Relief for Owners of Earthquake-Prone Buildings

Rosie Clark

Much has been written lately about earthquake-prone buildings and the huge costs facing building owners. In July the Government announced changes that will assist owners of lower value buildings. This has been touted as a boost to the regions, where the rules are having a disproportionate effect due to the relatively low value of buildings compared to larger centres.

The Ministry of Building, Innovation and Employment (MBIE) maintains a national system for managing earthquake-prone buildings. The system categorises New Zeland into three seismic risk areas and sets time frames for identifying and taking action to stregthen or remove earthquake-prone buildings.

In coastal Otago the Councils have until 1 July 2032 to identify potentially earthquake-prone buildings and issue “EPB Notices”. Owners of earthquake-prone buildings must carry out strengthening work within 35 years from the time they receive an EPB Notice. Further inland, the timeframes are shorter  as the seismic risk is higher.

Owners can trigger a requirement to undertake earthquake strengthening work earlier than this if they undertake “substantial alterations”. Most of us will have heard stories of building owners facing crippling costs associated with earthquake strengthening work which is triggered by a building consent application for much more minor work.

Under the current rules, there is a “substantial alteration”  if the estimated value of the proposed alterations (less any strengthening  work) plus the estimated value of any (non strengthening) work consented in the past two years is greater than 25% of the total building value. This means that two building owners could undertake the same work, and one owner might be required to undertake additional strengthening work, whereas an owner of a more valuable building might not.

To address this, the Minister for Building and Construction has announced that the criteria for “substantial alterations” will be changed so that the strengthening requirement is only triggered if the 25% test is met and the value of the building work is greater than $150,000. This should mean that modest building work will be able to be completed without triggering a requirement to undertake more onerous strengthening work immediately.

This news will be positively received by small investors and community groups looking to maintain their buildings, but without the resources to undertake substantial alterations in the short term. However, in Dunedin and other large centres I think we will continue to see building owners proactively taking steps to upgrade and strengthen their buildings in order to continue to attract top tier tenants.  Their ability to do this will be dictated to a large extent by the availabilty of engineers and builders to undertake the work, which  is why it is important that building owners have a long term plan in place for completing upgrade works.

Rosie Clark is a partner in law firm Gallaway Cook Allan.