Reliance on Code Compliance Certificates comes with a risk

September 2, 2013

in Property

Property: HousingMost people purchasing a home these days have come to understand that it is important to check that code compliance certificates have been issued for any work carried out on the property that requires building consents.

Commonly the first step in that process is obtaining a Land Information Memorandum (LIM) report from the relevant city council (Territorial Authority).

The council records and the code compliance certificate process have been shown to be woefully inadequate in the case of leaky buildings as many of the homes that have been purchased suffering leaky building problems have had Code Compliance Certificates (CCC) issued by the council.

This has resulted in a great deal of litigation against the relevant Territorial Authorities claiming negligence by the council in its certification/code compliance process.

As a consequence it has now developed that purchasers are recommended to obtain building reports from suitably qualified experts before purchasing a property. This ensures that there is an additional check made on the condition of the property being purchased that is not solely reliant on council records including code compliance certificates.

A recent decision of the High Court Thompson v. Auckland Council ([NZHC16]) has highlighted the importance of this step from a purchaser perspective.

The purchaser in question purchased the property at a tender which involved a deletion of all the usual warranties.

After purchase the new owner found out that work had been done on the property including a reclad of the entire house and a CCC had been issued by the council. Although the reclad work was not part of the original building consent.

As the owner had no recourse against the original vendor the owner sued the council on the basis of the deficient CCC. The council admitted negligence but the council claimed the purchaser had contributed to his loss by not undertaking the reasonable prudent enquiries that any purchaser would undertake in the circumstances and was therefore not liable for the full amount of the loss due to the purchaser’s contributory negligence.

The purchaser of course argued that they had relied on their initial LIM report which advised that the CCC has been issued for works undertaken.

The purchasers were experienced property owners and had bought and sold other properties.

The judge took this into account and also took significant notice that the leaky building issue had been a well publicised issue. The Court also took into account evidence from experts that a prudent purchaser would normally undertake a pre-purchase building report before purchasing a home unconditionally particularly where the house was one that fitted the criteria typically associated with leaky building issues.

On this basis the Court decided that the purchaser had been foolhardy and contributed to its own loss to the extent of 70% of the amount of those losses and reduced the damages payable by an equivalent percentage.

This decision is another example of the need for comprehensive and competent advice when purchasing a property. Farry and Co. are experts in this area and can advise you in all aspects of property sale and purchases.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Paul Farry

09 379 0055 or 03 477 8870


The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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