By: Emily Walton, Sarah Ulmer
Published: 7/02/2013
Six days after the 4 September 2010 earthquake, the Christchurch City Council adopted its Earthquake-Prone, Dangerous and Insanitary Buildings Policy 2010 (the Policy). The High Court has recently found it is unenforceable in terms of the level of strengthening required for earthquake-prone buildings.

A building is "earthquake-prone" if it is likely to collapse causing injury, death or property damage as a result of a moderate earthquake. The definition has two components, the building's "earthquake resistance capacity" and the likely consequences of the shaking. 

A moderate earthquake is one with shaking one third as strong, but the same duration, as shaking used to design a new building on the same site. This sets the earthquake-prone building threshold at 34% of the "new building standard", or NBS.

The Policy identifies the preferred level of seismic strengthening for earthquake-prone buildings as 67% NBS. It is described as an aim, not a fixed requirement.  Since the Policy's introduction, seismic strengthening requirements have been negotiated with CCC as part of the building consent process. In some cases, it has derailed that process altogether.

Insurers have resisted meeting the cost of strengthening earthquake-prone buildings to 67% NBS, arguing the Policy is not "law". Material damage policies require insurers to meet the cost of reinstatement of the building to its pre-quake condition, including costs reasonably necessary to comply with any "law". 

The Insurance Council challenged the legitimacy of the Policy. It argued that the Policy has placed some earthquake repairs on hold, that it will increase insurers' repair bills by several hundred million dollars, and that the cost and availability of reinsurance in New Zealand will be compromised if the Policy stands.

On Monday, Justice Panckhurst found that the CCC does not have the power under s124 of the Building Act to require building owners (and their insurers) to strengthen earthquake-prone buildings to 67% of NBS. 

Implications

Strengthening to 67% NBS may still be perceived as "good practice" and "commercially advantageous"  to encourage tenants and employees to occupy repaired buildings. If a commercial decision is made to strengthen to 67% NBS, insurers will not meet the cost of additional strengthening.  However, building owners should still obtain cost estimates for strengthening to both levels (34% and 67%), to claim at least part of the strengthening costs from their insurer. 

If the only practicable method of strengthening a building to 34% NBS will result in a building being strengthened above that level, then it seems the CCC can require that method of construction.1  This may give rise to future disputes about strengthening methodology, as arguably the entire cost of building strengthening should still be covered in this scenario.

Some building owners have argued that the additional cost of strengthening to 67% NBS pushes their building from a repair to a rebuild.  This can have enormous consequences, as while repairs can only happen on the same site, a rebuild can ordinarily be performed elsewhere. For some owners whose building is on a site designated in the CCDU Blueprint, this decision is not good news. 

The CCC has twenty working days to appeal the decision.  Whether an appeal will be lodged remains to be seen.
 



1ICNZ v CCC [2013] NZHC 51, at paragraph [45].

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