Supreme Court weighs in on seismic strengthening dispute

The University of Canterbury has lost its appeal in the Supreme Court regarding the issue of whether the Christchurch City Council has the authority to set its own seismic strengthening standards. Kensington Swan’s property team has previously analysed the Court of Appeal decision (that analysis can be found at the following link: http://www.kensingtonswan.com/Legal-Updates-And-Events/Property/2014/Seismic-strengthening-dispute-heading-to-the-Supre.aspx).

In 2010, the Christchurch City Council adopted a policy requiring earthquake-prone buildings to be strengthened beyond the 34% of the New Building Standard (NBS) required by the Buildings Act 2004. The policy required strengthening up to a seismic resistance rating of 67% of the NBS. This percentage is based on a recommendation by the New Zealand society of earthquake engineers.

This policy would increase the cost for insurance companies substantially. The Insurance Council subsequently sought judicial review of the policy, arguing that the Christchurch City Council was not entitled to require a building to be strengthened above 34% of the NBS. The High Court and Court of Appeal accepted the Insurance Council’s contention.

The University of Canterbury had an interest as it owns substantial properties damaged in the earthquakes. It was estimated that the difference in the cost of strengthening  between 34%  and 67% was about $140 million. The University of Canterbury would have to cover the cost if the insurance policies did not respond. The University of Canterbury contended that the Christchurch City Council had the power to require buildings to be strengthened above 34%, as certain buildings could be in danger of collapsing in an earthquake whether they meet the current definition of earthquake-prone (less than 34% of the NBS) or not.

The Supreme Court unanimously dismissed the appeal, and held that the Christchurch City Council only has the power to require seismic strengthening of earthquake-prone buildings up to 34%.

The decision confirms that individuals wishing to strengthen their buildings beyond the legally required minimum must pay out of their own pockets. However in the commercial space, strengthening buildings beyond 34% of the NBS will help attract quality tenants, especially in light of competition with new builds which must be built to at least 100% of the NBS.

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