Billions of dollars worth of commercial and residential buildings might not get their legal certificates renewed because of a little-known change this year, causing big ramifications for insurance, mortgages and sales according to two specialist
real estate lawyers.

But the ministry in charge says councils are now ensuring full compliance with the law on potentially life-saving measures within buildings and the need for that was fully communicated via numerous channels lately.

Joanna Pidgeon, a member of the Law Association’s property committee and convenor of its documents and precedents committee, and barrister Tim Jones said the Ministry of Business, Innovation and Employment had changed procedures for building warrants of fitness [WoF] without wide consultation or announcement.

But the ministry’s building system assurance national manager Simon Thomas said it hadn’t changed anything but councils knew to ensure compliance because that meant systems which saved lives like fire protection were fully functioning.

The law and the building WoF system had stayed the same since such systems were introduced in 2005, he said. Some councils had allowed the certificates to be issued without full compliance yet the ministry approach had always remained the same – seeking full compliance as the law demanded.

Allowing lesser levels of compliance than what the law demanded wasn’t satisfactory, Thomas said. Some WoFs were being issued with low levels of compliance.

“This is not acceptable and is misleading. The standard needs to be raised,” he said.

The procedures set out in a building’s compliance schedule for its WoF were there because they were essential for the performance of specified systems which in most cases were life safety systems, he stressed.

“If an owner or specialist believes that an existing procedure in a compliance schedule is insignificant enough that it can be missed then they have the option of applying to the council to have that compliance schedule amended to remove that procedure,” Thomas said.

The missed inspection and maintenance guidance was originally issued by MBIE during the first Covid-19 lockdown in 2020. That was modified in April this year to allow a wider application of the forms, he said.

That guidance did not change, or attempt to change, the provisions of the law or MBIE’s long-held position on the issue, he said.

But Pidgeon and Jones said a radical change had indeed occurred a few months ago in the way councils carried out their functions. That had caught the sector by surprise because there was no flexibility and a lesser standard was now in force.

The process was changed so if owners like bodies corporate failed to get their WoF within a specified timeframe they would instead get a lesser standard document. That is not a full WoF but a declaration that it is in lieu of that WoF and there is non-compliance within the building.

If there are problems or delays, instead of a report in lieu of a WoF being issued as happened previously, the lawyers said owners now got one of two new MBIE documents: either a specified system report and declaration or a building warrant of fitness report and declaration but not a building WoF.

Those documents would highlight non-compliance.

Neither were building WoFs, the lawyers said.

That could jeopardise mortgages, insurance and sales, they complained.

“If they miss a single inspection, have to wait for a unit to come from overseas or if their monthly inspector retires, they won’t get a WoF. The building might meet all the standards but owners will be breaking the law then because there is no building WoF.”

That had implications for mortgages, leases to tenants and insurance “so if you go to sell, you’ll be breaching warranties under your agreement”, Pidgeon said.

If one inspection was missed through no fault of the building owners, the warrant of fitness would now be refused, the lawyers said.

If an inspector went out of business, died or retired during the year, although a replacement was appointed, no warrant of fitness would be issued, they said.

Jones said: “This is a massive problem and one that the Body Corporate Chairs Group is very concerned [about]. If for instance, you’ve turned off the fire sprinklers in a building because construction work is being carried out, owners wouldn’t be able to get their full WoFs, yet turning off sprinklers is often necessary when some types of work are being carried out.”

The timing of those sprinklers being disabled could trigger no full WoF building issued for the building, he said, even though it was most likely unavoidable.

“Yet under the old regime, you’d get a dispensation from the council on the basis that you were doing work, then you’d get the building WoF once that had been rectified. But you couldn’t do that now,” he said.

Thomas said the need for owners to fully comply with the law for WoFs had been fully and openly communicated and nothing was being hidden.

The modifications to the guidance were publicised in several MBIE newsletters with wide distribution. MBIE also gave open presentations to council staff and industry members, and guidance was also published in the Building Officials Institute’s magazine, Thomas said.

Councils were supportive.

“We have had examples of buildings that have previously been issued a WoF despite non-compliance, now getting a report and declaration detailing the defects of the systems with a plan to fix them,” Thomas said.

Any concerns about buildings without WoFs breaching insurance contracts could be argued to equally apply where a WoF had been issued that was false or misleading, Thomas said.

Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.