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"Opting-out" of the Fletcher / EQC managed earthquake damage home repairs may seem like the relief that some anxious earthquake damaged homeowners are desperately seeking.  However, while it certainly serves as a useful alternative, there are risks that a homeowner must carefully consider before "leaping up to opt-out" and it may not necessarily be suitable for all.

The EQC/Fletcher Repair Programme

If EQC has assessed the costs to repair the earthquake damage to your home as between $15,000 to $100,000 plus GST, this will place you in the EQC's managed home repair programme; the "Canterbury Home Repair Programme".

Fletcher EQR, a division of Fletcher Construction, manages the Programme on behalf of EQC.  A number of independent building contractors and tradespersons are accredited by Fletcher under the Programme.  These accredited tradespersons will then undertake the repair works on your property.  The repair work is managed to completion by Fletcher.  The tradespersons invoice Fletcher for their costs, and Fletcher pay the tradespersons.  EQC then reimburse Fletcher and also pay Fletcher a management fee.   

As project manager, Fletcher is responsible for ensuring that all repair work has any necessary building consents and is completed in accordance with the Building Act and relevant building codes, which include obtaining all necessary code compliance certificates. In short, the Programme means you do not have to manage your home repairs - Fletcher does.  In many cases, you will need to wait for Fletcher to contact you to commence your home repairs under the Programme.  Many are still waiting to be contacted.

However, you can "opt-out" of the Programme.

Opting-Out of the Programme

By opting-out, you manage your own home repairs.  You have no involvement with Fletcher.  So you don't have to wait for Fletcher to contact you. This may mean that you can repair your home earlier.   

You can choose your own building contractor or tradesperson to complete the repairs, whether or not they are accredited with Fletcher.  If your contractor is accredited, you can remain in the Programme, and, if your accredited contractor is available to work, we recommend you contact Fletcher to discuss timeframes (rather than waiting for them to contact you). 

Your chosen contractor may also offer to project manage your home repairs (similar to Fletcher under the Programme).

You are able to renovate your home, at your own cost, in conjunction with the repair work.  This is not an option under the Programme.

This all seems very good.  And it certainly can be, but there are important matters to consider before blindly rushing to "opt-out".

Risks in Opting Out

By opting-out, you are responsible for all aspects of the repair work. 

This means that you are responsible for ensuring all repair work has any necessary building consents and is completed in accordance with the Building Act and relevant building codes, including obtaining code compliance certificate (if necessary).  You'll need to manage any changes and variations to the planned repair work along the way. 

If any disputes or difficulties arise with your building contractor, you will need to resolve those yourself.  Fletcher (or EQC) will not resolve any disputes on your behalf.    

There are potential financial risks in opting-out. 

While EQC are still responsible for meeting the repair costs even if you are opting-out, you now need to provide EQC with your building contractor's or tradespersons' costs invoices before EQC will reimburse you.  You may need to pay the invoices yourself, before EQC reimburse you.  If you don’t pay an invoice when it falls due, the contractor may charge you interest or impose a penalty for late payment (which they may be entitled to do under their terms of trade). 

EQC's standard payment terms are the 20th of the following month, so you will need to manage contractor's invoices and EQC payments carefully to ensure you can pay the contractor in full and on time.  It is important to check with your chosen contractor their "opt-out" payment terms.

Further earthquake damage discovered during the repair work which increases the repair costs, may be covered by EQC.  But you will pay the difference if the completed repair work otherwise costs more than the EQC-assessed value of the work  However, a number of contractors advertise that they provide a fixed quote, and will not seek payment from the homeowner if their final costs exceed their quote.  You should check this with your chosen contractor, and the terms that apply.

If you opt-out and EQC's assessed repair costs are undercap, but the actual repair costs exceed the EQC cap, you will probably not be able to claim any costs over the EQC cap from your private insurer.
You should also check that your chosen contractor has contract works or contractor's all risks insurance, which covers the building works during the repairs and usually other liabilities arising out of the building work.  You should also advise your insurer of the planned repair works.  

How to Opt-Out

In order to opt-out, you need to send a builder's quote and a Request To Opt-Out form to EQC (available on the EQC's website: 

EQC will then meet with you and your contractor to determine the scope of repair works.  Your chosen contractor will prepare a quote based on an agreed scope of works and send this to EQC.  EQC will then decide whether to approve your opt-out request.  If your request is approved, EQC will confirm its payment procedure with you.

You may not be able to opt-out if Fletcher has already made contact with you to make an appointment to cost-assess the earthquake damage to your home, as identified in the EQC's scope of works following their preliminary assessment.

If you have any questions or require further information on opting-out, or if you have any general queries over your earthquake insurance claims, please contact us.  We'd be happy to assist you.
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