Damage checks, repairs, insurance claims. How to assess risks in an area affected by earthquakes, floods or other natural disasters.
Buying a home anywhere requires some checks to give you confidence you're doing the right thing. In a known disaster-affected area, it's especially important to be aware of any potential issues or hazards with a house or area before you commit to buying.
Understand the impact of natural hazards - Understanding the impact of natural hazards | Settled.govt.nz(external link)
Many homes are repaired carefully following natural disasters like earthquake, flood, or landslips. But not all properties are sure to be a safe, sensible purchase.
Extra money, extra help
Anyone considering buying a house in an area affected by natural disaster should:
Budget for extra due diligence: Plan to spend more time and money assessing the condition of a house than you otherwise would.
You still need to do the basics, eg commission a builder's report, read the LIM report. But to learn about potential damage and repairs, and generally have peace of mind, you'll need to consult with experts.
The cost of extra checks can feel frustrating, but budgeting for these is better than finding out later you have an unsafe home.
Hire a building surveyor: Choose a registered expert with knowledge of structural damage and repairs.
Find a registered building surveyor(external link) — New Zealand Institute of Building Surveyors
Get independent legal advice: Talk to a lawyer with proven experience in conveyancing law and insurance claims. A Community Law Centre will be able to provide a list of lawyers who can help.
Find the nearest Community Law Centre(external link) — Community Law
Check out the house and area
Visit the property and have a good look around. This won't help you understand the structural condition of the house. But it will give you a sense of whether you want to learn more about the property. The EQC website has tips and videos.
Features to look for in a property(external link) — EQC
Find out how land and buildings in the area were affected by the natural disaster. Search online for news stories. Walk or drive around the neighbourhood to check if other homes are newly repaired or having building work done.
Understand the impact of natural hazards - Understanding the impact of natural hazards | Settled.govt.nz(external link)
What to watch out for: If many homes appear to be new, freshly repaired, or have repair work underway, it can be a sign that most properties in the area were damaged in the disaster. If a seller says their home had no damage, or they didn't make an insurance claim, ask more questions. It's possible a cash settlement was awarded but not used for necessary repairs. As an interested party, you can also call EQC to find out whether the house has been the subject of a claim.
If you are thinking about buying the house, ask a building surveyor to inspect it. Ask for a report about any damage to the house, and the quality of any repair work.
Ask the seller or agent questions. Even for properties in good order, it's important to get correct, up-to-date information about damage and repairs.
Example — Extra inspection, just to be sure
Hannah and Elliot want to buy a house in an earthquake-affected area. A report from a pre-purchase building inspector shows it has "good bones" with no major problems needing attention. The interior has been upgraded following the quake, so the couple also hire a registered building surveyor to check how the house has been maintained for wear and tear, and how quake damage has been repaired. Hannah and Elliot learn the house had new floors and door frames installed to address post-quake problems. The surveyor helps them understand the history of repairs and improvements. Confident they won't be surprised by unexpected issues, Hannah and Elliot buy their first home.
Insurance claims
Ask the seller or real estate agent:
- Was the property damaged in the disaster?
- Were any insurance claims made?
- If yes, have the claims been settled yet?
If no claim was made
Take extra care looking over the home and property. Commission a report from an expert, eg registered building surveyor or engineer. Ask them about their area of expertise and any limits to what they can advise you on. They should pay close attention to:
- uneven floor levels
- stuck or loose doorways into rooms
- stuck or loose doors on cabinetry
- any leaking or cracking.
Find a registered building surveyor(external link) — New Zealand Institute of Building Surveyors
Find an engineer(external link) — Engineering New Zealand
If claims were made
Find out which insurers are involved. It might be EQC alone, or there could be claims with EQC and a private insurer, eg if the cost of repairs go over the EQC cap.
Ask if settled claims were resolved through a cash settlement or managed repair. This casts light on what documents and evidence you should check.
Check what you will be entitled to if any insurance claims are transferred to you:
- EQC claims, or parts of claims, transferred to a new owner give that person the same entitlements as the previous claim holder. This means the new owner will receive any remaining entitlement up to EQC’s cap for a natural disaster event.
- Private insurance claims work differently. A new owner might not be entitled to the same benefits assigned to the previous owner. Seek legal advice to understand what transferring any claims would mean for you.
To receive information as an authorised party, ask the claim holder to sign a privacy waiver so private insurers can consider sharing details with you. EQC can release limited assessment and repair information without authorisation, but you are encouraged to get a privacy waiver which then allows EQC to discuss the claim details and history in full.
What to watch out for: Insurance claims are held by people, not properties. Ask the seller or agent if all claims have been transferred to the most recent owner. As an interested party, EQC can provide you with a summary of building claims made in relation to a property. The information they can provide is limited but will let you know if any insurance claims exist, but have not been transferred.
If claims were settled
An accepted insurance claim is settled by either:
- Cash settlement — money to pay for repairs.
- Managed repair — the insurer pays tradespeople to complete repairs.
Cash settlement
The insurer pays the property owner directly if there is no mortgage. If there is a mortgage, cash settlement goes through the lender. The owner and lender then agree how to release money for repairs.
All cash settlements include an agreement on how funds need to be spent, and most owners are responsible and use the money for repairs. To protect your interests, it's good to do extra checks.
Ask the seller to see:
- documentation of damage, eg photos, quotes for repair, insurer's scope of works
- proof of the amount paid, eg receipts from tradespeople
- evidence of repairs, eg code compliance certificate, producer statements from construction professionals.
Search online to check that tradespeople or engineers who worked on the property are licensed and reputable.
What to watch out for: If the seller says repair work has been done but they can't or won't provide proof, it's possible they decided not to use their insurance payment for repairs. This is a warning sign. It means a house might have issues the seller is not aware of, or that haven't been disclosed. As an interested party, you can contact EQC to request copies of the scoping and assessment documents completed in relation to the property. This may then help you query the seller on repair work carried out.
Managed repair
Ask the seller to see:
- damage report or scope of works, setting out how the home was damaged and which repairs or replacements were needed
- repair statements, code compliance certificates, or other documents showing the sign-off of repairs — these show an inspector has checked the repairs and is satisfied.
Check the date on damage reports. Reports issued soon after the damaging event can be overridden by later reports as more investigations are carried out — especially if the damage value goes over the EQC cap.
Any home buyer can ask the seller for documents about repairs from EQC or a private insurer. If these are not available, it's possible the previous owner accepted a cash settlement for the value of damage to the house.
If claims are yet to be settled
If insurance claims for damage to a house you want to buy haven't been settled, talk to a lawyer to find out what this means for you. It could mean repairs haven't been completed and might end up being your responsibility. Ask what rights you will get if any insurance claims are assigned to you.
An ‘as is, where is’ sale suggests a house is being sold in its current state. The seller may not know about necessary repairs. Make sure you understand any known issues.
Gather documents and records
Make an effort to understand as much as you can about the house. The type of information you can get might include:
- how the house and area were affected by the event, eg flood, landslip, earthquake
- the sales history of the property, including previous owners
- how any settled insurance claims for damage have been resolved, eg cash settlement or managed repair programme
- if any insurance claims are yet to be settled
- if repairs to fix damage meet building requirements
- if the property has been sold since the event
- the possibility of damage that has not yet been identified.
Here is a list of records you can ask for, and the limits of each:
Take time to consider and compare the documents you have access to. Get expert help. Pay particular attention to this step to give yourself confidence about whether or not to buy the house.
What to watch out for: If you notice anything out of the ordinary, eg a big difference in the amount paid out and the cost of repair work, the seller may be keeping information from you. This is a warning sign. It could mean damage hasn't been repaired and may cause problems in the future.
If you are the new property owner or hold a conditional sales and purchase agreement, you can ask EQC to provide copies of the scoping, repair and settlement documents on file. This can then help you to compare the damage found against the damage fixed.
Types of expert help
Buying a home is a big deal. In an area recovering from natural disaster, it is even more important to carefully consider the pros and cons. You can assess risk yourself, but expert advice is the best way to make an informed decision about buying in a disaster-affected region.
Lawyers can help you interpret insurance information. They can explain issues relating to insurance policies, and your rights and obligations when purchasing property affected by natural disaster. A lawyer can help you access documents you're entitled to. They might be able to liaise with insurers on your behalf.
Registered building surveyors can identify damage and advise you about the quality of repair work. They know about construction issues, and can help you interpret damage reports and scope of works information. A registered building surveyor can tell you if something needs further investigation, and who else to seek help from.
Pre-purchase building inspectors/pre-purchase building surveyors can provide a pre-purchase condition record. Choose an accredited inspector who complies with NZS 4306 — the New Zealand standard for property inspections.
Builders can advise on the condition of a house. Not all builders are qualified to inspect natural disaster damage — and builders can't say what would or wouldn't be covered by insurance.
Residential risk analysis specialists can help you compare repair quotes, receipts and work completed. They can help you decide if buying a particular property is the right thing to do.
When you buy
As a condition of purchase, ask the seller to transfer any insurance claims for damage to you through a deed of assignment. There may be one or more claims from EQC or a private insurer. You can use the sale and purchase agreement to cover detail of claims being transferred, and ask your lawyer to carefully check any conditions in the agreement.
Transferring claims into your name is a vital step.
- Settled claims: transferring gives you the ability to liaise with insurers about past claims on your new property. It means you know the history of the claim and can take action if you have any concerns later. It might mean you can take over the rights of the seller.
- Yet to be settled: transferring claims into your name means you might get remaining entitlements held by the previous owner(s), eg payments for repairs.
- Send your Deed of Assignment to EQC for processing: This will ensure they have you on file as a claim contact ready for any future interactions.
If something goes wrong
There might not be a way to resolve any problems that appear after you buy the house. This is why it's very important to devote time and energy to assessing any risks before buying property in an area recovering from a natural disaster.
If there's a problem with your new home, it's best to seek legal advice.
If the seller or their representative, eg real estate agent, lawyer, deliberately didn't share information about a known problem, that's illegal. You can take legal action.