‘Whacked’ with huge costs: $16.3m estimated to fix defective Auckland apartments

An Auckland apartment owner faces paying more to fix his place than the purchase price six years ago, with an estimated $16 million worth of remediation work needed on the building.

Stefan Seiler, of Avondale’s Alto apartments on St Jude Street, said he paid $310,000 for his unit in 2015 but owners are being told about $400,000 each will be needed for repairs to bring the building up to standards.

Recladding for leaks, structural upgrades and an update of fire systems for sprinklers and fire separation between units are required.

“Not many people can afford the huge costs they have been whacked with,” he said, referring to mortgage payments as well as accommodation costs while repairs are under way for months.

On December 18, Boutique Body Corporates wrote to owners saying quantity surveyors at Maltby’s had estimated the costs to fix the units at $16.3m, including a $2.45m contingency that might not be used.

Seiler said he thought everything was fine when he bought his unit.

“When I purchased, I had a building report done and it came back all clear, no issues. I was young, a first-home buyer and was thrilled to finally get onto the property ladder,” he said.

By 2019, owners got the bad news that the multi-level property would require remediation.

“Over the course of 2020, the assessment was done to understand the costs involved with what was needed and, late last year, we were told that the building would require approximately $16m spent on it to repair it.

“From a report I received last week, $400,000 [will be due] for each owner,” he said.

“From the feel I get from others, not many can afford the huge costs. We also have to come to terms that we have lost a huge amount of money, which we still owe the banks.”

Repairs are expected to take longer than a year.

“Where are people are expected to live? I don’t understand why this cost has been thrown at owners, as I would think any logical buyer would have done their due diligence. I and others are on the understanding that our individual apartments were fine,” he said.

Seiler said insurance won’t cover the building because it is defective. He investigated trying to sell but was informed about “misrepresentation” which he said had been completely unintentional.

People considering buying apartments often only get an inspection on the unit they are looking at, not the wider building.

Boutique Body Corporates said that, under the Unit Titles Act, the body corporate had to maintain the building.

All unit owners are part of the body corporate, meaning all owners are responsible for the work that now needs to be done, even though the repairs aren’t directly for their own unit.

A remediation design is due to be finished by December, building consent by next June, tendering of the contract and vacation of all apartments around next October and completion in December 2023.

Some owners might look to sell but Boutique noted that full disclosure would need to be provided.

Craig Leishman and Carly Edwards of Boutique wrote to owners: “It is sadly apparent the complex has significant original design and construction failings.”

Decisions would need to be made to address those issues.

‘”It is intended all owners will be updated on matters of importance as they arise and it is proposed key decisions will be made by all owners at general meetings after current information is provided,” they said.

Alto’s body corporate “has a huge shared problem” so everyone should work together to resolve matters, they said.

A meeting in January heard how problems were largely associated with the end of Block A where the concrete frame above the two carparks was rated at only 20 per cent of new building standards.

“As a result, the whole building is deemed to be less than the 34 per cent minimum benchmark. At under 34 per cent, the building is deemed to be earthquake-prone,” Boutique’s minutes of the January 26 EGM said.

Unit owners retaining their insurance was one of the biggest challenges because the insurers had already said they expected progress to be made in addressing the seismic deficiencies before the next renewal.

One apartment owner at the January meeting said the building might have a limited economic life of only 15 years. By then, the land might be so valuable that the building “will to some extent become irrelevant”.

The Herald has reported how building consent authorities are estimated to have stumped up about $1b during the past decade in compensation for defective buildings, including leaky homes.

Of that, about a third of the bill was to cover the tab of failed builders and developers who more often than not dodged their liability, with the council-backed agencies usually the last entity standing.

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