Government tightens payout criteria for on-sold quake homes

The government is tightening up criteria and timeframes for the On-sold Support Package, a scheme aimed at helping people get back into quake-damaged homes.

The scheme was set up to help homeowners who had bought a home repaired after the Canterbury earthquakes, where those repairs were later found to be inadequate.

The payment - managed by the Natural Hazards Commission (NHC, formerly Earthquake Commission EQC) - was "ex gratia", meaning it did not imply the acceptance of liability, and covered the portion of repair costs above the statutory cap of $100,000 plus GST.

It aimed to bring the homes back up to EQC standards.

Applications closed in October 2020 and more than 800 homeowners have had their repairs completed, but hundreds more were still in the process of getting that done, and a further 250 had not yet signed a settlement.

Associate Minister of Finance David Seymour announced changes to ensure "a full stop on the programme in a way that allows applicants fair settlement".

"The programme was never intended to continue indefinitely," he said in a statement. "The government is making changes to simplify it, encourage timely settlement for these remaining homeowners, and avoid delays that add to programme costs."

Costs to the government for the scheme have risen from the initial 2019 estimate of $250m, to $717.9m as of June this year.

The changes include:

• Limiting settlement amounts to 1.5 times the current rateable capital value of the property
• New deadlines: settlement deeds must be signed within 30 business days of the offer being made, and construction must start within six months of agreement
• Project management costs before construction starts are limited to 4 percent of the total payment
• From 23 December, a further limit will be applied if the homeowner has bought another new home

"The amount of the repair grant that can be repurposed will be limited to the market value of the buildings at the on-sold property - assuming the damage eligible for remediation through this programme did not exist - plus the costs of demolishing the damaged on-sold property.

"The other existing parameters for, and limits to, these alternative settlement payments will continue to apply and NHC will continue to verify the appropriateness of proposed costs on behalf of the Crown.

"I'm happy that we're delivering an outcome that benefits everyone - with remaining applications on track without creating more costs for taxpayers," Seymour said.

'Misunderstanding' from Seymour - Community Board member

Innes ward community board member and former city councillor Ali Jones said while the programme was never intended to continue indefinitely, the costs and delays were "more often than not the result of NHCs processes and behaviour".

"Putting deadlines on homeowners is going to add to the stress and upset they are already suffering after years of this palaver," she said.

His announcement showed "a misunderstanding of the issues claimants are managing", she said.

The limit on settlements in relation to the property's capital value was "grossly unfair".

"I am aware of people who have had to find significant funds to complete the repair because the money from NHC didn't cover the work required. How do you think that's going to work for people in their twilight years or who are unwell or have no way of finding extra money?"

She said she had contacted Seymour's office, concerned that his announcement could be based on "incorrect information from NHC".

"We saw this with Gerry Brownlee in the EQC CE Ian Simpson years, and I am sure Mr Seymour doesn't want a repeat of that. It is admirable that government wants to see earthquake damage to residential properties repaired as soon as possible ... but unfortunately this announcement today may see homes incorrectly repaired and we are right back to where we were that required the On Sold programme in the first place."

'It's bad on all fronts' - Labour

However, Labour's MP for Christchurch Central, Duncan Webb, said the changes were unfair cost cutting, and would mean homeowners not getting what they were entitled to.

"It's changing the rules underneath people who have entered into the program in good faith," he said. "It's cost cutting which by definition means people aren't going to get the repairs that EQC - or Natural Hazards Commission - is obliged to deliver."

"What's more is the kind of rules that have been put there, if he knew anything about the building industry in Christchurch you realize that it's just not workable either.

"It's bad on all fronts."

He pushed back against the suggestion the government should be looking to close the scheme down, and scale back the costs.

"If you're not in the on-sold program now, you can't enter it, so it was time limited, that's really important to remember ... the costs are going up because we are finding more shonky repairs by EQC and building costs have gone up.

"The person or the entity that should cover that increased cost is the entity that caused them - that's EQC, which has now become the Natural Hazards Commission.

"There's plenty of instances where defects have come out of the woodwork, and there's more than we thought there were, so sure it's costing some money but you've got to remember this: it's only putting people in position they should have been if EQC as it then was had done its job."

He said the new rules seemed to limit the obligations of the Natural Hazards Commission.

"The cap on the rebuild costs, if someone's house is utterly damaged by the earthquakes and needs to be rebuilt then it should be rebuilt, and it shouldn't be limited by some arbitrary cap ... the idea that you can start a significant building project within six months, which is the new rule, just doesn't make sense: if you've got to find a new house, find a builder, finalise design, get the costings done properly and launch away, that can often take a lot more than six months.

"The 30 day limit on signing settlement agreement is essentially holding people to hostage ... is quite unfair, particularly if someone doesn't actually agree with, for example, what the costs are or what the repair methodology should be ... then there's an arbitrary cap on project management costs of 4 percent and the fact of the matter is that's at least 1 percent lower than everyone would say project management costs anyway.

"It's just cutting costs, cutting corners, and doing Christchurch homeowners - who have had a raw deal already - out of what they're entitled to.

"People entered into it on the basis of the rules that were set out. And now David Seymour has changed the rules of the game when the game's three or four years in."

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