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Friday, October 14, 2011

Red Zone and a damaged house? Could EQC move it for you, and give you a section?

The doings of EQC are governed by the Earthquake Commission Act 1993. In terms of specifics, the insurance of any residential building, residential land, or personal property is subject to the conditions set out in Schedule 3 (see Sec. 27 of the Act). You can find Schedule 3 in its entirety here, on the website legislation.govt.nz

For the purposes of this post we are interested in Sec. 10 of Schedule 3. The heading of the section is Relocation of building. That section is reproduced in full at the end of the post.

I am not a lawyer, and it will take some legal brains to work out the fish hooks (e.g. getting EQC to agree to use this option), however the wonderful opportunity this would be for some is:
  • you are in a Red Zone with a damaged house,
  • you are a rebuild  repair (below the cap),
  • you get the value of the land,
  • EQC pays the cost of relocation,
  • Fletchers/EQR fix the house.
If the house is over cap, but still a rebuild, then there could be an arrangement between EQC and your insurance company for removal and repair. Seems simple enough, and a good option for protecting the equity of some of the people currently facing the biggest losses.

What about the cost of buying a new section? This is where a lawyer would be very handy - does the second half of sub-section (1)
or, where that site is unsuitable because of damage which it has suffered or is likely to suffer, (shift the house) to a different site determined by the Commission, being a site that is reasonably equivalent in all material respects to the existing site immediately before the damage occurred.
contain the implication that EQC would also provide the land?

It seems so to me, as sub-section (2)(c) says:
where the building is moved to a different site, provide the insured person with a legal right or interest in the different site of the same kind as the right or interest that the insured person had in the previous site; ...
It is a little surprising that neither EQC or CERA have put this forward as one of the choices for those with damaged houses in either a Red or Green zone. Can EQC retrospectively change its policies by removing what might be a preferred option for many? Presumably EQC's re-insurance cover was purchased with a view to this option being used? It must have been, as the zoning concept had not been conceived when reinsurance was taken out.

Any qualified legal opinions out there?

Schedule 3
Conditions applying to insurance under this Act

10. Relocation of building
(1) Instead of paying the amount of any natural disaster damage to, or reinstating, a residential building or residential land, the Commission may, at its option, relocate the building concerned on the same site or, where that site is unsuitable because of damage which it has suffered or is likely to suffer, to a different site determined by the Commission, being a site that is reasonably equivalent in all material respects to the existing site immediately before the damage occurred.
(2) If the Commission elects to relocate a residential building, it shall—
(a) pay all costs of relocation; and
(b) reinstate the building to the same condition as the building was in immediately before the natural disaster damage occurred, except that the Commission shall not be bound to reinstate exactly or completely, but only as circumstances permit and in a reasonably sufficient manner; and
(c) where the building is moved to a different site, provide the insured person with a legal right or interest in the different site of the same kind as the right or interest that the insured person had in the previous site; and, upon provision to him or her of this right or interest, the insured person shall transfer to the Commission his or her right or interest in the previous site.
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