external moisture entering the building.
Functional requirement
E2.2 Buildings must be constructed to provide
adequate resistance to penetration by, and the
accumulation of, moisture from the outside.
Requirement E2.2 does not apply
to buildings (for example, certain bus
shelters, and certain buildings used for
horticulture or for equipment for washing
motor vehicles automatically) if moisture
from the outside penetrating them, or
accumulating within them, or both, is
unlikely to impair significantly all or any of
their amenity, durability, and stability.
Building Consent
A Building Consent is a document that details proposed building work. It includes all
information necessary to demonstrate that the building, if constructed as per the
consent document, will comply with the relevant clauses of the NZ Building Code.
The Building Act 2004 empowers the territorial authority (usually the district or city
council) to prosecute the owner of a property, and the builder concerned, for any
work that requires a Building Consent, but has been undertaken without one. The
REAA Continuing Education 2013
Topic 2: Property structures
penalty is a fine not exceeding $100,000, and a further $10,000 for each day that the
offence has continued.
Code Compliance Certificates
The first thing to note here is that there’s no “of” in Code Compliance. Code
Compliance is about compliance with the Building Code. This is a commonly misused
term amongst licensees and members of the public. You must mention ‘Certificate’
to correctly describe the document. As a real estate licensee, you need to use the
correct terminology.
Code Compliance Certificates (also known as CCCs) have been required for new
building projects since 1 July 1992. A CCC is able to be issued when a building has
been completed to a stage where all the necessary provisions of the Building Code
have been met.
Note that while the Building Act 1991 stated (in part):
The building work to which the certificate relates complies with the
building code …
the Building Act 2004 says:
… that the building work complies with the Building Consent
The Building Consent process is very rigorous. The applicant must show not only that
the work will comply with the Building Code, but how it will comply. If work is
undertaken that complied with the Building Consent but did not, in fact, comply with
the Building Code, the building owner would have possible redress against the
Territorial Authority which had issued the Building Consent.
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IMPORTANT NOTE:
The Building Consent Authority (usually the council) will only issue a CCC following
application by the property owner or their authorised agent. It is NOT automatic.
In the case of large property developments where work is completed in stages, or
where a property has been redeveloped or extended, there may be several CCCs,
each covering a different element.
This means that it is possible for some parts of a building to have CCCs and others
(especially those constructed before 1992), not to have them.
If a building hasn’t received a CCC the owner can:
 arrange for an independent inspection report, acknowledging that the work
complies with the Building Code
 apply for a Certificate of Acceptance (COA). This is however, inferior to a CCC
because it is seldom possible to fully inspect the componentry and quality of
workmanship involved after the work has been completed.
A Safe and Sanitary report may exist for any building work undertaken that required,
but was not issued with, a building permit, prior to the introduction of the Building
Act 1991.
A Certificate of Acceptance relates to any unconsented work undertaken since the
enactment of the Building Act 1991, and for which a building consent was required.
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IMPORTANT NOTE:
If you are attempting to sell a property with a building that was constructed after 1
July 1992 and it does not have a CCC or COA, or you have been unable to sight one,
you must alert your prospective customers to this fact. You should also refer them to
the local territorial authority and/or their solicitor for further advice.
Even if a house has a CCC, that doesn’t mean that it is not at risk of leaking or other
deterioration. Therefore, the fact that there is a CCC doesn’t relieve licensees of
their obligation under the Code, based on their experience, to advise prospective
purchasers whether the property may be subject to some defect. (Refer to Footnote
4 of Rule 10.7 in the Code).
The lack of a CCC does not prevent a sale proceeding; many properties have been
sold in this manner, but this is a critical disclosure that must be made. To keep the
licensee safe, the customer must be placed in a position to make a fully informed
decision.
Best practice is to confirm in writing to any prospective customers that you have
been unable to sight a CCC. Retain a copy of this document on file.
Under section 364 of the Building Act 2004, it is an offence for a residential property
developer to transfer ownership or possession of a household unit that does not
have a CCC. There is a potential penalty of up to $200,000 for a breach. However,
the parties may enter into a written agreement before the sale or transfer of
possession, waiving this right. Licensees should always refer the parties to the
advice of their respective solicitors, when considering entering into a statutory
waiver.
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EXTRACT: REINZ/ADLS AGREEMENT FOR SALE
AND PURCHASE OF REAL ESTATE, 9TH ed. 2012
If you are attempting to sell a property that was constructed after 1 July 1992, and it
doesn’t have a Code Compliance Certificate, you must make the parties aware of
Clause 3.14 of the REINZ/ADLS Agreement for Sale and Purchase of Real Estate, (9 th
ed. 2012), which reads:
3.14 If;
1 this is an agreement for the sale by a residential property developer of a
household unit;
and
2 a Code Compliance Certificate has not been issued by the settlement date in
relation to the household unit then, unless the parties agree otherwise (in which
case the parties shall enter into a written agreement in the form prescribed by
the Building (Forms) Regulations 2004) the settlement date shall be deferred to
the fifth working day following the date upon which the vendor has given the
purchaser notice that the Code Compliance Certificate has been issued (which
notice must be accompanied by a copy of the certificate).
Copyright © REINZ / ADLS, 2012
The weblink below has the legally required document for this purpose.
Weblink: Agreement between residential
property developer and purchaser
http://www.dbh.govt.nz/forms-building-forms
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The following case summary relates to the licensee’s obligations to be more than just
a conduit of information on behalf of a vendor.
CASE SUMMARY:
Complaints Assessment Committee decision
1 A licensee listed a residential property that comprised a main dwelling and a
minor unit. At the time of listing, the vendor (client) disclosed that the kitchen in
the minor unit did not have a Building Consent. However, the vendor did not
disclose that he had withdrawn his application for resource consent for the
minor unit, as required under the district plan.
2 During the marketing, the licensee advised all interested prospective purchasers
of the lack of Building Consent, and made a copy of the LIM, building inspection
report and council property file available to anyone who showed sufficient
interest.
3 When the complainant (a prospective purchaser) found that the minor dwelling
did not have a resource consent, she requested that the licensee obtain one. The
licensee referred the matter to the vendor who provided a copy of a Code
Compliance Certificate. The licensee passed this document on to the
complainant.
4 The complainant later found that the CCC which had been given to her related
only to the main dwelling, not the minor unit.
5 At the time of agreement between the vendor and the complainant (now the
purchaser), the vendor had inserted a clause in the agreement that effectively
waived his obligations under the vendor warranty – (currently 6.2(5) in the
REINZ/ADLS Agreement for Sale and Purchase of Real Estate, 9th ed. 2012).
6 The Complaints Assessment Committee (CAC) found that the “information
coming from the council was confusing” and that the vendor may have
“knowingly deceived the licensee”.
Continued on next page
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7 However, the CAC held that the licensee had an obligation to use reasonable care
and skill when making representations about the property. In its discussion, the
CAC referred to the decision in the Tribunal decision [2011] READT 39, regarding
licensees’ obligations to be more than a conduit of information from a vendor.
8 The CAC stated “The complainant, as a layperson, was able to determine from
the paperwork provided by the licensee that an application for resource consent
had been made, amended and subsequently withdrawn and yet the licensee
relied completely on the claims of his client that all was in order.
9 In this case, the CAC indicated that there was a possible case to answer on the
part of both the vendor and the council, but this is beyond the scope of CAC
work. However, the licensee was found guilty of unsatisfactory conduct,
censured and ordered to apologise to the purchaser.
Reference Number: CB5707649
Home and income properties
There is often confusion about what constitutes a legal home and income. For
example, the mere fact that in some cases property owners have converted
basements or detached garages into living quarters, without benefit of Building
Consents or Code Compliance Certificates, does not authorise a licensee to market
or promote such a property as a ‘home and income’.
IMPORTANT NOTE:
In July 2012, the Disciplinary Tribunal (in [2012] READT 44), overturned an
unsatisfactory conduct finding by a Complaints Assessment Committee (CAC) against
a licensee. However, the Tribunal made the following significant statements
regarding disclosure relating to home and income properties:
When advertising includes a positive representation, that the property is a legal
home and income, then the agent must ensure that either:
Continued on next page
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a. they have made proper enquiries to ensure the property is a legal home and
income; or
b. they make it clear to any purchaser that this is a statement, from the vendor
and will need to be independently verified by the purchaser; or
c. they clearly inform a purchaser that there may be issues regarding this and
they need to obtain independent legal advice.
They further report:
… failure to take some steps to verify whether the property was a home and
income or to take steps to warn the purchaser is behaviour capable of
amounting to professional misconduct, either unsatisfactory conduct or
misconduct depending on the nature of the concerns.
Home occupations
In some cases, a property will give the appearance of being suitable
for a home-based business. For example, there may be a large
basement room that could be (or already has been) developed for
use as a business enterprise, such as hairdressing or tailoring. Or a
substantial garden may be in use growing flowers which are packaged
on site, and sold directly from a small shed on the premises.
However, such activities are not necessarily consented under the rules of the local
district plan, and you would need to check whether there were any restrictions
before making a positive statement that an activity could be commenced, or
continue.
Over the page is an extract from the (Auckland) North Shore District Plan that
demonstrates the range of limitations that applies to buildings which are used as
home occupations. Other district plans may have different rules.
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EXTRACT: NORTH SHORE CITY DISTRICT
PLAN, Rule 16.6.2 – Home Occupations
16.6.2
Home Occupations
a. Every home occupation shall be incidental to the residential use of the site and
occupy not more than 25% of the gross floor area of the main unit.
b. The total number of persons employed in any residential unit in a home
occupation shall not exceed three.
c. In the case of any residential unit, on a site having an area of:
i. 450m2 or more, not more than two persons outside the residing family
shall be employed in home occupation purposes.
ii. From 350m2 to 449m2, not more than one person outside the residing
family shall be employed in home occupation purposes.
iii. Less than 350m2, no persons other than the residing family shall be
employed in home occupation purposes.
d. In addition to those persons engaged in the home occupation, the activity shall
not attract more than four persons in any one hour.
e. Non-resident employees and visitors on the site, for the purpose of the home
occupation, shall be limited to the hours 8:00am to 6:00pm Monday to Friday
inclusive, and 9:00am to 6:00pm Saturday. In general, all other activities which
form part of the home occupation, including vehicle trips, shall not be permitted
between 10:00pm and 8:00am.
f. The activity shall be carried out wholly within the residential unit or within an
accessory building erected or modified for that purpose, provided that in
relation to an accessory building, the maximum area that may be used for this
purpose is the equivalent of 25% of the gross floor area of the main residential
unit.
g. There shall be no exterior storage, display or other indication of the home
occupation or variation from the residential character of the site or
neighbourhood, other than a sign allowed under the Plan.
Continued on next page
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h. There shall be not more than 16 private vehicle trips associated with the home
occupation per day.
i.
There shall be not more than two inwards and two outwards vehicle trips a day
for the purpose of transporting products which are either used or produced by
home occupations on the site.
j. Only one non-domestic vehicle used in conjunction with the home occupation
shall be stored on the site.
k. All car parking requirements are complied with, including the provision of one
parking space for each non-residential employee.
l.
There shall be no retail sales from the site.
m. The residential unit for any home occupation must have its own separate vehicle
access from the public road or street. It must not have the shared use of a
common vehicle access or entrance strip which serves also any other site or any
other residential unit.
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Minor Residential units, Granny flats, Family flats
Although a variety of names are used to describe them, these are
special dwelling units allowed for by some councils to
accommodate elderly or otherwise partially dependent relatives
to live in a separate dwelling on the same property as the land
owner. The district plan often contains restrictions, such as
prohibiting the unit from being used as a rental property for nonfamily members, or requiring its removal when the building is no
longer required by the dependent person.
For example, Auckland’s North Shore City District Plan provides the following:
EXTRACT: NORTH SHORE CITY DISTRICT PLAN,
Rule 16.6.3.1 – Minor Residential Units
16.6.3.1
Minor Residential Units
a. Any minor residential unit shall not exceed 60m2 gross floor area.
b. No more than one residential unit may be on the same site as a minor unit, and
only one minor residential unit may be erected on any site.
c. Any minor residential unit shall comply with Rule 16.6.2.4(a) Outdoor Living
Space and Rule 16.6.2.5 Service Court: Residential 1, 2, 3, 4, 5, 6, and 7 zones.
Explanation and Reasons
The purpose of this control is to provide for the establishment of a small dwelling in
association with a main residential unit which can either provide accommodation for
a relative or be used as a home and income. The control seeks to ensure that the
minor residential unit and the main residential unit retain a good standard of
amenity.
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Note that in the above case, the use of the minor unit for the purposes of a rental
dwelling is within the rules of the district plan. Compare this with a recent proposal
for Dunedin, which does not currently have provision for such dwellings.
EXTRACT: DUNEDIN CITY DISTRICT PLAN
REVIEW – Family Flats
Family flats are small housing units designed for independent living for elderly family
members, or accommodation for someone with a dependence or connection to the
occupiers of the main residential unit on the site.
The intention of family flats is that they remain within the same lot and ownership as
the main residential dwelling and cannot be subdivided off to create two separate
dwellings on separate lots. Performance standards would specify the maximum size
of the family flat and location in relation to the main dwelling. As the occupants of
the family flat are expected to be related to the occupants of the main dwelling,
performance standards for parking and amenity open space could be reduced as it is
anticipated that they could share the outdoor space required for the main dwelling.
Potential performance standards could include:
 Locating the family flat within a certain distance of the main residential
dwelling
 Requiring the family flat to be located behind the main residential dwelling;
this is particularly important where there is heritage character that needs
preserving
 Where it is attached to an accessory building, such as a garage, no internal
access would be permitted
 Limiting floor area
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In Christchurch, a different approach has been adopted:
EXTRACT: CHRISTCHURCH CITY PLAN –
Requirements for a family flat (or granny flat) on a
property
A family flat or ‘granny flat’ means self-contained living accommodation whether
contained within a residential unit or located separately to a residential unit on the
same site, which is occupied by a family member who is dependent in some way on
the household living in the residence. A family flat is required to be encumbered by a
legal instrument which ensures that the use of the family flat is limited to dependent
family members of the household living in the residential unit. The Council’s
preferred form of legal instrument is an encumbrance.
Under the City Plan the maximum gross floor area permitted for a family flat is 65m 2
except that terraces, garages, sundecks and verandahs are excluded. Once the
building is no longer needed as a family flat and it will not comply with all the
standards for a residential unit the building is required to be relocated from the site,
or the kitchen removed so that the building is no longer self-contained.
NB: a sleepout that is not self-contained (i.e. no kitchen) is covered by different
rules.
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Review – 1
Read the statements that follow and circle the letter that represents the most
appropriate answer.
1 If a granny flat of 62m2 was proposed, and met all other requirements, would
this be permissible in:
a. Christchurch
b. North Shore
c. Neither of the above
d. Both of the above
2 Under the Dunedin proposal, occupants of family flats are expected to be:
a. Related to the occupants of the main dwelling
b. Elderly
c. Non-related tenants
d. Pregnant
3 Under the North Shore District plan:
a. The minor residential unit must not be larger than 60m2
b. There may be no more than one minor residential unit on a site
c. The minor residential unit must comply with other district plan rules
d. All of the above
4 The purpose of the New Zealand Building Code is to:
a. Specify design information about buildings
b. Specify construction information about buildings
c. Specify minimum performance requirements for buildings
d. None of the above
5 If the owner of a property has undertaken (or allowed) work that requires a
Building Consent without first obtaining such a consent, the Building Consent
Authority may:
a. Prosecute the owner and the builder who did the work
b. Seek a fine of up to $100,000
c. Seek a fine of up to $10,000 for each day the offence continues
d. All of the above
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The following case summary provides an example of some of the issues that can
arise if the legal status of a property is not correctly identified at the outset.
CASE SUMMARY:
Complaints Assessment Committee decision
1 A property, comprising two dwellings, was listed for sale, with the notation on
the agency agreement form that “Downstairs is a legal Granny flat not a
separate flat”.
2 The subject property was part of a cross-lease title.
3 A licensee marketed the property as “home and income” referring to it as two 2bedroom flats on the signboard.
4 During a discussion between the licensee and the complainant (a prospective
purchaser), there was mention that the “’granny flat’ did not have a final sign off
from the District Council, and that the current vendor was receiving an income
from the ‘flat’”.
5 The complainant investigated further, and found that the downstairs flat was
only allowed by Council under ‘limited special circumstances’. The Council’s file
also recorded that the kitchen sink in the second dwelling was to be removed if
the property was sold.
6 In their defence, the licensee stated to the Complaints Assessment Committee
(CAC) that they had received an assurance from the client that the flat was
‘legally established’. The licensee took the further step of telephoning the
council, and was told that the ‘downstairs’ was legally established, the kitchen
was shown on the plans, and Building Consent had been granted, but that no
final inspection had been completed.
7 The LIM report mentioned the development, but included the statement: “Final
inspection: No record”.
Continued on next page
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8 As soon as the licensee became aware of the true situation regarding the second
dwelling, the property was withdrawn from the market until revised advertising
could be prepared, making no mention of the “home and income”.
9
The CAC held that a ‘“reasonably competent licensee” ought to have known that
it could not advertise a property with a granny flat as a “home and income”’.
10 The CAC further stated that the licensee should have been aware that under the
terms of a cross-lease, there is no provision for subdivision in this way.
11 The licensee was held guilty of unsatisfactory conduct, fined $500, and ordered
to undergo further training.
Reference Number: CA2994564
Alterations to buildings
When a building is planned, designed and constructed, it is
intended for a specific use, such as residential housing, commercial
offices, or industrial use. Schedule 2 of the Building (Specified
Systems, Change the Use, and Earthquake-prone Buildings)
Regulations 2005 identifies 15 different uses for whole buildings or
parts thereof. In each case, there are certain requirements in
respect of:





construction methods and materials
insulation
ventilation
sanitary requirements
building safety and emergency evacuation.
Amongst other things, if any part of a building is to be altered, the upgrading
requirements will apply across the whole building.
When a building is renovated or altered, the same issues will almost always apply. If
the alterations relate to a change of use, such as redeveloping an old villa into a
restaurant or a warehouse into apartments, there will be a number of issues that
need to be addressed. We will deal with these shortly.
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Section 7 of the Building Act 2004 defines alter in relation to a building as:
… rebuild, re-erect, repair, enlarge and extend the building.
Residential
If an alteration relates to a residential property (such as private homes and small to
medium-sized apartment buildings), it is likely to need a Building Consent. The
consent must be obtained from the local council before the work can be undertaken.
The weblinks below set out the requirements relating to residential buildings.
Weblink: Build it right – Restricted work
(Homeowners)
www.dbh.govt.nz/builditright-homeowners-what-is-restricted
Weblink: Build it right – Exemption for OwnerBuilders
www.dbh.govt.nz/builditright-homeowners-owner-exemptions
The Licensed Building Practitioners (LBP) scheme was introduced in
New Zealand in November 2007. Effective from 1 March 2012, any
building work that relates to the primary structures of a building
(foundations, flooring, walls, roof, services, etc.) must be carried out
or directly supervised by a licensed building practitioner. As a
general guide, if something requires a Building Consent, it also
requires an LBP.
There are seven licence classes in the LBP scheme:
-
Design
Site
Foundations
Bricklaying and blocklaying
Carpentry
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-
External plastering
Roofing
Plumbers, drainlayers, gasfitters and electricians also require licences, but these are
not LBPs. Plumbers, drainlayers and gasfitters are licensed through the Plumbers,
Gasfitters and Drainlayers Board. Electricians are licensed through the Electrical
Workers Licensing Group and Electrical Workers Registration Board.
Commercial
If an alteration relates to a building that is used by members of the
public, such as a retail shopping complex or office building, there will
be further requirements relating to public safety. These include
health and safety protection systems, such as emergency exits, fireretardant systems, alarms, access for people with disabilities, and
earthquake strengthening.
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IMPORTANT NOTE:
Section 363 of the Building Act 2004 provides special public safety measures that
must be applied when a building (or part thereof) is undergoing building work.
It is an offence to permit people to use parts of the premises intended for public use
unless the territorial authority has provided confirmation that it is safe to do so.
Buildings which must meet this standard include properties providing public
accommodation (hotels, motels, etc.), restaurants and bars, conference facilities,
churches, theatres, community and sporting facilities, and public foyers in offices or
apartment buildings.
This applies in either of the following situations:
 A Building Consent has been issued, but a Code Compliance Certificate or
Certificate for Public Use has not yet been issued (or one or more conditions
on the certificate for public use is not being complied with), or
 A Building Consent had not been issued for building work that has been
undertaken, even though such consent was required.
Failure to comply could result in a fine of up to $200,000 and a further fine of up to
$20,000 for every day or part of a day that the non-compliance continues.
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IMPORTANT NOTE:
One important outcome from the recent Canterbury earthquakes has been the
impact on buildings, particularly in central Christchurch and Lyttelton.
There is now a recognised process for evaluating buildings that may have been
affected. This involves a Detailed Engineering Evaluation (DEE), a process designed to
determine how well a building has withstood the major earthquakes of 2010 and
2011, and/or to attempt to predict how well the building will perform in future
earthquakes. DEEs now apply beyond the Canterbury area.
The objective is to identify buildings which remain at a high standard of
performance, and those which require immediate repair or strengthening to bring
them to a satisfactory level of compliance, making them safe for occupation. This is
to enhance commercial and public confidence that existing building stock
(commercial and residential) is, in fact, safe for occupation and use.
It is now not uncommon for prospective purchasers, tenants, or even mortgage
providers and insurers to request a DEE on buildings in which they have an interest.
There have been instances where purchasers have bought commercial buildings
subject to the vendor earthquake-proofing the building to a predetermined
standard. In such instances, it may take one or more years to complete the required
work. Extensive time delays can make it difficult or impossible to lease the building
to commercial tenants, or to arrange for existing tenants to temporarily relocate
while the work is completed. Because of such difficulties, some purchasers have
sought to cancel their contracts.
Change of use of buildings
For the purposes of the Building Act 2004, change of use is defined as
one where the compliance requirements relating to the new use of
all or part of a building would be additional to, and more severe
than, what was required to comply with the Building Code under the
original (or most recent) use.
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For example, if the owner of a building that was designed for ground floor retail
(excluding food preparation and service) with offices above wished to develop a
restaurant on part of the ground floor, this would be a change of use.
If the change resulted in the requirements of the Building Code being reduced, this is
not considered a change of use. If the building was already permitted for use
including a restaurant in a specified area, and this was changed to a non-food retail
outlet, the change of use rules would also not apply.
If the change requires that all or part of the building be altered, the owner must
apply for a Building Consent.
The areas of major concern in cases of change of use are:






the structural performance of the building
means of escape from fire
fire rating performance
protection of other property (such as from the spread of fire)
sanitary facilities
provision of access and facilities for people with disabilities (if these are not
already provided)
 earthquake strengthening.
Particularly in the case of older buildings, a proposed change of use may require very
extensive alteration and the addition of new services and safety features to bring it
to the standards required today. This may be prohibitive, and any prospective
purchaser must be encouraged to seek appropriate specialist advice before
proceeding.
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Reflection
A client tells you that she has had a recent inspection of a garage that her late
husband had built some years ago. She says the Council officer had given her a
retrospective Code Compliance Certificate. Would her statement be correct? Why or
why not?
Summary
In this first section we have provided a brief overview of the main elements of
building law as they apply to real estate licensees.
We have discussed the Building Consent process and the main documents involved;
resource management consents and Building Consents. We have distinguished
between Code Compliance Certificates and Certificates of Acceptance.
In addition, we have considered the things you need to be aware of before you
market a property as a ‘home and income’, or ‘home and granny flat’ (or similar
wording).
Finally, we have discussed alterations and changes of use as they apply to residential
and commercial buildings.
As we have seen from some decisions by CACs and the Disciplinary Tribunal
discussed in this section, licensees need to be very careful when describing or
discussing properties to avoid making positive representations which are not
founded in fact. If you are unsure of the true situation relating to the structure or
permitted use of a building, you must say so, and recommend that prospective
purchasers seek legal advice before proceeding.
Note: Legislative and council compliance is expected to be covered in more depth in
the REAA Compulsory Continuing Education programme, 2014.
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Having looked at the issues surrounding building law, we will now move on to
explore the main compliance documents that you need to be familiar with.
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SECTION 2: COMPLIANCE DOCUMENTATION
There is a wide range of compliance documentation required under the Resource
Management Act, the Building Act, other legislation, regulations and local body
initiatives. However, for the purposes of this section, we will just consider the main
compliance documentation you need to be familiar with.
Project Information Memoranda (PIMs)
A PIM is the first stage of a building project. It is a report prepared by the local
territorial authority at the request of the applicant, and contains all the information
known to the territorial authority about the site itself. This information usually
includes:
 information about the physical conditions affecting the site, such as potential
or known flooding, potential or known subsidence, the presence of harmful
substances or previous landfill usage
 stormwater and wastewater locations on, or adjacent to, the site
 any land and building classifications (such as zoning, or the existence of
heritage buildings, or otherwise protected areas, such as sites of significance to
Māori)
 any requirements relating to other legislation that could be relevant to the
project.
The PIM must include a definite statement as to whether the proposed work may or
may not proceed (subject to the necessary authorisations being obtained). It allows
the applicant to obtain, as a matter of right, information that may affect the design
of any proposed building/s that may or may not otherwise be readily apparent.
When a PIM application is submitted, the territorial authority
then has 20 working days to complete the PIM and make it
available to the applicant. If the territorial authority requires
further information from the applicant as part of the
preparation process, it must seek this within 10 working days
of the application being lodged. This will effectively halt the process until the
information sought is received from the applicant.
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IMPORTANT NOTE:
A PIM is a useful document if starting a new building project, and may help in the
initial planning stage, i.e. before architectural drawings or other work is undertaken.
However, a PIM is not compulsory.
Land Information Memoranda (LIMs)
A Land Information Memorandum (LIM) is a report issued by a city or district council
that provides information known to the council in respect of a specific property. The
REINZ/ADLS Agreement for Sale and Purchase of Real Estate (9th ed. 2012) provides
for a LIM to be requested by property purchasers. Details of the LIM clause are
contained in clause 9.2 of the agreement form.
A LIM report contains information known to Council about a specific property. Such
information usually includes:
 details of land features which may affect its use or its capacity to support
buildings or other structures, such as erosion, subsidence, or flooding
 zoning and town planning information relevant to the property
 details of rates (including the current annual rates charge, and any outstanding
rates)
 Building Consents or building permits that have been issued
 resource consents for other purposes
 details of public and private drainage services to the property
 wind zone information
 details of any heritage buildings, sites, trees or other objects.
ConsumerBuild, a joint project by the Building and Housing Group within the
Ministry of Business, Innovation & Employment and Consumer NZ has an excellent
website. The following weblink is to a page that explains the differences between
PIMs and LIMs.
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Weblink: ConsumerBuild PIMs and LIMs
http://www.consumerbuild.org.nz/publish/legal/legal-other-pimspims.php
The weblink below provides access to a specimen LIM report, compiled by Te Ara,
The Encyclopaedia of New Zealand.
Weblink: Specimen LIM report
http://www.teara.govt.nz/en/real-estate/5/2
Limitations of the LIM
Although it is common for a LIM condition to be included as a term of sale, it should
not be relied upon as a source of all the information a purchaser might need in order
to make an informed decision about a property.
While the LIM does include information relating to permits, consents and
subsequent documents issued by the territorial authority with a high degree of
accuracy (but not infallibility), there may be other issues of which the authority is not
aware. For example, if an owner (either the current or a previous one), has carried
out building or other structural work without obtaining the required permit or
consent, the territorial authority will have no record of this work.
IMPORTANT NOTE:
Some work may have the effect of making all or part of the building or structure
uninsurable, thus severely limiting the ability to raise funds, such as a mortgage.
Another possible problem is that the LIM does not give information regarding
proposed or actual planned work on neighbouring properties. Such work might
adversely affect the subject property.
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Finally, the LIM report is not intended to give information regarding what work is, or
might be, permissible at the property in the immediate future. (This is more the role
of the PIM).
Just recommending to prospective purchasers that they obtain a LIM report is not
sufficient diligence on the part of a licensee. You should also advise them to have the
LIM report reviewed by their lawyer, who can then advise the purchaser accordingly.
Refer back to Topic 1: Property Ownership where we discussed the need to obtain
and review a certificate of title, including any relevant interests or encumbrances.
IMPORTANT NOTE:
In the case [2012] READT 44, the Tribunal made a comment regarding LIMs,
covenants and other documents. This very important statement was made:
We do not expect that land agents will have the ability of a solicitor to
determine acceptable risk and problems with titles and/or covenants
and/or LIM reports but clearly purchasers rely upon an agent when
making representations as to the state of the property. The agent’s
job is to ensure that the purchaser is not misled. In this particular case
if the agent had bothered to obtain a LIM or had called the Council to
ask, or even obtained a rates report then there would have been no
misrepresentation.
At times, a client will have obtained a copy of a LIM report as part of their
preparation for marketing the property. If the client wishes to make the LIM
available to prospective purchasers, first check that it is current. An outdated
document might not include all the necessary information.
If you are asked to distribute LIMs or similar documents to third parties, you must be
aware that if you do this, you are leaving yourself open to a complaint if there is
something within that document that you know or should know, that you have not
passed on to the recipient. Always check with your manager or supervising agent as
to the agency’s policy for distributing such documents.
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Here’s a useful link to the ConsumerBuild website that gives you more information
about PIMs and LIMS:
Weblink: ConsumerBuild: PIMs and LIMs
http://www.consumerbuild.org.nz/publish/legal/legal-other-pimspims.php
Notice to Fix
If work has been undertaken that does not comply with the Building Code, the
Council, Regional Authority or other Building Consent Authority may issue a Notice
to Fix. This is a written order, setting out the remedial work that must be done, and
giving a timeframe for the work to be completed.
If the building owner fails to comply with the notice, they commit an offence, which
is punishable by a fine of up to $200,000, plus a further penalty of up to $20,000 for
each day that the work remains outstanding.
Notices to Fix may be applied to any building structure that requires compliance with
the Building Code.
CASE SUMMARY:
Complaints Assessment Committee decision
1 A complaint was lodged with the REAA by a customer (purchaser) who, five months
after completing the purchase of a property, was issued with a Notice to Fix relating
to a firewall. (Note: a firewall is a partition between adjoining properties, which
must be rated to withstand fire for a specified period, e.g. 30 minutes).
2 The complainant alleged that the licensee who affected the sale had failed to
disclose a known defect at the property.
Continued on next page
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3 In addition, the complainant claimed that an insurance application which had been
completed by the licensee on the complainant’s behalf (as the complainant is
resident overseas), was misleading.
4 The complainant stated that he had suffered a loss of approximately $67,000 as this
was what was required to remediate the property, and have the Notice to Fix
withdrawn by council.
5 The property itself was at the lower end of the price and condition spectrum.
6 The licensee gave evidence that he had been involved with the property (and its
three previous owners) over approximately an eight year period. None of those
owners had been aware of any problems with the firewall. However, it was well
known that the building was of an age and condition that structural issues were likely
to be of concern.
7 The complainant had been represented by solicitors throughout the purchasing
process, and they had made it clear to him that they would not be undertaking a
physical inspection of the property. The solicitors recommended a building
inspection be completed as part of due diligence.
8 The Complaints Assessment Committee (CAC) recorded that it was satisfied that the
defect had been unknown to the previous owners and the licensee, and the issue
had not become apparent until after the Council had issued the Notice to Fix. It
therefore accepted that this was in fact, a hidden defect, that the licensee would not
have been expected to have known about.
9 In reaching its decision, the CAC considered the advice given to the complainant, as
well as the fact that he already owned two rental properties which fell into the low
value category. It held that although the complainant had clearly suffered a financial
loss, this was not in any way attributable to the actions of the licensee. Therefore,
the decision was to take no further action.
Reference Number: CA 4526157
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Documents relating to commercial/industrial buildings
In addition to the documents discussed previously, commercial and industrial
buildings are subject to further, ongoing compliance requirements.
Compliance schedules
Compliance schedules are issued by the territorial authority for commercial or
industrial buildings that contain certain features. These features are listed below:
 automatic systems for fire suppression (for example sprinkler systems)
 automatic or manual emergency warning systems for fire or other dangers
(other than a warning system for fire that is entirely within a household unit
and serves only that unit)
 electromagnetic or automatic doors or windows (for example ones that close
on fire alarm activation)
 emergency lighting systems
 escape routes pressurisation systems
 riser main for fire service use
 any automatic back flow preventers connected to a potable water supply
 lifts, escalators, travelators or other systems for moving people or goods within
buildings
 mechanical ventilation or air conditioning systems
 building maintenance units providing access to exterior and interior walls of
buildings
 laboratory fume cupboards
 audio loops or other assistive listening systems
 smoke control systems
 means of escape from fire
 emergency power systems for, or signs relating to, a system or feature
specified in any of clauses above
 cable car (including to a private dwelling).
© Christchurch City Council, Retrieved October 1 2012, from:
http://www.ccc.govt.nz/homeliving/buildingplanning/buildinginspections/buildingwofandcompliance.aspx
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Building Warrant of Fitness
All buildings that have one or more of the items in the above compliance schedule
list require a Building Warrant of Fitness (BWOF). This is a formal annual declaration
by the building owner, or their authorised agent, that the specified systems are in
full working order in accordance with the provisions of the compliance schedule.
Each component listed on the compliance schedule must be inspected by an
independently qualified person (IQP), who has sufficient expert knowledge to do so.
In large buildings, this will require site visits from a number of IQPs, each dealing
with their specialist area.
Once the inspection has been completed, the IQP provides relevant documentation
verifying this to the building owner. The owner is then able to sign the BWOF, a copy
of which must be publicly displayed on the site. A further copy is held by the
territorial authority.
Statement of Fitness
During the first year after construction, a building will be covered by a statement of
fitness issued by the Building Consent authority, which gives a temporary notification
that the items on the compliance schedule are in appropriate working order. This
must also be displayed publicly at the property and replaced by a full warrant of
fitness within 12 months.
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Review – 2
Read the statements that follow and circle the letter that represents the most
appropriate answer.
1 A LIM contains information:
a. Provided to the council by the property owner
b. Recorded by the council following property inspections
c. Relating to permits, consents, and other property-related issues
d. About proposed work on adjoining properties
2 If a building requires upgrading to meet “change of use” standards, major
concern relates to:
a. Fire rating and fire escape systems and procedures
b. Provision of access and facilities for the physically impaired
c. Earthquake strengthening
d. All of the above
3 In respect of a residential property, a Licensed Building Practitioner must carry
out or oversee:
a. All structural work involving foundations, flooring, walls, and roofing
b. Any work the property owner doesn’t feel capable of doing without help
c. Only renovations over a specified dollar value
d. Only work on new buildings
4 The following activity would be considered a “change of use”:
a. Converting a domestic garage to a bedroom
b. Converting a warehouse to apartments
c. Converting a large house to a restaurant
d. All of the above
Continued on next page
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5 The initials “P.I.M” stand for:
a. Put In Money
b. Progressive Interpretation Measures
c. Project Information Memorandum
d. Property Information Model
6 Commercial buildings that have compliance schedules must:
a. Display a Building Warrant of Fitness (or Statement of Fitness)
b. Have annual inspections by IQPs of all compliance components
c. Submit a copy of the BWOF to the council
d. All of the above
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Review – 3
Read the fictitious case scenario below, and then identify the correct course of
action for the licensee.
CASE SCENARIO
A licensee is asked to market a property that he had sold to the current owners
three years previously. The licensee is aware that the previous owner had
undertaken renovations to the dwelling, including removal of a load-bearing wall
between the lounge and dining room, and converting the garage to a bedroom. No
building consent was obtained for this work, and therefore there was no Code
Compliance Certificate. The work remained non-consented. The vendor’s lawyer has
provided a LIM report.
1 When the licensee markets the home, should he or she:
a. provide a copy of the LIM report to prospective purchasers
b. provide a copy of the LIM report to prospective purchasers, and draw their
attention to the non-consented work
c. recommend that prospective purchasers obtain their own LIM report as part
of any offer
d. recommend that prospective purchasers obtain a building inspection.
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Summary
In this section we have discussed the main compliance documentation you need to
be familiar with.
Questions are often asked by members of the public about the purpose and contents
of LIMs. You need to have a good understanding of these, and should have up to
date information about the cost of a LIM from your local territorial authority. We
have also briefly discussed PIMs, which are essentially a prelude to a building
development project.
We have also reviewed the compliance documents that apply in commercial
situations, such as Statements of Fitness, which apply in the first year of a
commercial building’s life, and Building Warrants of Fitness, which must be
completed each subsequent year.
In the next section, we will review the structures and components of buildings and
consider a range of issues that licensees need to be aware of when appraising and
marketing properties.
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SECTION 3: MAIN STRUCTURES AND COMPONENTS OF
BUILDINGS
We have previously discussed the Project Information Memorandum (PIM) which
sets out information about the subject land. This includes zoning controls, the
location of stormwater and wastewater services, any potential or known risks to the
land (such as flooding or subsidence, or coastal erosion), and any required heritage
information.
We will now focus on exploring the overall structure and components of a building
and highlight potential issues that may arise. We then go on to discuss the
important and common interior and exterior features of a building.
All buildings have certain structural elements in common:
 foundations
 exterior walls
 doors and windows
 roofing
 services, such as plumbing and electrical.
Foundations
The main purpose of foundations is to provide structural support to the entire
building, anchoring it to the land through the distribution of both vertical loads (from
the weight of the building itself), and horizontal loads (from the effects of wind, and
movement of the earth).
Foundations usually take one of the following forms:
 concrete slab
 concrete or timber piles
 continuous perimeter foundation, with internal concrete or timber piles
 timber poles.
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Note that concrete slab foundations are either onground, or in areas where the soil is poor for load
bearing (such as sandy soils), a ‘raft foundation’ may
be used. This effectively elevates much of the
concrete slab above the ground level, and requires
heavier reinforcement than a conventional slab.
Some buildings (particularly commercial ones constructed after the 1970s) have
been constructed using base isolators within their foundations; a system that
separates the load of the building from the actual foundations, and allows the
building to move laterally in an earthquake. (You can see the base isolators under
Parliament House in Wellington if you take a guided tour of the building.)
What can go wrong?
If solid concrete foundations are not laid on a properly installed damp-proof
membrane, ground moisture can rise through the foundations, causing dampness
within the building.
The roots of large trees close to a building can cause cracking to
concrete foundations.
If the building is constructed on clay soil, shrinkage or expansion
of the soil can also cause cracking of concrete foundations. This
can result in cracks in brickwork or blockwork walls.
Concrete or timber piles can sink as a result of ground
subsidence.
Timber piles can be subject to wet or dry rot, both of which are fungal infections that
cause the timber to gradually disintegrate. They can also be subject to borer, a small
beetle which eats the wood.
Common signs that timber piles may be failing include:
 cracks in the outside brick cladding
 sagging or bowing of weatherboards
 sagging or bowing of the roofline
 sloping floors, doors or windows that stick
 cracks in plaster ceilings or crinkled wallpaper.
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Exterior walls
Exterior walls come in a variety of materials. These include concrete slab, concrete
block, brick, stone, fibre-cement sheets, asbestos-cement, timber weatherboards
and weatherboards made of fibre-cement. Also used are oil-tempered hardboard
(e.g. Weatherside®) metal or vinyl, marine ply board and batten, prefinished metal
or plastic claddings, and monolithic cladding.
There are actually three types of exterior insulation and finish systems (EIFS)
cladding:
 Stucco (which is a cement-based plaster layer (usually about 25mm thick)
usually applied over a fibre-cement or plywood sheet). This has been used in
New Zealand since the 1920s.
 Texture-coated fibre-cement, which is a thin (usually about 7mm thick) veneer
of cement, fine sand and cellulose, with a texture applied after the sheets are
affixed to the wall. This has been around since the 1970s.
 Exterior insulation and finish systems (EIFS) which are a deep product of
approximately 40 – 60mm, which often makes the windows appear recessed.
Its purpose was to provide an attractive cladding that included insulation
within a single product. This became popular in the 1980s, but has since
developed an unfavourable reputation. We discuss weathertightness issues
later in this topic.
What can go wrong?
Failure of the foundations (discussed above) can lead to movement of the exterior
walls. This is usually indicated by cracking (particularly with bricks or blocks or
monolithic cladding), and sagging or bowing of weatherboards or sheet products.
Masonry walls (brick or block) are sometimes prone to spalling (where thin pieces of
brick or concrete break away), cracking or crumbling of mortar.
Timber weatherboards may suffer splitting or cracking, corrosion of nails or bolts,
and the growth of mould (especially on south-facing walls or those that are subject
to prolonged dampness). North and west-facing walls of unpainted timber will
sometimes warp because of exposure to sun.
Plywood walls can become damaged over time, especially through prolonged
exposure to ultraviolet (UV) rays.
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Fibre-cement sheets and monolithic claddings can be easily damaged by impact,
such as from garden tools, sporting equipment, vehicles, and so on. Monolithic
claddings have often been the focus of issues such as water ingress. Water ingress is
when water penetrates the building envelope.
On its website, ConsumerBuild reports:
Some homes with monolithic cladding types are at risk of being leaky
buildings. Design and installation are critical factors in ensuring your
home is protected.
We will specifically consider the issue of leaky buildings later in this topic.
In the case summary that follows, you will read about a situation in which the failure
to distinguish between fibre cement (Hardiplank) and oil-tempered hardboard
(Weatherside) could have resulted in considerable cost to the licensee and the
agency.
CASE SUMMARY:
Complaints Assessment Committee decision
1 A property was marketed as having Hardiplank cladding. However, it was
actually Weatherside, an inferior product that if not carefully maintained often
requires extensive remedial work or replacement.
2 After the sale, the purchaser’s circumstances changed, and the property was relisted on the market, with a different licensee, who warned the client that the
building was, in fact, clad primarily in Weatherside, with only a very limited
amount of Hardiplank.
3 In his defence, the licensee against whom the complaint was laid, gave evidence
that he had relied on information from a property website which stated the
exterior cladding as “fibre cement”. He had interpreted this to mean Hardiplank,
because that was the term generally used within his agency. He also noted that
the vendor did not correct this information at the time the listing authority was
signed.
Continued on next page
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4 There was no evidence to suggest that the vendor had claimed the material to be
Hardiplank, and there was apparently no discussion between the vendor and the
licensee regarding the cladding.
5 The Complaints Assessment Committee (CAC) held that the agency and the
licensee had innocently misrepresented the cladding to the purchaser, and that
such an issue could only have reasonably been resolved if the purchaser had
obtained a building inspection.
6 The purchaser had declined a building inspection clause, at least in part because
he was in competition with another purchaser for the property.
7 The CAC found both the licensee and the agency guilty of unsatisfactory conduct,
and censured them. However, no other penalty was imposed in this case.
Reference Number: CB5811176 / CB 5861882
IMPORTANT NOTE:
Licensees are advised to avoid using brand names when describing building-related
components. For example, the term ‘fibre-cement cladding’ should be used rather
than ‘Hardiplank cladding’.
Doors
Exterior doors must be constructed in such a way that they are able to withstand
long-term exposure to the natural elements, such as wind, rain, and sun. Interior
doors are usually hollow-core, which is lighter weight than solid core. However,
solid-core doors provide better sound insulation.
Ranch-sliders are often used as an alternative to conventional doors, especially in
smaller dwellings such as home units. However, these lack the security features of a
solid core exterior door.
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What can go wrong?
Doors may become prone to jamming or sticking if they become misaligned, or the
joinery has become damaged through age, lack of routine maintenance, or rough
treatment.
When carpet has been installed, this can effectively raise the height of the flooring,
making internal doors hard to open or close. This can be easily resolved by having
the lower edge of the door trimmed accordingly.
Older-style ranch-sliders often had poor drainage channels, meaning that internal
condensation could build up and potentially cause damage to flooring materials and
floor coverings.
Windows
Buildings constructed after the 1970s usually have aluminium window joinery. Older
buildings more commonly have wooden joinery (window frames), however, those
which have been fully or partly renovated are usually converted to aluminium
joinery. Some relatively new buildings use PVC joinery, however this is not a
common practice in New Zealand.
IMPORTANT NOTE:
In some buildings, especially those involving multiple floors, there are likely to be
restrictions on the opening of windows. Many modern commercial buildings rely
exclusively on HVAC (heating, ventilation and air conditioning) systems for the
distribution of fresh air and climate control throughout the building.
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Windows come in a variety of styles:
 Awning: here a single pane window opens outwards on a vertical axis from
hinges at the top.
 Bay: projects out from the exterior wall. Commonly used in houses where a
window seat is a feature; or in kitchens to provide extra space and light.
 Bi-fold: a modern style, allowing separate panels to be pushed flush against
one another, at right-angles to the wall, creating a very open effect.
 Casement: hinged at the side, this window opens outwards (like a door).
 Dormer: windows which protrude through the roofline, adding a sense of
space to an upstairs room.
 Double-hung: most commonly seen in older style properties, such as cottages
and villas. Two panes of glass move vertically along the window channels,
allowing ventilation at the top or bottom. Also known as sash windows.
 Fanlight: a smaller awning-type window, usually used in conjunction with
sealed and casement windows, to allow extra ventilation to a room, while
providing reasonable security.
 Geometric: commonly circular or arched, as a design feature. They are often
used in conjunction with other windows, as these are usually unable to be
opened.
 Louvre: small panes of glass overlap, controlling the amount of airflow. These
can be potentially draughty, because it is impossible to get a complete seal.
They can also be a security risk because of the easy removal of the panes, so
are usually only used in small spaces, such as toilets.
Continued over page
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 Picture: large single sheet windows which are not designed to be opened. They
are normally used to enhance a view, or allow maximum light penetration.
 Skylight: a form of window inserted into a roof design to allow extra light
penetration, and in some cases, including an opening feature which may be
manually (using a long rod) or electrically operated.
 Slider: a window where two (or more) panes slide horizontally across one
another to create an open space.
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Review – 4
Choose the appropriate window style from the list above and insert in the
appropriate space below each picture.
A
______________________
B
______________________
C
______________________
D
______________________
E
______________________
F
______________________
© Golden Windows Ltd. Retrieved October 31 2012
http://www.goldenwindows.com/product.php?cat=product17
REAA Continuing Education 2013
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CASE SUMMARY:
Complaints Assessment Committee decision
1 A licensee had approached the owners of a property on behalf of a customer,
and secured an agency agreement. At the time, there was discussion about the
glazing on the northern side of the property, because there was an issue with
noise.
2 The licensee recorded “double glazing” on the agency agreement, which was
signed by the vendor (client).
3 The customer subsequently discovered that the windows were not, in fact,
double-glazed, but were merely thickened (6mm) single-pane glass. The
customer lodged a claim against the clients in the Disputes Tribunal for the
amount of $7,818.82. The claim was successful, and the client was required to
compensate the customer.
4 The Disputes Tribunal adjudicator held that the vendors had made a
representation to the agent, and were therefore bound by the acts of their
agent.
5 The clients (vendors) subsequently complained to the REAA on the grounds that
the licensee had misrepresented the property, causing the clients financial loss.
6 In an interview with an Authority investigator, one of the complainants (a
vendor) mentioned that the previous owner of the property had said the
windows were “extra thick, double glazed, or something like that”.
7 The Complaints Assessment Committee reviewed the testimony and reached a
conclusion that the actions of the licensee were insufficient to warrant a charge
of unsatisfactory conduct. The CAC referred to the Disputes Tribunal decision
that it was the client who had made the misrepresentation, and determined that
no further action be taken against the licensee.
Reference Number: CA 3862767
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Double glazing
The case summary above refers to the use of double glazing. Let’s now discuss what
that term means. Double glazing consists of two parallel panes of glass, usually
between 6mm and 12mm apart. The space between the panes of glass is filled with
air or a gas such as argon, which has enhanced insulating properties.
The purpose of double glazing is to improve the insulation qualities of windows, as
well as providing a level of noise reduction.
Double glazing can be installed in new buildings or retro-fitted into many types of
buildings. It is relatively easy to identify, because of the clearly thicker joinery
needed to accommodate the two panes of glass.
Double glazing is now a requirement for new buildings in certain areas of New
Zealand, especially in colder climates, because of the insulation properties and
added heat retention value.
© Smarter Homes. Retrieved October 31 2012 from http://www.smarterhomes.org.nz/design/glazing/doubleglazing-glass-options/
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What can go wrong?
If there is insufficient protection from window flashings (strips of galvanised steel or
other impervious material) moisture may penetrate through the window seal.
Broken or cracked glass can also be a source of moisture entry.
Dark coloured aluminium joinery may be subject to thermally-induced movement,
causing stress to the framing joints. This may lead to moisture penetration,
especially in colder weather. In high wind areas, some windows are simply unable to
fully withstand the pressure and temperature gradients, and may develop leaks, that
are almost impossible to resolve.
Windows may become prone to jamming or sticking if they become misaligned, or
the joinery has become damaged through age, lack of routine maintenance, or rough
treatment.
Paint applied too thickly, or a build-up of dirt and debris on wooden joinery may
cause problems with opening or closing windows.
Double glazing can be subject to condensation between the glass panes if the edge
seal has failed (through poor installation, ultraviolet deterioration, or defective
manufacturing). In some cases, the double glazing unit is too light to withstand the
wind loading for the area, meaning that the glass can flex, causing damage to the
seal.
Roofing
The roof is an important part of the functional and aesthetic aspect of any building.
Roofs come in a variety of shapes, as shown in the sketches below.
Gable:
This is one of the most common styles,
suitable for most building types. It gives good
overall coverage, deflects water away from
the exterior walls, and can be designed using
a wide range of roofing materials.
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Winged gable:
A variation on the gable roof, the winged
gable features an angled extension at each
end of the building.
Hip:
This is another very popular roof design used
in dwellings and other buildings throughout
New Zealand. In this roof design, all sides
slope downward to the walls, usually with a
gentle slope.
Dutch hip:
Similar to a hip roof, but with the addition of a
small gable at either end.
Flat:
A very simple design, the flat roof actually has
a slight fall to one side (at least 1.5° to enable
run-off of rain. This design is more commonly
used on commercial and industrial buildings
than residential ones.
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Shed:
Similar to the flat roof, but with a steeper
pitch from front to back. This design is often
used as a lean-to addition to an existing
building.
Mansard:
A French design, with elements of a hip roof,
but a double pitch. Because of the complexity,
this is not as common as some other roof
types.
Gambrel:
This roof design has a wide angle at the top
which provides excellent space for use as an
attic. It is sometimes referred to as the ‘barn’
roof, because of its similarity with many barns.
A-Frame
The A-Frame design is popular for cottages,
smaller homes, and some commercial
buildings, as well as churches. It is economical,
and, because of its steep pitch, serves as both
roof and upper walls simultaneously.
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Folded plate:
The Folded plate is most commonly used for
industrial and some commercial buildings.
© Goodheart Willcox Co. Inc. Retrieved October 30, 2012 from: http://www.slideshare.net/stootypal/roof-types
What can go wrong?
All roofing materials are likely to suffer damage if considerable care is not taken
when accessing the roof for cleaning or maintenance purposes.
Many different roof materials are subject to the growth of moss, lichen and mildew
if not cleaned regularly according to the manufacturer’s instructions. This is
particularly likely to happen if the roof is overshadowed by large trees.
Corrugated iron or other long-run metal roofs can be subject to general corrosion,
especially in high risk areas such as those close to the sea. They can also be affected
by deposits from chimneys or flues. Sheets may also become damaged if roof fixings
are loose or missing (which often happens over time), leading to lifting or buckling.
This can allow water to penetrate into the roof cavity.
Metal tiles which have a stone-chip coating (Decramastic®) may be affected over
time by the deterioration of the coating that binds the chips to the metal.
Clay and concrete tiles are the heaviest roofing materials, but may still become loose
if not fixed securely at the time of installation or subsequent repair. They may be
subject to cracking, especially in high-frost areas. If the roof framing was insufficient
at the time of construction, or if load-bearing walls have subsequently been
removed, the roof may show signs of sagging.
Flat roofing may be too flat (it needs a slight fall of at least 1.5 o to permit rain runoff). Sometimes, the framing of flat roofing will sag, causing water to pond on the
roof itself.
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Topic 2: Property structures
Timber shingles are most likely to suffer from splitting or warping. If conditions are
routinely moist and warm, they may also be prone to the growth of moss and algae.
Sheet membrane roofs, (especially flat roofs), are subject to ponding water if the
outlet drain has become blocked, or is too small for the volume of water. The
membrane can also be torn or split, usually as a result of impact damage or nails
popping as a result of timber shrinkage.
Translucent (usually corrugated) sheeting is sometimes used as a roofing material for
decks, conservatories and walkways. This tends to become crazed (scratched) and
brittle over time, usually as a result of exposure to ultra-violet light. Fixing screws
must be applied to the top of the ridges to prevent moisture penetration.
Interior components of a building
We will now explore important and common interior components in a building
including:
 Flooring
 Internal walls
 Ceilings
 Fireplaces and chimneys
 Stairs
 Kitchens, bathrooms and laundries
 Plumbing, water and gas
 Electrical
 Insulation
 Security.
Flooring
Concrete floors are most common in modern homes. They have thermal heat
properties that, if used with efficient insulation, can help to store heat within a
building. Concrete slab floors must be carefully laid to minimise the risk of cracking,
and to avoid unevenness in the finished floor surface.
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Timber floors are more common in older homes. In the 1960’s, the development of
partly prefabricated homes led to more homes being constructed using
particleboard flooring, which is less costly but also less durable. Some modern
timber floors are actually timber laminate, which is a thin sheet of timber veneer
overlaid on (usually) particleboard.
IMPORTANT NOTE:
If you are marketing a property that has a timber floor, be careful how you promote
this. There are many instances where a licensee has marketed a property as having
‘kauri flooring’, when at least part of the floor (which was covered by carpet or
another covering), had been replaced using an inferior product.
If you are unable to verify the type and condition of flooring accurately, you should
not make definitive statements. Always recommend that prospective purchasers
seek specialist advice.
What can go wrong?
If a concrete floor becomes cracked or otherwise damaged, there is a chance of
moisture penetrating.
Timber floors may become springy if the floor joists (the timbers that support the
floor) are too widely spaced, if poor quality timber has been used for the joists, or if
timber piles are rotting. Timber floors may also develop squeaks if the wood shrinks,
(usually through excessive dryness which may be caused by high room
temperatures). The same problem may occur if the flooring has not been adequately
fixed to the joists. In areas where there is high ongoing dampness, untreated timber
can rot.
Particleboard (composite fibre) floors are very susceptible to
moisture, especially if they have not been thoroughly coated in
a protective sealant. This can result in swelling and warping.
They are also prone to impact damage, such as that caused by
spiky heels on shoes.
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Internal walls
The most common products for internal walls in residential properties are
plasterboard, hardboard or particleboard. Timber walls are featured by some
construction companies. Larger buildings, and most commercial and industrial
complexes use solid masonry or concrete, such as tilt-slab (which is a pre-cast
concrete product formed into panels, beams or columns.)
What can go wrong?
Walls using plasterboard can develop cracks. This is due to building movement which
may be caused by a building settling on its foundations, earthquakes or even the
vibration caused by heavy traffic in the area. They are also susceptible to impact
damage.
The appearance of water stains or mould is usually a sign of leaks either through
failing pipework, water ingress into the building cavity, or condensation (which is
usually limited to ‘wet areas’ such as kitchens, bathrooms and laundries).
Timber walls may develop bowing because of either shrinkage of the joists or
insufficient allowance for expansion during the construction period. This can also
occur if the timber was excessively dry at the time of installation. Mould growth
(which usually appears as dark or black staining), is also a potential problem,
especially if the area is not well ventilated.
Ceilings
Most common ceiling materials include plasterboard, fibrous plaster, tiles or
softboard, which may be large sheets finished to a smooth surface. In the 1960s and
1970s, many homes were fitted with textured ceilings containing asbestos. We will
discuss asbestos later in this topic.
What can go wrong?
If there is condensation in the roof space, the roof is
leaking, or there are leaking pipes above the ceiling, the
likely result will be water staining and possible
deterioration.
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Ceilings may be prone to sagging if they have not been adequately fixed to the
ceiling joists (timbers), or if the ceiling joists or insulation materials have become
wet. This is an especially serious problem with ceilings constructed using heavy
materials, such as plasterboard.
If there are gaps in insulation in the roof space, damp patches are likely to appear on
the ceiling, which will eventually develop into mould.
Where there are open fireplaces, ceilings may be prone to discolouration because of
smoke from the fire.
Fireplaces and chimneys
Fireplaces are a feature of many residential properties built before the 1990s. Earlier
homes commonly used open fireplaces. More recently, wood burners and other
solid fuel appliances have become popular as they generate better heat distribution
and are therefore more efficient.
The Ministry for the Environment introduced specific guidelines regarding the
control of emissions and efficiency standards, which apply to all new wood burners
installed in urban areas after 1 September, 2005. Such installations require a Building
Consent. Many councils also have specific restrictions within their district plans
regarding fireplaces of all types.
There are strict requirements regarding the placement and securing of all fireplaces,
irrespective of whether they are open-hearth or enclosed, such as wood-burners.
What can go wrong?
Common problems among older fireplaces include cracks in the chimney, cracks in
the (internal) fire bricks, deterioration of mortar, and corrosion of the metal flue or
related fastenings. Also, if the chimney is not swept regularly and kept clean and
debris-free, this can lead to problems with the operation of the fireplace.
Another problem is moisture penetration through the roof where the flue is fitted.
This can led to water stains on the ceiling in the surrounding area.
Burning driftwood, treated timber or hardwoods (e.g. Jarrah) will have a serious
adverse effect on the firebox. In the former cases, corrosion is likely to result, and in
the case of hardwoods, the fire is likely to burn hotter than the manufacturer’s
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stated maximum because of the increased density of the timber, causing
deterioration to the firebox.
IMPORTANT NOTE:
A significant problem can arise if the firebox becomes cracked or warped, as this can
make the fireplace extremely unsafe, and potentially make the building uninsurable.
All (working) fireplaces must be maintained in proper condition, by a qualified
tradesperson.
Stairs
Stairs are made up of treads (horizontal) and risers (vertical), usually with balusters
(vertical posts between the tread and the handrail). They need to be designed and
constructed so that there is sufficient depth (from front to back) of the tread to
allow an adult to step safely up and down. The riser also needs to be set at a height
that is not too steep.
The diagram on the following page shows common staircase styles.
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© Open Polytechnic, 1996
What can go wrong?
Most internal stairs use timber treads, which can become worn or shrunken, leading
to squeaks. External stairs are often made of concrete, metal or sometimes wood. If
not kept clean and free of debris, they can become slippery and cause a tripping
hazard.
Handrails and balusters can become loose (through wear and tear or abuse), leading
to a potential hazard. If the stairs are covered by carpet or other flooring materials,
these can become worn at the edges, causing a potential tripping hazard.
A licensee should always check the overall condition of stairs at the time of listing a
property, as the licensee will be responsible for ensuring the safety of any
prospective purchasers during inspections.
Kitchens, bathrooms and laundries
Kitchens and bathrooms are often considered the most expensive areas of a dwelling
to upgrade. They have a high utility value, especially if well-planned with quality
surfaces, appliances and adequate storage.
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These rooms should be in overall keeping with the rest of the dwelling; there is little
to be gained from having a designer kitchen in a modest home.
In some dwellings, laundries are located in the garage space. In others, especially
where space is at a premium, laundries may be incorporated within the kitchen or
installed in a recessed area like a large cupboard. Note that some people and
cultures are averse to having a laundry in the kitchen, because they consider it
unsanitary.
What can go wrong?
Kitchens, bathrooms and laundries frequently have high moisture levels and can be
prone to deterioration of wall linings, skirting and bench-tops, unless these are of
very durable materials.
Porcelain fittings such as baths and hand-basins can become chipped or stained.
Acrylic fittings such as baths and hand-basins can be cracked or scratched. The grout
between tiles can discolour or crack over time.
Waste pipes and taps can develop leaks if not maintained. Slow dispersal of water
from sinks, baths and basins can occur if there is residue build up in the outlet pipes.
Cupboard doors can become misaligned, especially if hinges are old, or they have
been roughly used. Where composite board has been used as shelving, this will
deteriorate rapidly if exposed to moisture.
Laminated surfaces can lose adhesion, causing lifting, cracking and blistering,
especially if water is allowed to penetrate beneath. Stone, terrazzo or acrylic
surfaces can crack, especially if the foundations are not fully secure, or there is
thermal movement. Thermal movement is expansion or contraction caused by
changes in temperature.
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Review – 5
Read the case summary below, and then apply this information to the five
questions that follow. Circle the letter that represents the most appropriate
answer.
CASE SUMMARY:
Complaints Assessment Committee decision case study
1
A property was listed for sale at auction by a licensee who had a long-standing
knowledge of the property. The licensee was aware that, among other things,
the current owners (the clients) had undertaken renovations of the bathroom.
2 At the time of listing, the clients assured the licensee that none of the work
undertaken required council consent.
3 During conversations with the complainant (purchaser) in the period leading up
to the auction, the licensee explained that there was a lack of information
regarding the alterations to the bathroom. The licensee recommended that the
customer obtain a builder’s report, and seek legal advice.
4 The complainant did obtain a builder’s report and sought legal advice, before
advising the real estate agency that he would not be attending the auction.
5 The complainant did, in fact, attend the auction at which he was the successful
bidder.
6 The complainant resold the property, approximately four months after purchase.
7 It was after the resale that the complaint was lodged with the REAA.
Reference Number: CB6241601
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1 The licensee:
a. Deliberately withheld information about the status of the bathroom
renovation
b. Explained to the customer that there were no documents relating to the
bathroom renovation
c. Relied on advice from the client about the bathroom renovation
d. Didn’t know the bathroom had been renovated
2 The licensee:
a. Acted negligently
b. Breached Rule 6.4 of the Code
c. Ignored the customer’s requests for information
d. Disclosed what he knew, and recommended a thorough due diligence
process by the customer
3 The customer:
a. Relied solely on information provided by the licensee
b. Undertook due diligence and continued to purchase the property
c. Was unaware of the bathroom renovations
d. Believed the bathroom renovations were Code compliant
4 The most likely finding by the Complaints Assessment Committee (CAC) in this
case is:
a. That no further action was required
b. That the licensee was guilty of unsatisfactory conduct
c. That the licensee should be ordered to undertake further training
d. That the licensee was guilty of misconduct
5 In this case:
a. The licensee had acted entirely appropriately by passing on the information
available, and recommending further action by the customer
b. The complainant acted in full knowledge of the situation when he purchased
the property
c. There was nothing more that could have been expected of the licensee
under the circumstances
d. All of the above
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Plumbing, water and gas
Plumbing systems include the pipework and other mechanisms for the supply or
disposal of water, wastewater, gas and sewage at a property. Water pipes, hot water
cylinders, reticulated gas supply lines and bottle-gas cylinders, toilets, sinks, septic
tanks and stormwater disposal systems are all included.
In urban areas, water is supplied by way of a public distribution system managed by
the local or regional authority. A valve (usually in a metal box known as a toby) is
located just outside each property’s boundary. This is the connection between the
public supply water main and the water pipes used at the property. Water is
supplied on a metered basis, with multi-unit properties having separate meters.
In rural areas, water supply is usually by tanks (commonly 25,000 litre), which collect
rainwater from the dwelling and other buildings such as barns and sheds. An average
family home needs a minimum of one 25,000 litre supply and two is preferable.
Further water supply will be needed if there are livestock, or extensive gardens that
require irrigation.
All plumbing and drainage work must be carried out by registered plumbers and
drainlayers, apart from very minor work such as changing taps or washers. Plumbers
and drainlayers are licensed by the New Zealand Plumbers, Gasfitters and
Drainlayers Board. The plumber or drainlayer must hold a personal licence, or the
company for which he or she works must hold a licence.
Any new plumbing or drainage work will require a Building Consent before the work
takes place. The relevant documents will be held in the property file at the local
council. A licensee would be looking for the subsequent issue of a Code Compliance
Certificate, to confirm that all work has been signed off.
Work relating to gas supply or gas appliances (such as gas stoves, water heating
systems, etc.) must be carried out by a licensed gasfitter. If any gas appliance has
been installed, replaced or repaired, there should be a Gas Certification Certificate.
This certificate signs off the work by the licensed craftsman gasfitter. Licensed
gasfitters are registered by the New Zealand Plumbers, Gasfitters and Drainlayers
Board.
Some plumbing and drainage work is exempt from the requirement to obtain a
building consent. This includes work that involves very low risk or danger to people
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or property, such as repairs and maintenance using the same or comparable
materials and fittings, and in the same location as the original work.
Other relatively uncomplicated work, such as replacing a bath with a shower in the
same location, is also exempt. However, such work must be carried out by a
certifying plumber.
Remember, even if work does not require a building consent, it must still comply
with the Building Code and any relevant legislation. If there is any uncertainty, the
owner, plumber, drainlayer or gas fitter should seek advice from the building
consent authority before commencing work.
It is acceptable for a householder to install small LPG cylinders (less than 15kg).
However, the work must comply with NZ Standard NZS 5261. It is recommended
that because gas is a volatile and potentially lethal substance, such work should only
be undertaken by a qualified tradesperson.
What can go wrong?
One of the most common problems with plumbing, water or gas are dripping taps or
leaking pipes, usually caused by failure of the seals, or due to corrosion.
Another problem is inconsistent water pressure, usually caused by multiple users of
a building using the water supply simultaneously.
Blockages are also very common resulting from either food, rubbish or other debris
deposited into sinks. At times, tree roots near the building can crack or block drains,
causing water to dam.
In rural areas which are reliant on tank water, care must be taken to ensure that
downpipes are disconnected from any building where the roof is to be cleaned. If
this is not undertaken, there is likely to be contamination of the water supply
through residue or chemicals being used for cleaning.
A faulty plumbing installation can result in failure of one or more components,
resulting in backflow of potentially contaminated water. There may also be possible
leaking or flooding, which may occur inside the building envelope but remain
undetected for some considerable period of time.
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If there is a serious problem with a gas supply, this could be fatal to one or more
occupants of the building. Any property in which a gas appliance has been installed
without proper certification, could void an insurance claim in the event of a fire.
Electrical
The electrical supply to a property includes all wiring (including that used for
telecommunications and information technology). There is very little work relating to
electrical services that can be carried out by a layperson. This is largely limited to
simple repairs and maintenance, such as replacing light switches, lamp holders,
thermostats and stove heating elements, or replacing fuse wires and fuse cartridges.
The following website gives a thorough explanation of what can be done by a
layperson.
Weblink: Orion New Zealand Ltd
http://www.oriongroup.co.nz/your-network/safety/your-safety/electrical-safetylaws.aspx
Some buildings constructed before the late 1970s may contain either vulcanised
Indianised rubber (VIR), tough rubber sheathing (TRS), or old steel conduit. The type
of wiring would be identified as part of a comprehensive building inspection. It is
prudent when marketing such properties, to alert prospective customers to the
possibility, and encourage them to have a building inspection undertaken.
If a client states that a building has been re-wired, there will be a Certificate of
Compliance Issued by the electrician. Remember to clarify whether the building has
been subject to a full re-wiring, or if only part has been replaced. If a partial re-wiring
has been done, this may not have (or require) a Certificate of Compliance.
Issues relating to electrical wiring have come to light as a result of some insurance
companies declining to provide cover on such properties unless they are fully
rewired. This would put a customer at considerable risk, especially if they were
purchasing subject to a mortgage.
Remember, you are not expected to take on the role of a building inspector yourself.
Nor are you required to engage in unnecessary scaremongering of prospective
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purchasers. However, you need to understand the problems that can arise from
defects that you are, or should be, aware of.
In this section, we also consider common electrical appliances, such as stoves,
dishwashers, etc. It is always important to check with clients that any appliances that
are to be sold with the property are not leased, subject to hire purchase or other
finance arrangement, and to confirm that they are in working order, both at the time
of listing and at the time of sale. If not, this information needs to be passed on to any
prospective customer, and should be documented on any Sale and Purchase
Agreement or lease.
Solar systems
There has been increasing demand for solar systems to complement the commercial
electricity supply. Solar systems come in two types:
 thermal, which is used for hot water generation, and
 photovoltaic, which is used for electricity generation.
Both operate in daylight, rather than needing direct sunlight, so can perform in
cloudy or overcast conditions. For optimum performance, however, direct sun is
needed, so panels are usually sited on a north-facing roofline.
The thermal system transports heat from the roof collection area, via a transfer fluid
to the hot water cylinder of the building. This reduces the need for electric hot water
generation, which is one of the most significant components of the average
electricity bill.
The photovoltaic system enables the production of electricity, which is normally
used directly within the building, but in some cases may be redirected back to the
electricity grid.
The installation of solar panels requires a Building Consent. Some councils, for
example Nelson, don’t charge for this.
What can go wrong?
One of the most common problems is damage to light switches or power sockets,
usually as a result of impact damage or rough usage.
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Cables and wiring may become damaged as a result of general wear and tear. In
some cases, rodents have been known to chew through cables.
Appliances are subject to general wear and tear, but may also be damaged through
rough handling. It is important to carefully note the details (make, model and
condition) of appliances that are to be included as chattels at the time of sale, as this
is one of the most common causes of complaint from customers.
Solar panels can be damaged through rough handling or impact. They usually have a
ten year performance guarantee. Older solar equipment is likely to be less effective
than more recent technology.
Insulation
Insulation in buildings serves a number of purposes:
 it retains warmth in winter, and helps keep a building cooler in summer
 it reduces dampness and condensation
 it reduces noise levels
 it helps minimise certain health risks, such as asthma and other respiratory
conditions.
There are two main types of insulation: bulk (which works using a thick layer of
material to trap air between the inside and outside of the building) and reflective
(which works by reflecting radiant heat off a shiny surface). Double glazing of
windows also improves a building’s insulation value.
Insulation has been a mandatory requirement in domestic buildings in New Zealand
since 1977. New buildings are commonly insulated in the ceiling, floor and exterior
walls. Bulk insulation is usually used in the ceiling and walls, and reflective insulation
used over floor joists to prevent dampness rising from the soil below.
What can go wrong?
Insulation loses its efficiency if it hasn’t been installed properly. This means there
must be no gaps between the insulation material and in ceilings, bulk insulation
should cover the ceiling joists (horizontal timber members). An insulation gap as
small as 5% can lead to a 50% loss in insulation value.
The following diagram shows the loss of heat in an uninsulated house.
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© Smarter Homes. Retrieved October 31 2012 from http://www.smarterhomes.org.nz/design/insulation/
Over time, bulk insulation will tend to flatten. The easiest remedy is to add new
insulation over the top, increasing the density. However, if the insulation has
become wet, it needs to be replaced.
Buildings which have a low-pitched or flat roof especially need a vapour barrier
because there is little or no ventilation in the roof cavity. This can lead to mould
growth on ceilings.
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Security
A building is only as secure as the occupants or users of that building are prepared to
make it. Most private homes have relatively simple security measures such as door
locks. Security window latches, that only allow a window to be open a short span,
are also deterrents to intruders.
Another simple security measure is to use low-height landscaping and fencing to
improve visibility between the building and street frontage, rather than offering
effective hiding spaces for thieves and burglars. Sensor-lights are also valuable,
unless these are likely to be frequently set off by the movement of pets or legitimate
passers-by.
At the next level, there are a variety of burglar alarm systems (both hard-wired and
wireless), which in many cases are linked to a security company’s monitoring system.
Some have provision for separate alarm codes to be issued for different uses (such
as to give a temporary code to real estate licensees for the purpose of showing the
property to prospective purchasers).
Many multi-unit residential and commercial buildings have limited access entry,
through the use of swipe cards. These are required for access to garages and parking
areas, main and side entrances and specific elevators or floors.
CASE SUMMARY:
Complaints Assessment Committee decision
1
A licensee had arranged to show a property to a representative acting on behalf
of customers, who at the time were negotiating an agreement to purchase the
property. This was a conjunctional agreement between two agencies.
2
The representative was well known to the licensee, as a personal friend and
respected business person.
3
The complainant (the client) alleged that the representative had entered the
property alone, using the access code provided by the licensee, while the
licensee waited in her car.
Continued on next page
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4 The licensee acknowledged that she had given the access code to the
representative, but claimed that in fact, she had accompanied him to the
property, and remained with him and the customer during the inspection
process.
5
The complainant negotiated an agreement with the licensee’s employer,
whereby the matter would be discussed at a staff meeting, the licensee made
an example of, and compensation paid, amounting to the commission the
licensee would have received from the sale.
6
There was a subsequent claim lodged by the complainant’s partner, whereby the
agent further agreed to refund the agency’s setup fee ($550 plus GST).
7 The complainant then took his case to the Complaints Assessment Committee
(CAC), seeking (among other things) a written apology.
8
The CAC held that there had been a breach of Rules 9.18 and 6.3. The licensee
was reprimanded and ordered to pay a fine of $1,000. The CAC also ordered a
written apology to the complainant.
Reference: CB 5768705 / CB 5782331
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COMMON EXTERIOR FEATURES
We will now turn our attention to the following common exterior features:
 Paving and paths.
 Fences and gates.
 Pools and spas.
 Retaining walls.
Paving and paths
Paving and paths usually comprise durable materials such as concrete or concrete
slab, stone or clay pavers. Paths should be sufficiently wide to allow at least one
person to walk comfortably, and should be designed to avoid unnecessary steepness
where possible, as this is a common cause of fall injuries.
What can go wrong?
Concrete (and similar products) are likely to crack if the base surface has not been
properly prepared, such as levelling and compacting, or if the underlying surface
subsides. They will also crack if subjected to excessive heavy loads that exceed the
capacity for which they were designed.
Paving materials may become uneven if the surface has not been thoroughly
prepared.
Water ingress through damaged or leaky pipes, or high rainfall, are common causes
of movement and damage to paving and paths. Growing tree roots are another
source of damage.
If the paving and paths are not kept reasonably clean and free of surface dirt and
debris, or if they are in damp conditions, the surface will become slippery and
hazardous. This is a potential cause of injury to yourself or people you introduce to
the property, such as prospective purchasers or those conducting inspections.
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IMPORTANT NOTE:
Remember, licensees are the “person in control of a place of work” and responsible
for ensuring the safety of visitors to properties during inspections and open homes.
You need to check that hazards such as slippery paths are not likely to pose a
problem. If there is a risk, you should ask the property owner to arrange for the area
to be thoroughly cleaned, or alternatively a barrier should be erected around the
affected area, to minimise the possibility of an accident.
Fences and gates
Fences and gates are available in a wide variety of materials and styles. They serve a
need for privacy and security, and many have aesthetic value.
Remember, the placement of a fence is not necessarily a representation of the
physical boundary of the property.
The photos above illustrate two commonly used fences in rural settings. On the left
is a post and rail fence, and on the right is a barbed-wire fence.
Swimming pools require special fencing and gates, which we discuss in the next
subsection.
What can go wrong?
Timber fences may twist or warp if they have been insufficiently fixed to groundretention posts, or to framing. If untreated timber has been used, the fence may
also be subject to rotting, especially at ground level.
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If fence posts or gate posts are pulled out of alignment, through either ground
movement, or incorrect tension on the materials, this can make it difficult or even
impossible to open or close gates. Similarly, non-galvanised gate fixings can become
corroded, especially in coastal areas.
Pools and spas
Swimming pools range in quality from extremely elaborate to very simple.
Swimming and spa pools are subject to special fencing requirements under the
Fencing of Swimming Pools Act, 1987. Specific provisions include the following
requirements:
 Fences must be at least 1.2m high on all sides. If the fence is made of
perforated material, netting or mesh, or any other material that might enable
children to climb the fence, it must be 1.8m high.
 Fences must be made of durable materials, and built in such a way that
children under 6 years are not able to climb them.
 There must be no gaps wider than 100mm which may enable a child to
squeeze through the fence to the pool area.
 All parts of fencing that are not vertical and may present an opportunity for
climbing by a child, shall be inaccessible from outside the pool area.
 Any gate in the fence has to be self-closing and self-latching. In most cases, the
latch must be at least 1.5m above ground level.
Under the Fencing of Swimming Pools Act, the occupier of the property at which
there is an inadequately fenced pool may be held liable. This means that tenants are
not excluded from liability.
Any pool which is not fenced in compliance with the Act should be emptied until the
necessary remedial work can be carried out.
What can go wrong?
All in-ground pools have the potential to rise out of the ground and become
distorted if they are left empty. This is because the water pressure in the ground
under the pool becomes greater than the weight of the pool itself. This is a particular
problem in areas with a high water table (the level at which ground becomes
saturated with water).
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Concrete pools may be prone to cracking, especially in cases of ground movement,
or an alteration in the surrounding soil moisture. They may also be subject to spalling
(breaking off of thin pieces) of the concrete, because of corroded fittings or through
incorrect pool maintenance.
Fibreglass pools may become delaminated, blistered or cracked, either through a
fault in the manufacturing process or if not maintained in good year-round
condition.
Vinyl-lined pools can deteriorate, developing wrinkling or shrinkage of the liner
through normal ageing, or excessive or inappropriate use of chemicals. If used
carelessly, the liner can become torn or stained.
Retaining walls
Retaining walls are designed to create a barrier that prevents soil or other material
following a natural slope. The retaining wall creates a flat space to be used for
landscaping, traffic flow, or another purpose. They are commonly built using
concrete, concrete blocks, or timber. In some places, large wire mesh structures are
filled with rocks to create a retaining wall.
These walls are subject to considerable pressure from the land they retain.
What can go wrong?
Retaining walls need to be engineered specifically for the location. Failure to do so,
or failure to maintain the wall in good condition, can result in loss of the wall’s
structural integrity, with the resulting effect that it might collapse.
Retaining walls should be regularly inspected for signs of damage or deterioration,
especially after severe weather or seismic events such as earthquakes.
Summary
When appraising or inspecting a property, it is important to be on the alert for any
visible signs of actual or potential problems in the structure of a building, or for
indicators that may point to actual or potential problems.
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Be aware, that if a problem is identified, this is not necessarily a barrier to its sale.
However, in your capacity as a licensee you have very clear obligations, in terms of
your knowledge of the types of buildings and structures you market, to disclosure
any issues.
Here is a summary of some of the main exterior and interior issues you should be on
the alert for.
Exterior
 cracked or missing roof tiles, long-run or other roofing material
 cracks or damage to chimneys
 cracks or damage to exterior walls
 landscaping that is butted up against exterior walls, especially timber
weatherboards, or bricks where soil or plants may be blocking the ventilation
slots
 signs of water ingress around doors, windows, patios, decks, balconies and
conservatories (we will review this in more detail later in this topic)
Interior
 uneven, squeaky or springy flooring
 cracks or discolouration on ceilings
 cracks or discolouration on walls or flooring
 damage to kitchen, bathroom cabinetry (inside and out)
 damage to kitchen, bathroom, or laundry appliances and fixtures
 problems with steps or stairs
 signs of water ingress
Remember, you are not required to have the knowledge and skill that would be
expected of a building inspector, however if any of the above items are clearly
visible, they should warrant further inspection.
Just as you are expected to thoroughly and carefully inspect the interior and exterior
of a building, or part of a building that you are going to market, you are also
expected to be familiar with other features associated with the property.
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It is very important to remember your role in respect of the Health and Safety in
Employment Act, where you are responsible for the general personal safety of
visitors to properties you are marketing.
You need to be aware of any possible risks, such as slippery footpaths or steps, loose
railings on stairways, etc. Such issues should, in fact, be addressed before the
property is made available for viewing.
In the next section, we will look at other land and building-related problems that you
need to be familiar with.
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SECTION 4: LAND AND BUILDING-RELATED ISSUES
In this section, we will briefly discuss three common land and building-related issues
you need to be on the lookout for, before you take on the responsibility of marketing
a property. These are:
 Asbestos
 Lead-based paint
 Land contamination.
Asbestos
Asbestos was used in a wide variety of building and interior décor products until the
mid-1980s. Asbestos fibre has since been recognised as a potential health hazard if it
is cut, broken, or burned.
The following is a summary of products that may be a potential hazard:
 asbestos fibre cladding
 asbestos/cement roofing
 soffit boards
 some thermal and acoustic insulation
 some textured ceiling coatings (e.g. Artex)
 some ceiling tiles
 older vinyl floor coverings
 older electrical fuse boards and switch gear
 lagging (insulation covering hot water pipes).
© New Zealand Guidelines for the Management and Removal of Asbestos 3rd Ed. Retrieved October 2, 2012
from http://www.osh.dol.govt.nz/publications/booklets/asbestos-management-removal/fig10-large.asp
If there are concerns about the possible or actual presence of asbestos in a property,
a specialist inspection should be recommended. Asbestos removal is a specialist
process that should only be undertaken by trained technicians in controlled
conditions.
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Lead-based paint
Lead-based paint was commonly used before 1980. It is a toxic substance, which can
be easily absorbed through contact with skin. Particles can be released into the
atmosphere if the painted surface is sanded or is flaking.
A simple test kit can be purchased from many paint stores that will identify the
presence of lead in paint. Even buildings which have been recently painted may
show traces of lead, if old paint had not been removed before repainting.
Land contamination
Historically, a number of hazardous substances have been used for agriculture,
horticulture and a wide range of industries, often with disposal practices that would
not be permitted today. In some cases, this has resulted in contamination of the soil,
waterways, and air. These include areas that have been historically used for the
production or storage of pesticides and agrichemicals, or timber treatment, old
gasworks and petroleum storage sites, old mining areas.
Local councils usually have a reasonably reliable record of areas which may be
subject to contamination, and LIM and PIM reports may contain reference to a
Hazardous Activities and Industries List (HAIL). However, if there is such a reference
relating to a property, this does not necessarily mean that the property is
contaminated, only that it is in an area where specific land use activities may have
led to a level of contamination. The council should be able to provide more details as
to any likely or actual risk.
Summary
Some parts of New Zealand are more likely to have problems with land
contamination than others. Some prominent contaminated sites are well publicised.
Older properties are more likely to contain asbestos products or lead-based paint
than newer ones. However, these are issues that you need to be aware of.
In the final section of this topic, we will consider how to identify and deal with one of
the most significant problems seen in New Zealand buildings (especially housing), in
the last century.
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SECTION 5: WEATHERTIGHTNESS
One of the most commonly identified issues in building in New Zealand is
weathertightness, otherwise known as ‘leaky building syndrome’. This first occurred
in New Zealand in the late 1980s and early 1990s. In this period, there was a trend
towards Mediterranean style buildings, often involving relatively complex designs,
recessed windows, and concealed spouting and drainage systems.
Monolithic cladding was most commonly used, because it resembled the more costly
stucco, which was traditional in Mediterranean designs, and because it offered both
an external covering to the building and an internal insulation system, within one
product.
IMPORTANT NOTE:
While there is a common perception that buildings constructed using monolithic
cladding are the main sources of weathertightness problems, they are certainly not
the only cause of problems.
Price Waterhouse Coopers (2009) reports that in the period between 1992 and 2008,
approximately 400,000 homes were constructed. Of these, 80,000 monolithic and
113,000 non-monolithic are expected to fail. (Weathertightness: Estimating the
Cost, 2009)
Weatherboard, brick, metal and concrete buildings account for up to 15% of leaky
building claims.
In addition, the Government and the Building Industry Authority (BIA) had approved
the use of untreated kiln-dried timber for framing. If untreated kiln-dried timber
framing is allowed to become wet, and stay moist, it tends to rot. In the process it
can also develop toxic moulds that can create a serious health risk. It is important to
be aware that treated timber, and steel framing can also deteriorate if allowed to
stay wet for an extended period of time.
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Coincidentally, this was a time when there were heavy demands on builders,
apprenticeships had been discontinued, and in some cases, the skill levels of
practitioners (builders and building inspectors) may have been called into question.
Buildings constructed between about 1997 and 2004 are most likely to be at risk.
If moisture infiltrates behind certain cladding types, especially monolithic cladding
(see the description in Section 3 of this topic), it can become trapped. This can have
two serious effects:
 deterioration of the structure of the building
 increased health risk through the development of a variety of moulds, many of
which are highly toxic.
The building styles considered to be most at risk are:
 Spanish or Mediterranean style with shallow roof pitches and recessed
windows
 those with multiple rooflines
 buildings of two or more storeys
 buildings that contain multiple units (such as apartments and townhouses)
 decks and balconies with solid balustrades
 internal guttering systems
 insufficient flashings to parapets or windows
 those with exterior cracks, allowing moisture to penetrate
 those where cladding continues below ground level.
Note: all buildings have the potential to develop weathertightness problems.
The following weblink gives a more detailed summary of the issues, and offers advice
for the maintenance of monolithic cladding.
Weblink: ConsumerBuild – Monolithic cladding
http://www.consumerbuild.org.nz/publish/maintenance/ext-monolithic.php
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Disclosing weathertightness issues
REINZ has issued a comprehensive flow chart, which is available on their website,
www.reinz.co.nz, but also reproduced below.
03/02/2012 All information © 2012 REINZ DISCLAIMER: The information contained in this document is not
intended to form professional legal advice or legal opinion on any particular matter. The Real Estate Institute of
New Zealand Inc therefore accepts no liability for any claim or other action that may arise from the use of the
information provided in this document.
“WARNING”
The attached diagram you are about to view has been prepared solely on the basis of
REINZ’s compilation of decisions issued from the Complaints Assessment Committees
(CAC) and the Real Estate Agents Disciplinary Tribunal (READT) up to the date of its
preparation and is not intended to form any legal opinion for members of REINZ in
handling properties with potential weathertightness issues. It is available for REINZ
members to view as a reference to assist in drafting their own protocols. Members
should note that some of the decisions which this diagram has been based on are
currently under appeal or in the process of being appealed and therefore is subject to
change as these appeal processes are completed and decisions are issued by judicial
bodies with higher authorities which could overturn the existing precedents.
This diagram should not serve as a guaranteed tool to ensure that members are free
from such risk.
The diagram displays a number of sections where a disclosure or an explanation by a
member is suggested. When you arrive at those sections whilst following the diagram
please bear in mind that:
(1) REINZ does not assert in any way that the said disclosures should necessarily be
done in the order displayed as it has been designed to capture the broad questions
first; and
(2) It goes without saying that good record-keeping all the way through the process is
essential. REINZ recommends that all forms of disclosures made be left in writing for
your record – e.g. as a diary entry, transaction report, email or file-notes and get the
customer to acknowledge receipt of all documents provided.
Member agencies are recommended to adopt their own protocols to handle these
situations and REINZ recommends that they rely on specific legal advice obtained from
their legal representatives and ensure that your insurance policies include
weathertightness cover, if possible.
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The information contained in the diagram is not intended to form professional legal
advice or legal opinion on any particular matter. REINZ therefore accepts no liability for
any claim or other action that may arise from the use of the information provided in the
diagram.
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84
84
© REINZ. Retrieved October 31 2012 from https://www.reinz.co.nz/shadomx/apps/fms/fmsdownload.cfm?file_uuid=0B8B81B9-E00C-9A1A-BD47-CB1E8C7C026D&siteName=reinz
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What to look out for
There are a number of clues that a licensee needs to be aware of when inspecting a
building:
1 Exterior wall cladding
If the exterior cladding has the appearance of being a textured sheet, a gentle
tap with the back of the knuckles will give a clue as to whether it is a monolithic
system or stucco. If it is monolithic, it will feel and sound hollow. Stucco has a
much harder texture (usually like that of concrete).
Remember to check all exterior walls for signs of cracks, chips, or bubbles under
the paint surface. Also, check for adequate clearance between the wall and the
ground, which may be covered by soil or a surrounding paving material. Pay
particular attention to walls that are subject to most weather exposure or
prevailing winds.
2 Flat roof with narrow eaves
The eaves are an extension of the roofline, intended to deflect water away from
the building, especially where there are joints, such as between the roof and the
exterior walls. If these are narrow (or non-existent), this may suggest that the
building is at risk.
3 Windows
Certain window styles are more prone to leaking than others. Windows that are
recessed into the wall (in the Mediterranean style) may be at risk, but also
corner windows, which are joined by silicone, and windows on sloping angles
(such as skylights) may be at risk.
4 Concealed guttering and downpipes
Some buildings have been designed so that the guttering and downpipes are
concealed within the wall cavity. If these become blocked or damaged, they can
release water into the cavity of the building, rather than transport it to a
drainage system.
5 Complex building design
Buildings that are designed to have complex or numerous angles may be more
at risk, because of the number of joins between different surfaces (mainly walls
and roofing).
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6 Decks and balconies
If these are enclosed, or designed in a manner that leads to slow dispersal of
water, there may be a risk factor.
7 Interior signs of dampness
Be on the lookout for signs of dampness around doors and window-sills, ceilings,
architraves and enclosed areas such as cupboards and wardrobes. With timber
joinery, obvious signs include damp patches, dark stains (especially on
unpainted surfaces), deterioration of paintwork, and the growth of mould.
At floor level, watch out for swelling of fibreboard skirting boards, or damp
areas of carpet or other flooring material, especially at the corners and edges of
rooms. Vinyl and similar types of flooring will sometimes start to lift or bubble
when left damp over an extended period.
The following diagram illustrates the potential areas of risk on a modern home.
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Potential risk house
Risk Areas
1
Sloping head flashing
11 Fascia plastered in
21 Garage door head flashing
2
Roof parapet
12 Curved head flashing
3
Roof rainhead
13 Handrail penetration
22 Cladding and framing
close to ground
4
Deck outlet
14 Flat top balustrade
5
Cladding touching flashing
15 Wall to deck clearance
6
Parapet capping
16 Wall to deck junction
24 Meter box
7
Roof penetration
17 Balustrade to wall junction
25 Window head flashing
8
Deck handrail fixings
18 Post penetration
26 Sill
9
Door head flashing
19 Downpipe onto roof
27 Horizontal control joint
20 Apron flashing
28 Louvre vent
10 Pergola fixings
23 Cladding close to paving
at garage door
© Prendos, 2012. Retrieved October 29 2012 from http://www.prendos.co.nz/potential-risk-house
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These are just some suggestions of issues to be aware of. Each licensee should
actively seek out anecdotal knowledge of problems that have occurred within their
local area.
Multi-unit properties
If you are working with a property which is part of a complex (whether physically
attached or not), you need to be aware of whether any part of the complex is, or has
been subject to, weathertightness problems. If the property is on a unit title, this
information can usually be ascertained through a review of the Body Corporate
minutes. The property owner should be able to supply the details, or may refer you
to the Body Corporate Secretary. Reluctance or a refusal to do so should raise a
significant warning.
IMPORTANT NOTE:
All buildings require a certain level of maintenance throughout their lives. Those
which are likely to be prone to leaky building syndrome need particular care and
attention.
One of the difficulties for licensees is identifying which properties have been fully
maintained, with any minor issues rectified immediately, so that the inherent risk is
significantly minimised.
Due to the potential seriousness of issues, it is not appropriate to rely solely on an
owner’s statement that the property has been fully maintained, and is in excellent
condition. If a property owner supplies documentation, such as builder’s invoices for
remedial work completed, this may not be satisfactory evidence unless it is
accompanied by a CCC which signs off that the remedial work has been approved by
the territorial authority.
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CASE SUMMARY:
[2011] NZREADT 19
1 This case concerns an appeal by a purchaser (the complainant) against a
decision by a Complaints Assessment Committee (CAC), in which no action was
taken against an agency and a licensee. Two specific issues were considered. The
first related to the recommending of a building inspector by the licensee who
sold the property, and the second related to the disclosure obligations of the
licensee in respect of the monolithic cladding of the property.
2 The purchasers, a husband and wife who had recently immigrated from England,
had inspected the property on two occasions, and arranged for a building
inspection to be completed, before making an offer to purchase. They claim that
the licensee had not made them aware of any issues regarding monolithic
cladding, or alerted them to the fact that the property had been subject to
earlier repairs.
3 The licensee referred the complainant to a building inspection business. (There is
some contradiction between the parties about how many building inspectors
were actually recommended at the time.) The inspection was completed, and the
inspector reported that although there had been some historical issues involving
water leaks, the property now appeared to be in good overall repair.
4 Three weeks before settlement, the purchasers obtained a further inspection
report from a different building inspector, who stated that “the leaky house
syndrome is in evidence” and detailed a number of significant but unresolved
issues with the building.
5 The Tribunal held that the property was clearly showing signs of problems at the
time the purchasers inspected it. However, that does not in any way lessen the
licensee’s obligation to either obtain confirmation from the vendor that there
are, in fact, no outstanding problems, or actively disclose the issues to the
purchasers, and recommend that they take appropriate specialist advice before
proceeding.
6 The Tribunal ordered the licensee to pay costs of $4,000 and compensation /
damages of $25,000 to the complainant.
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IMPORTANT NOTE:
Remember, Rule 6.4 of the Code imposes an obligation on licensees not to mislead,
provide false information or withhold information. Footnote 1 to Rule 10.7 sets the
minimum standard for disclosure of knowledge about the condition of a property.
The footnote is particularly important:
For example, houses built within a particular period of time, and of
particular materials, are or may be at risk of, weathertightness problems.
A licensee could reasonably be expected to know of this risk (whether or
not a seller directly discloses any weathertightness problems). While a
customer is expected to enquire into risks regarding a property and to
undertake the necessary inspections and seek advice, the licensee must
not simply rely on caveat emptor (let the buyer beware). This example is
provided by way of guidance only and does not limit the range of issues
to be taken into account under rule 6.4.
The first step should always be for the licensee to ask the owner/s for details of any
current problems, or any problems that have since been resolved. The obvious
second step is for the licensee to disclose whatever is known to prospective
purchasers, especially if they know that the property has been subject to earlier
agreements which have fallen on the grounds of a weathertightness or building
inspection, or if they know that other units within a complex have had such
problems.
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CASE SUMMARY:
Complaints Assessment Committee case study
1
In the process of marketing an apartment, a licensee relied on information
contained in the listing authority form that was worded to the effect that the
vendor was not aware of any “leaky home” issues. The fact that the building was
a “cavity system” was mentioned, but no further discussion took place.
2 The complainants entered into an agreement to purchase the property, subject
to a satisfactory building inspection (amongst other things). The inspection took
place, and the complainants confirmed their contract.
3 There were a number of defects on the property which were known to the
vendor, but may not have been disclosed to the licensee.
4 Approximately six months after settlement, the complainants received notice
from the Body Corporate of a plan to spend a significant amount on remedial
work for the apartment above. It was at this time that the complainants
investigated the matter further, and found there were a number of major defects
with the property, which had been known well prior to the time of sale.
5 The Complaints Assessment Committee (CAC) held “that the licensee did not go
far enough in discharging her positive duty to advise the complainants of the
potential of the building, given its age and building materials, to be a leaky
building.”
6 In making their decision, CAC referred to Rule 6.5 and Footnote 1 to 6.5.
(Note: this decision was made under the 2009 Code.)
7
The CAC ordered a fine of $500 to be paid by the licensee, and $3,000 by the
agency.
At the time of writing, this case was under appeal to the Disciplinary Tribunal.
Reference: CA4697319 / CA4702647
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Review – 6
Consider the following case summary, and then answer the questions that follow.
CASE SUMMARY:
[2011] Hamid v England
High Court, 2011
This case relates to the Fair Trading Act 1986.
1 A real estate licensee and his wife decided to sell a townhouse (the middle one
of a block of three) owned by their family trust, using the medium of private
sale.
2 The property was advertised on TradeMe, without any mention of an agency
being involved. However, subsequently, it was advertised under the agency’s
logo, and open homes were conducted, using the agency’s open home signage.
3 During an inspection, the complainant (purchaser) asked whether the building
leaked. The vendor replied that it didn’t.
4 In fact, the vendor had obtained two specialist building reports on the property,
one of which indicated a high moisture reading, and the other, which showed the
building as being in good condition. He gave only the latter report to the
purchasers.
5 The vendor also provided a written price comparison between the property he
was selling and an adjoining unit that had recently sold, without disclosing that
the adjoining unit had undergone substantial re-cladding, because of
weathertightness problems.
6 Following the purchase and settlement, the owner of the neighbouring
townhouse approached the purchasers, and advised them of the work that had
been undertaken on his own dwelling. As the townhouses were erected at the
same time, using a similar profile and the same materials, there was a significant
likelihood of problems. These problems were later confirmed.
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7 Upon considering the facts of the case, the judge ruled that the purchaser was
able to rely on the signage and other evidence that the vendor was acting in
trade. The vendor was liable under the Fair Trading Act for 80% of the
complainant’s loss, and the agency liable for 20% of the loss, even though the
sale was concluded under a private agreement.
8 However, the judge further ruled that the purchaser must take some
responsibility for not seeking independent advice either before making a decision
to purchase, or including a weathertightness clause in the agreement. He
determined that the purchaser should have understood that under the terms of
a private sale, he was not being afforded the same protections as would have
applied if he had purchased through an agency.
IMPORTANT NOTE:
A private seller is not regarded as ‘in trade’, and therefore is exempt from the effects
of the Fair Trading Act. However, they are still subject to the Contractual Remedies
Act 1979.
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1
The Fair Trading Act 1986 only applies to those “in trade”. Was
the vendor acting in trade, and therefore subject to the Fair
Trading Act?
Yes / No
2a
Should the vendor have made both building inspection reports
available to prospective purchasers?
Yes / No
2b
Briefly explain your reasons for your choice in 2a.
3a
Was the vendor under any obligation to disclose the fact that
the neighbouring property had been the subject of substantial
re-cladding?
3b
Briefly explain your reasons for your choice in 3a.
Yes / No
The problem with leaky buildings is not just limited to water entering the building.
All buildings are subject to varying levels of internal moisture depending on their
use.
A family home is likely to generate approximately eight litres of water vapour
through normal use, such as using hot water for showers and baths, cooking, and
even breathing. This can be increased dramatically in homes where clothes dryers
are not externally vented, or where un-flued gas heaters are used. Both generate
considerable amounts of moisture.
All buildings need adequate ventilation (even in cold weather) or the use of
dehumidifiers, to allow normal moisture to escape or be controlled.
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IMPORTANT NOTE:
It is important to realise that buildings constructed using monolithic cladding are not
necessarily bound to fail, however there is an expectation that most will experience
problems to a greater or lesser extent.
Buildings which have been constructed to the highest standard, by experienced and
skilled tradespeople, and which are then maintained carefully and thoroughly
throughout their lifetime, are less likely to require expensive remediation.
However, it is worth repeating that licensees are not expected to be anything more
than thorough and careful observers of the properties they plan to take to the
market.
Many agencies currently take the precaution of adding a building inspection or
weathertightness inspection clause to Agreement for Sale and Purchase documents
during the drafting process. Should the purchaser wish to delete such a clause, it
should be done following a frank discussion of the nature of the property, its likely
risks, and the recommendation of specialist inspection. It should be noted that such
a clause would not protect a licensee who had not initially disclosed something that
he knew or should have known about weathertightness issues. See Rule 10.7,
Footnote 1.
Note: Such clauses in the Agreement for Sale and Purchase cannot be relied upon as
protection if a licensee has failed when representing the property, to disclose
something that he or she knew of or should have known.
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The licensee’s responsibility
If a building has the appearance of one which might be subject to weathertightness
issues, the licensee must take specific steps to minimise his or her own risk. We refer
again to Rule 10.7 of the Code, which replaces and expands on the original Rule 6.5
(2009), with effect from 8 April 2013:
EXTRACT: RULE 10.7 OF THE CODE (2012)
Disclosure of defects
10.7 A licensee is not required to discover hidden or underlying defects in land but
must disclose known defects to a customer. Where it would appear likely to a
reasonably competent licensee that land may be subject to hidden or underlying
defects, a licensee must either;
a. obtain confirmation from the client, supported by evidence or expert
advice, that the land in question is not subject to defect; or
b. ensure that a customer is informed of any significant potential risk so that
the customer can seek expert advice if the customer so chooses.
Option (a) is a significant departure from what has previously been required. It goes
significantly beyond requiring clients to simply tick a checkbox on an agency
agreement form stating that they are not aware of any problem with
weathertightness.
It is realistic to expect that some clients will never have experienced any problems
during their period of ownership and will be unable to provide the required
‘evidence’.
However, best practice suggests that this is not an excuse for not specifically asking
questions about the building’s construction, history and current status, or being
observant to clues that may point to a risk, such as those we have already discussed.
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If the owner claims that a building has been inspected and found to be in good (or
better) condition, consider the following questions:
1 How was the condition of the building determined? (Competent building
surveyor?)
2 How current is the report?
3 How complete is the report?
4 Has the report been altered in any way?
5 Has the building been subjected to any interim work before it was presented to
the inspector?
6 Has the reporter been influenced in any way by the owner or another interested
party?
7 Does the report contain any conditions that limit its distribution to other parties?
8 Is the reporting company still in business?
Property reports
The following are examples of how reports can be rendered inaccurate by deception
in order to favour a certain outcome.
 The recent application of paint or alternative covering to disguise staining or
marks (interior or exterior), or filler to cover gaps between building materials
or components, or to hide deterioration.
 The use of dehumidifiers over an extended period to absorb internal moisture,
and disguise an existing problem. (However, it is appropriate to use
dehumidifiers in many properties as an appropriate step towards minimising
the effects of normal climatic dampness.)
 The party who commissioned the report may have engaged an appraiser
whose work was intended to favour a specific outcome.
In addition, it is possible for reports to be inaccurate through other means:
 Using an appraiser who is insufficiently trained, qualified or experienced to
carry out the necessary inspections.
 Use of inappropriate, invalid or insufficient inspection and investigation
techniques.
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Many building inspectors are moving to adopt NZ Standard 4306 Standard for
residential property inspections: 2005. However, it should be noted that the
Standard itself does not require critical evaluation or analysis of what is found during
the inspection.
In some cases, reports are written and presented that fail to meet the basic
communication standards of clarity, completeness and comprehension.
IMPORTANT NOTE:
While it is an important part of a licensee’s duty to closely inspect properties, to see
whether there are buildings that may have weathertightness issues, and to engage
with clients in full and frank discussion about such matters, you are not expected to
carry out the work of a building surveyor.
Nor should you make any recommendation about the skill, experience or
performance of any building inspector/surveyor. It is however, appropriate that you
advise prospective customers to carefully investigate any building/surveying service
they are considering using. Recommend that they ask at least some of the following
questions:
1
2
3
4
5
How long have you (your business) been in operation?
Do you carry professional indemnity insurance?
What formal qualifications do you hold?
What affiliations do you hold (e.g. registration, etc.)
What specific inspection methods do you use, and why are these preferable to
others?
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In the case Mok v Bolderson [2011] High Court, the purchasers of a property had
included a building inspection clause in their agreement to purchase. The inspector
they had chosen was a member of the Master Builders Association, with several
years’ experience. Several problems were identified, and it was agreed that the
vendors would repair those.
However, the court had to decide whether a building inspector had breached the
Fair Trading Act by reporting that the property was “generally sound”. He had failed
to draw attention to the fact that there were several cracks in the monolithic
cladding, and window flashings were absent. The inspector was found liable under
the tort of negligence and the Fair Trading Act 1986, and ordered to pay damages
amounting to one quarter of the complainants’ loss.
In this case, no agency was involved in the dispute, however, had a licensee made a
direct recommendation of Mr Bolderson, they could potentially have been held
liable for part of the damages claim.
Possible solutions
Repair costs for a standard (three bedroom) home can range from approximately
$150,000 to $500,000. More substantial properties are likely to carry greater costs of
remediation. Such a cost is likely to be beyond the reach of the majority of owners,
who will need to either sell at the property’s current market value (likely to be
considerably less than they paid), or seek redress through the Weathertight Homes
Resolution Service or the Courts.
A pre-purchase inspection report, costing on average between $600 and $1,000 plus
GST, may reveal weathertightness issues. There is significant variance in the quality
of such inspectors, many of whom do not carry professional indemnity insurance.
Some property owners are taking a further step, in arranging for an independent
building surveyor to undertake a full survey of the property before it is offered to the
market. The cost of such a process may range from approximately $5,000 to $13,000
plus GST, (or more if specialist equipment is required to enable the surveyor to
access parts of the building). A thorough survey report can, however, provide
vendors with a valuable marketing tool that demonstrates the status of their
property. Such an investment may well offset the dollar value of negotiations in
cases where there is doubt about whether a building has weathertightness issues.
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The REINZ/ADLS Agreement for Sale and Purchase of Real Estate (9th ed. 2012) has
provision for a building report (on the front page). If the ‘Yes’ option is selected by a
customer, you must clearly point out the contents of clause 9.3 of the General
Terms of Sale, which reads in part:
EXTRACT: CLAUSE 9.3
If the purchaser has indicated on the front page of this agreement that a building
report is required, this agreement is conditional upon the purchaser obtaining at the
purchaser’s cost on or before the tenth working day after the date of this
agreement, a report on the condition of the buildings and any other improvements
on the property that is satisfactory to the purchaser, on the basis of an objective
assessment. The report must be prepared in good faith by a suitably-qualified
building inspector in accordance with accepted principles and methods.
If the purchaser avoids this agreement for non-fulfilment of this condition pursuant
to sub clause 9.8(5), the purchaser must provide the vendor immediately upon
request with a copy of the building inspector’s report.
© REINZ/ADLS, 2012
Note that the building inspection clause above does not specifically mention
weathertightness issues. Most agencies have a suite of standard clauses that they
use, or your customer may prefer to seek the advice of their solicitor as to a suitablyworded clause.
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Finally, although there are a number of significant issues attached to buildings that
fall within the “leaky building syndrome” profile (and that covers a wide range of
styles and materials), such properties are still saleable. Licensees can minimise their
own risk exposure by:






taking special precautions to ensure that they inspect all properties thoroughly
paying close attention to what are now well-known indicators
avoiding any temptation to exceed the limits of their knowledge or skill
ensuring that clients and customers have all available information
seek appropriate specialist advice where necessary
recording thorough and accurate diary notes of all communications regarding
such properties.
Review – 7
A property is listed on the market. The client had made the licensee aware that there
were weathertightness issues with the cladding of the dwelling. The client informs
the licensee that the weathertightness issues have been repaired, and produces an
invoice from a builder for recladding two sides of the dwelling. The licensee asks the
client for a Code Compliance Certificate which signs off the work as being compliant
with the Building Code. The client tells the licensee that the builder had assured him
that no Building Consent or Code Compliance Certificate was required for this work.
The licensee tells prospective purchasers that, following weathertightness issues,
remedial work has been completed on the dwelling. The licensee tells the
prospective purchasers:
a. that he has been unable to sight a Building Consent or Code Compliance
Certificate for the work
b. that no Building Consent or Code Compliance Certificate is required
c. there is an invoice available for the work which has been carried out, but no
Building Consent or Code Compliance Certificate was obtained
d. there is an invoice available for the work, but doesn’t refer to a Building
Consent or Code Compliance Certificate.
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Summary
Weathertightness problems have had a significant impact in the New Zealand
property market for more than twenty years.
Contrary to popular opinion, weathertightness issues are not limited to just one
building material or design. However, there are some types of buildings which are
more likely to be at risk.
Licensees must keep up to date with the situation relating to the area in which they
work. This is especially important with reference to large developments of similar
types of housing or apartments.
In any event, it is important not to make positive statements about a property that
cannot be thoroughly substantiated. By following a cautious approach, and
recommending that prospective customers for all types of property do the same, you
are minimising your risk and fulfilling your obligations to the client and the customer.
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SECTION 6: RISK MANAGEMENT
In this final section, we reiterate many of the points raised in Topic 1, but also
include information specific to property inspections. Compliance with legislation,
regulations and rules, as well as your agency’s best practice guidelines, is a very
important aspect of your work.
Information and advice
 Make sure you are knowledgeable about the law, the property you are
marketing and agency best practice.
 Give verifiable and accurate information to customers when it is available.
 Do not pass on information that you are not sure about; always check the facts
first.
 If you don’t know the answers to a client’s or prospective customer’s
questions, say so.
 Advise customers to seek independent advice themselves, for example,
through a lawyer, building inspector, surveyor, registered valuer, engineer, or
by consulting the appropriate council.
 Remember Rule 5.1 of the Real Estate Agents Act (Professional Conduct and
Client Care) Rules 2009, which reads:
A licensee must exercise skill, care, competence, and diligence at all times when
carrying out real estate agency work.
Documents and advertising
 Make sure that all contractual documents, including agency agreement forms,
Agreements for Sale and Purchase of Real Estate, and lease agreements
comply with legal requirements, and that you carefully explain them to clients
and customers before they sign the documents.
 Carefully proofread all advertising and marketing materials to make sure they
are accurate and up to date. When making a positive representation about a
property (including its rights, interests and encumbrances, structural elements,
features, or potential for future use or development), you must proactively
check the information first. The decision in [2012] READT 44 also imposes
considerable obligations on licensees to take particular care to avoid possible
claims of misrepresentation.
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 If you are in possession of documents supplied by a third party, such as a LIM
report given to you by a client, with approval to distribute this to prospective
customers, you must follow your company’s compliance management
procedure before doing so.
 Do not exceed the limits of your skill when discussing documents with clients
or prospective customers. If you don’t know something, say so, and
recommend that they seek independent specialist advice.
 Keep diary notes, especially in relation to situations where you have given
advice, made recommendations, or distributed material to a third party.
Property inspections
 Don’t make positive statements about the condition of any aspect of land,
buildings or other structures unless you are able to verify the information you
provide.
 Listen carefully to questions and statements made by prospective customers
that may indicate their knowledge or understanding of issues that may affect
the suitability of the property for their needs. Correct any misunderstandings
immediately, or if unable to do so, recommend that the party seek
independent specialist advice.
 If a client or third party is present during a property inspection, ensure that
you clarify or correct any potentially misleading or deceptive statements made
by the client or third party to any prospective customer.
 Keep diary notes of inspections, recording any issues that were raised and
discussed during the inspection, or any questions asked by prospective
customers where you have offered to obtain more information.
Risk management
 You and your agency must be aware of your obligations and must implement
appropriate systems and procedures to ensure you comply with all relevant
legislation, to avoid breach and liability.
 You must recognise and respond promptly to ‘alarm bells’ where a situation
has the potential to expose you to liability. Approach contracts from a
‘protection of self’ point of view; this means you should exercise particular
caution when processing contractual agreements with clients or customers
where you think they could expose you to ‘dangerous territory’. Check with
your manager or supervising agent.
 Make sure you understand and comply with your company’s risk management
plan in respect of liability.
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 Check that your agency has adequate professional indemnity insurance to
cover claims and associated costs.
Finally…
This brings us to the end of Topic 2 and the end of this year’s compulsory, verifiable
programme.
In Topic 2 we have considered issues relating to property structures. We have
covered the key elements of building law and compliance documentation. We have
also reviewed the main structures and components that make up a building, and
looked briefly at the issues that may arise.
This knowledge is an important part of a licensee’s toolbox for providing excellent
service to both clients and customers. There are no acceptable shortcuts, and the
penalties for failure to meet our statutory, fiduciary and customer care obligations
are potentially severe.
We recommend that in addition to completing your required continuing education
programme, you make the most of every opportunity available to you to further
your knowledge. This may be through attending seminars, conferences, webinars, or
reading appropriate publications and reports.
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WANT TO KNOW MORE?
Pringle, T. (2011)
BRANZ House Building Guide (2nd ed). Porirua City, New
Zealand: BRANZ.
BRANZ
Weathertightness
http://www.branz.co.nz/cms_show_download.php?id=20552
47bdaf6f43de944323f3244470752a8e30a
BRANZ
E2 and E2/AS1
This is a technical document for building designers, but
includes an excellent table covering definitions of risk
associated with different issues, and an analysis of the risk
matrix associated with a range of factors.
http://www.branz.co.nz/cms_show_download.php?id=f04fe
e587a5250fac2d030eabaa8bda1263f559c
Websites
ConsumerBuild
www.consumerbuild.org.nz
HOBANZ (Home Owners and Buyers’
Association of New Zealand
www.hobanz.org.net
Land Information New Zealand
www.linz.govt.nz
Ministry of Business, Innovation
and Employment
www.dbh.govt.nz
Real Estate Agents Authority
www.reaa.govt.nz
Real Estate Institute of New Zealand
www.reinz.co.nz
REAA Continuing Education 2013
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APPENDIX A - GLOSSARY
Accessory unit
(Unit titles) Part of a unit title property designed to
supplement a principal unit. E.g. garage, parking space,
garden, etc. (See also Principal unit)
Building envelope
The part of a site that has been specified as capable of being
built on. This does not include paved areas, which are
deemed to be outside the main footprint of a building.
Body corporate
An association of people responsible for the management of
a unit title property.
Bundle of rights
The rights applied to ownership of property, including the
right to sell, gift or otherwise of the owner’s interest, the
right to mortgage the property, etc. The actual rights will
depend on the type of tenure involved – fee simple titles
have the greatest bundle of rights. Private rights are balanced
against public rights, such as the right to levy taxes, acquire
compulsorily and control land use (through the Public Works
Act 1981).
Caveat
A caveat gives notice to anyone searching the title that the
caveator is protecting a claim of an unregistered interest
against the property.
Common law
Law arising from judicial (court) decisions.
Composite estate
Where an estate in land is made up of two tenures. A crosslease is a composite estate comprising both freehold and
leasehold elements.
Dominant tenement
The tenement which gains the benefit of an easement or
other covenant, e.g. the land which has the use of a right of
way driveway. (See also Servient tenement)
Easement
The granting or benefit of rights in and which do not include
possession. (See also Dominant tenement and Servient
tenement, and Right of way.)
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Eminent domain
The principle that the Crown is the ultimate owner of the
land.
Equitable interest
An interest that is capable of becoming a legal interest (i.e.
registered on a certificate of title), but which has not been
registered. (See also Equitable interest)
Estate
Because the Crown owns the land in New Zealand, apart from
that under Māori sovereignty, the estate is the closest thing a
person can come to actual ownership of land.
Estates in land
The different tenures – e.g. freehold (fee simple), cross-lease,
stratum, company share.
Flats plan
That part of a certificate of title for a cross-lease property
showing a scale diagram of the buildings and other structures
on the land, and identifying any common areas.
Footprint
The boundary of the building itself within the wider site.
Ground rent
The annual rental paid by a lessee to a lessor.
Guaranteed search copy
A guaranteed search copy shows the same information as a
Search copy, but includes details of any interests lodged with
LINZ but not yet recorded on the certificate of title.
Historic search copy
This shows the full history of the title, including the name of
the original proprietor/s, and will include a scanned copy of
the original paper certificate of title, if one had been issued
(before 2002).
Indefeasibility
The registered proprietor of land is recognised and protected
by Crown guarantee against competing claims that do not
appear on the LINZ register.
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Joint tenants
Where two or more people are registered on a certificate of
title without any reference to them having separate shares.
They each own the land jointly, with the right of survivorship
(where upon the death of one joint tenant, the remaining
joint tenant/s acquire that person’s share). Trustees may own
land only as joint tenants.
Lease for life
An arrangement where a person is granted a lease of a
property for the duration of their lifetime.
Legal interest
An interest that is registered on the certificate of title. (See
also Equitable interest)
Legal person
A natural person (human), or a statutory body, such as an
incorporated company.
Lessee
The occupier of a property that is subject to a lease. (See also
Lessor)
Lessor
The owner of a property that is subject to a lease. (See also
Lessee)
Licence to occupy
Under a company share scheme or other entity, such as a
trust, occupiers are usually granted a licence to occupy their
residential or commercial unit. This is not the same as
outright ownership.
Life estate
Usually the right of the grantee to remain in possession of a
property for the duration of their life.
Life tenant
A person who has been granted a life estate.
Minor unit
A secondary dwelling, normally used for a semi- dependent
relative. Refer to the appropriate Council’s district plan for
details.
Misrepresentation
A statement of fact that proves to be false.
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Mortgage
A mortgage is security for repayment of a debt. It is both a
charge (obligation) on the land, and a personal promise by
the mortgagor (the borrower).
Ownership interest
(Previously known as Unit entitlement). This applies to Unit
titles (stratum estates), whereby each principal unit and
accessory unit is allocated a proportionate value of the whole
property by a registered valuer. This ownership interest is
used as the measurement for assessing each unit’s share of
costs which are levied by the body corporate, such as
insurance, and the long-term maintenance plan.
Personal property
This is all property apart from land and incorporeal
hereditaments (intangible assets that can be inherited, such
as rent or an easement).
Principal unit
The main dwelling or business unit shown on a unit plan (Unit
Titles). (See also Accessory unit)
Requiring authority
The Crown or a Crown agency (such as the Department of
Corrections) which requires land under the Public Works Act
1981, for a public use, such as the building of a prison.
Restrictive covenant
A covenant by which the covenanting parties have agreed
that the servient tenement shall not take an action which
could otherwise be taken, for the benefit of the dominant
tenement (who enjoys the benefit of the covenant). E.g. a
servient tenement agrees not to build a two-storey dwelling
which would have obstructed the view of the dominant
tenement. Without such a covenant, the servient tenement
would be lawfully allowed to do so.
Right of survivorship
(Joint tenancy) The parties own the land without reference to
shares. If one joint tenant dies, the surviving tenant(s) own
the whole estate.
Right of way
A right to pass and repass over the servient tenement. (See
also Easement, Dominant tenement and Servient tenement).
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Search copy
A copy of a certificate of title, showing the current registered
proprietor/s and any current interests or encumbrances on
the title.
Services easement
An easement for the provision of public services, such as
electricity and gas, water, drainage, sewage,
telecommunications, etc. (See also easement).
Servient tenement
The covenanting party who agrees not to take some action
they would otherwise be lawfully allowed to take, for the
benefit of the dominant tenement. (See also Dominant
tenement)
Tenants in common
The parties own the land in separate and defined shares, with
no right of survivorship.
Tenure
The mode of holding land, such as fee simple, cross-lease,
unit title, etc.
Terminating lease
A lease which has a definite termination date, and no further
rights of renewal. Such leases may require the removal of
buildings or other structures before the termination date.
Transfer
The process by which the legal right to property ownership is
passed from one person to another, such as following an
Agreement for sale and purchase of real estate. See also
Transmission).
Transmission
The process by which property is automatically transferred by
operation of the law. (See also Transfer).
Unit plan
(Unit titles). A plan that has been, or is intended to be
deposited with Land Information New Zealand (LINZ) under
the Land Transfer Act 1952.
View shaft
A view shaft prevents the erection of structures which may
intersect the line of sight to a protected view.
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APPENDIX B - GLOSSARY OF ACRONYMS
BCA
Building Consent Authority
BIA
Building Industry Authority
BWOF
Building Warrant of Fitness
CAC
Complaints Assessment Committee
CCC
Code Compliance Certificate
COA
Certificate of Acceptance
EIFS
Exterior insulation and finishing system
HAIL
Hazardous Activities and Industries List
HVAC
Heating, ventilation and air conditioning
IQP
Independently qualified person
LIM
Land Information Memorandum
PIM
Project Information Memorandum
REAA
Real Estate Agents Authority
REINZ
Real Estate Institute of New Zealand, Inc.
TRS
Tough rubber sheathing
VIR
Vulcanised Indianised rubber
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PHOTO CREDITS
The following photos from Jupiter Images have been reproduced under licence in
this learning material:
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