When is a CCC important and When is it Worthless?

When is a CCC important? Try selling a monolithic plaster clad house without a CCC and look at how much money the market will try to slash off your house value.

Try buying one, and your lawyer will raise a red flag the size of Africa, warning you that this is a massive risk.

But does this make sense, especially for houses built in the leaky home era?

Is your conveyancing lawyer doing enough, or even doing the right thing, placing so much emphasis on the CCC?

Why are CCC’s seen as so important when councils only have a 10 year liability from when they are issued?

Why didn’t CCC’s stop the leaky building era?  They were meant to mean the house complied with the Building Code and would last for at least 50 years?  So how could all these buildings with CCC then leak and rot?

So, if you are buying a house with monolithic cladding, how can you be sure that it is sound and won’t cost you a fortune to fix?

What Does A CCC Actually Mean?

A CCC or Certificate of Code Compliance, is issued by the local Territorial Authority (Council) if they are satisfied (on reasonable grounds) that all of the building work is in accordance with the building consent and compliant with the Building Act, 1992.

For ten years following issuance of the CCC, there is an implied warranty where the homeowner can sue the Council and other parties (e.g. the builder) if they can show the building had defects which lead to damage.  The ten year period is set by the “Limitation Act 2010”.

After that, under most circumstances, you can’t sue the council or any other party.  In other words, if a major defect takes more than ten years to be found, you are on your own. And if you buy a house with a CCC older than ten years, it gives you zero protection.

This article primarily discusses CCC’s issued (or not issued) for the original house built during the leaky building era (1992 to 2004) rather than for subsequent building work, such as deck replacement, extensions etc.  It is important that such works are properly consented and have CCC issued.

When a CCC Is Worthless

The Building Act requires the CCC to provide independent assurance to owners and buyers, that the house was, at the time compliant i.e. fundamentally built correctly. However, if that were true, we wouldn’t have had the leaky homes crisis, where thousands of houses leaked and rotted and more surfacing daily.

Most of these were signed off by Council as being compliant but many were built with timber that wasn’t compliant, with defective designs, and shoddy workmanship. Now, those buildings are some 20 or more years old, so what real value is there in a CCC providing no proof of compliance, and no legal protection?

In fact, the whole CCC process for buildings built at that time is known to be flawed so none issued over that period can be relied on.

In a comment on a well known leaky homes court case (Johnson v Council)  “it would have been negligent for a lawyer to advise a client that a code compliance could be relied on, and nothing more needed to be done. Any lawyer would have known that Councils had not been meeting their statutory obligations, so that checking Council records and taking other steps was advisable.

You can’t rely on a Code Compliance Certificate and taking other steps is advisable.

For many owners, their homes were built so badly that they leaked and rotted within ten years, and they were able to claim some of their losses back in the courts or via the Weathertight Homes Resolution Service (WHRS).

The remaining houses have varying levels of defects and issues which are showing up with time.  They may be minor issues or major ones however when it comes time to sell, their owners have to deal with the plaster home stigma and loss of value.

Does No CCC Mean a House is More at Risk of Leaking?

Not really.

There are a number of reasons why a good house may not have a CCC.

During the leaky home era, the process of issuing building consents, doing inspections and issuing CCC was not working well.

Also, in an effort to enable more competition, private certifiers were licensed to carry out inspections and recommend issuing CCC’s. However, this ran into trouble (and councils took back control), when insurance companies stopped providing cover. Private certifiers went out of business and a lot of CCC’s weren’t issued in the resulting confusion and disruption.

As councils became more aware of the growing leaky home crisis, they understood they were faced with potentially enormous leaky building claims and had to do something.  They started making it far more difficult to get a CCC for a monolithic clad house, particularly one with high-risk features.  Extra inspections, extra conditions, extra requirements over and above what was in the original building consent. Many owners simply gave up trying, which suited Council – no CCC meant no liability.

So just because a house has no CCC doesn’t mean there is anything wrong with it.

What is far more important, 20+ years after construction, is how the house has performed.  If it has stayed generally dry and decay free, then that is actual evidence and much stronger proof of future performance than an historic flawed CCC.

Anyone buying a plaster house needs to commission a thorough weathertightness inspection, that will identify potential defects and prove whether they caused framing decay or leak.

Please note that a CCC covers all aspects of the building construction and compliance with the Building Code, not just weathertightness.  No CCC may mean that the house has failed to comply in other respects.  You must obtain and research the Property File to understand why CCC was not issued.

Historic CCC’s For Monolithic Houses – Big Con Job

It is possible to obtain a late, or historic CCC.

Councils by law must have processes and teams to facilitate this. In theory!

However, if monolithic clad house owners try to gain an historic CCC now, look out! Councils have lined up a formidable set of barriers to protect themselves (and the ratepayers) from possible future claims.

The Final Residential Inspection for a Historic consent includes the requirement for a Condition Report from a certified (and insured) building surveyor.  That will cost thousands and includes destructive testing where some of the gib or cladding is removed, to check the condition of the framing.

Council also lists dozens of items that it negligently missed during construction. Many are observations which are maintenance items, rather than construction defect. The point is to make the list formidable to put the owner off.

Where monolithic cladding is involved, the surveyor’s report almost certainly concludes that a full re-clad is required.  Why would they risk being sued for hidden defects – much safer and more profitable to recommend a re-clad.

The Final Residential Inspection and the surveyors report then sit on your property file for every future purchaser to see. Forever. Talk about stigma.

When you look closer, you find out that the building surveyors are usually promoting their own services for further inspections, scoping and even management for the re-clad.  There is incentive for the report writer to overstate the problems to get the instruction for re-cladding.

So, the process for a monolithic clad house goes something like this:

  1. Council negligently issues building consent allowing defective materials and designs. This includes incorrectly treated timber and no requirement to ‘adequately ventilate’ the framing.
  2. Council negligently carries out inspections during construction, passing as compliant, defects that allow leaks, timber which decays and walls without ‘adequate ventilation’.
  3. Council starts getting sued and realises their negligence and potential cost of future claims.
  4. Council then creates policies to reduce future liability for the houses built but not yet issued CCC. That policy is to make it hard for the owner to obtain CCC – extra conditions, inspections, changing goal posts.
  5. Owner tries to comply with these requests one at a time. Eventually he again applies for historic CCC not knowing the main defect is the incorrectly treated framing and that it has no ‘adequate ventilation’.
  6. Council includes the requirement for an independent building surveyor report which will nearly always recommend re-clad.
  7. Building surveyor has created future work by recommending re-cladding.
  8. Owner gets re-clad which goes some way to correcting the defects originally allowed by the council in steps 1 and 2. The costs are almost always far higher then the original estimate.
  9. Council has escaped the consequences of their original negligence, surveyor and re-clad company makes great money, owner finally has CCC but has cost a fortune.
  10. Owner then tries to sell. He finds stigma still exists. Why? Because everyone knows that this was a monolithic clad house and is still risky. Untreated timber remains under the showers and in many multiple studs in walls.

It is no surprise that many perfectly sound houses and their owners are stuck in CCC limbo.

The Top Serious Defects in Houses with CCC’s

We have been inspecting, monitoring, repairing and pulling apart monolithic clad houses since 2005 and have built up an impressive library of defects that councils certified as compliant.

The Top Ten

 

Defect The Damage Caused by The Defect
Untreated Timber Timber decays when it gets wet.  Decay can spread to the left, to the right and below the leak, causing serious structural damage.
H1 Timber Timber decays with ongoing leaks.  Decay is more localised around the leak but can be extensive and serious in older houses. Some H1 timber gives some decay protection, some give none.
Direct Fixed Cladding Leaks and moisture gets in faster than it can dry out naturally. Framing stays wet and decays.
High Ground Lines Moisture from the ground wicks up and wets the framing which decays.
Internal gutters Gutter leaks especially at rain heads and overflows run into the walls and decay the framing
No Gutter Stop Ends and Flashings Water runs in behind the cladding and rots everything below the connection.
Defective Window Sills Window sills crack or buckle and leak at the corner, decaying timber from the window to the floor.
No/Small Eaves The house walls and windows have no protection, rain gets in and rots the framing.
No Head Flashings Water gets in off the ends of the tops of windows and doors and rots the framing
Taylor type fascia Includes Klass, these gutters overflow onto the soffits and into the walls. Water entering normally loaded with spores and partly germinated decay fungi
Cladding not sealed at joints and penetrations Water wicks in along unsealed cladding, and wets and rots the framing timber

We could list another 20, but you get the picture.  A CCC does not mean a house is free of these defects, and the damage they have caused.

You can only know if a house has decayed framing or is letting in water by inspecting and analysing the timber inside the walls.  This is called invasive inspection and testing.  An installed moisture probe system is the only way of testing and monitoring dozens of locations in a house with minimal cost and damage.

Buyers – Do Your Due Diligence Properly

The courts have judged that it is up to the purchaser to do enough due diligence to satisfy themselves about the condition of the house. Don’t blame the seller, or the Real Estate Agent– the courts won’t help unless you have been deliberately misled. The Pre-Purchase Inspector has pages of disclaimers in their report to cover them, so you won’t get much out of them either.

In this hot housing market, FOMO (fear of missing out) drives buyers to make rash decisions and take short cuts.  This will hurt a lot of people in the years to come.

Our advice, based on many years of experience,  don’t cut corners. A plaster clad house could be the buy of the year, or the biggest lemon on the block.

You cannot know the condition, or the likely future maintenance costs of a plaster clad house without a proper inspection.  This includes weathertightness inspection, and invasive testing at potential leak points. BUT crucially, you must know the timber treatment and whether decay damage has already happened. No visual inspection can ever find that out, unless the cladding is removed.

Moisture Detection Company use patented Mdu Moisture Probes to test timber moisture, decay and treatment without damaging the house.

Conveyancing Lawyers – Are You Doing Enough?

Is it enough just to check that the house has a CCC and that your client has had a pre-purchase inspection?

It is clear that a CCC provides no assurance that a house is in good condition, and a standard pre-purchase inspection to NZS 4306:2005, cannot detect expensive damage.

This leaves your client open to substantial loss.

We recommend that you advise clients buying plaster clad homes that their due diligence must be comprehensive.  It must inform them about the timber treatment and framing condition in enough places to represent the condition of the house to a reasonable level of accuracy. Otherwise, they are at high risk.

Depending on the design, and type of cladding (stucco and Harditex are the highest risk), that may be a significant number of places to test. This can only be confirmed with invasive testing.

Invasive testing is usually destructive, leaving damage that can’t easily be repaired invisibly.  As such, most vendors are reluctant to allow it.

Moisture Detection Company have been installing small, discrete probes into houses since 2005 to provide testing and monitoring for treatment, decay and moisture.  Most motivated vendors (with nothing to hide) are comfortable having these installed.  This is a win-win for all parties, and the probes can stay in place to continue monitoring for future leaks.

Home Owners – Where Does This Leave You?

Well, if you own a plaster clad house and want to apply for an Historic CCC, you can save yourself some money and time, and go straight to thinking about a re-clad because that is where the process will steer you.

However, re-cladding can be hugely expensive, disruptive and usually costs more than the increase in house value.  Do your sums very carefully and ask for fixed prices and set timeframes.  Be aware that re-cladding costs usually blow out of control. Make sure your sums include an informed estimate of what the house will be worth at the end. Be conservative.

So, if the cost or inconvenience of re-cladding doesn’t stack up, what next?

Making, then keeping your house safe and dry without re-cladding is an achievable option.  You won’t have a CCC, but your  home is safe for your family, and stays in good condition for future resale.

If you have a moisture probe system installed proving the house is dry, and have done the necessary maintenance, this is far better proof of condition than a 20 year old CCC issued by a negligent Council.

We believe that worthlessness of an old CCC and the value of proof of performance will become more obvious as time goes on.

Selling your house?

Expect that buyers are alert to the leaky building issue and will either try and reduce their risk by offering a low price, or request a building report. That building report will request invasive inspections.  This is good if you have already had moisture probes installed and repairs done.  You have the evidence to support a better price. If buyers want to pay land value for a house then they can go the next one where the owners can’t provide proof of performance – just an old nearly worthless CCC.

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