IN LATE 2013 , the Supreme Court confirmed that a council could not require building owners to strengthen earthquake-prone buildings to greater than the 34% of the new building standard required by the Building Act 2004.
This decision was good news for insurers. For commercial property owners, it also clarifies that territorial authorities cannot extend their policies beyond requirements in the Act.
Act defines earthquake-prone buildings
Under section 124(1) of the Building Act, a territorial authority has the power to require a building owner to carry out earthquake strengthening work. Section 122 of the Act provides that a building is earthquake-prone if:
● the building will have its ultimate capacity exceeded in a moderate earthquake
● the building is likely to collapse causing injury or death or damage to property.
The first characteristic is further defined in the the Building Act to mean that a building does not have the seismic strength of 34% of the standard required for new buildings.
Council pushes for greater strengthening
In 2010, the Christchurch City Council adopted an earthquake-prone buildings policy. This said that the council, when issuing notices under section 124 of the Building Act, would be guided by the New Zealand Society for Earthquake Engineering (NZSEE) recommendation of earthquake strengthening to 67% of the new building standard.
Insurance body appealed the policy
The Insurance Council of New Zealand successfully sought judicial review of the council’s policy. It argued that the council could not require a building to be strengthened to a level greater than the 34% required by the regulations to the Building Act. It said that a building strengthened to 34% of the new building standard was no longer earthquake-prone. The High Court and Court of Appeal agreed.
For insurers, the successful judicial review was particularly important following the Christchurch earthquakes. They did not wish to be responsible for both the costs of repairing buildings damaged by the earthquakes and the costs of bringing those buildings up to a seismic strength of 67% of the new building standard.
A dissenting view
The University of Canterbury, however, appealed the decisions. It owned substantial properties damaged in the earthquakes and wanted to upgrade these to the standard proposed by the council and pass the $144 million additional cost on to its insurer.
Supreme Court decides on 34%
The Supreme Court found that the council did not have the power to require earthquake strengthening beyond the 34% standard.
Once a building is strengthened to 34% of the new building standard, or to a strength that means it is unlikely to collapse, it is no longer earthquake-prone under the Act. Property owners strengthening their buildings to a higher standard do so at their own cost.
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