After the devastating weather earlier this year, the Government has confirmed that around 700 residential properties have been designated as properties where “future severe weather event risk cannot be sufficiently mitigated”. These properties will be offered a voluntary buyout. Around 400 of the properties are in Auckland, with the remaining 300 in Hawke’s Bay and Tairāwhiti. There may also be some properties in other cyclone-affected regions like Northland and Wairarapa that are similarly treated.
The buyout discussions are being led by the local District Councils rather than by the Government, which means that homeowners in different regions are at different stages of the process. Property owners in Hawke’s Bay have already been advised if they will receive a buyout offer, and the process has begun in Tairāwhiti. The Auckland Council expects to begin these discussions on 12 June.
What does the offer mean?
Buyout offers will be made on a voluntary basis to residential properties in the designated areas. Although something may happen in the future for commercial properties or farms in these areas, the current offers only cover residential properties.
If a property qualifies, the homeowners will receive an offer from the Government to purchase the property. The details of these offers, including how long they would have to accept, and how long they could stay living in the property before selling, are not yet known. A decision will not need to be made immediately. There should be plenty of time for a homeowner to consider the offer and take advice.
If an affected homeowner’s property is owned by multiple people or is in a family trust, all owners must agree on whether to accept the buyout. In the case of a family trust owned property, that will include the independent trustee (who may be a lawyer or accountant).
When will the offer be received and how much will the buyout be?
There is no indication yet provided of when individual offers will be made to affected homeowners, or how the offers will be calculated. The costs of the buyout will be shared between the Government and the local District Council. Insurers will also be involved in these conversations.
When similar offers were made in Canterbury after the earthquakes, those in the designated “residential red zone” were given two options:
- an offer to purchase the entire property at its current rating value (less any insurance payments already made), with the Government then receiving any amount payable by the insurer for damage that has occurred to the house; or
- an offer to purchase the land only, with homeowners able to continue to deal with their insurer about their home’s insurance claim.
Usually the first option was considered better for those whose homes which suffered only minor damage, while the second offer was better for those with more extensive damage (when the insurance pay out for the damage to the house was likely more than the homes improvement rating value).
If my home is affected, what should I do?
If you are an affected homeowner, you should ensure that you have a claim lodged with your insurer for any damage to your home and that you get the value of that claim assessed as soon as your insurer is able to do that. It is likely you will need to know the physical damage to your home and the likely extent of your insurer’s response to your claim when you consider a buyout offer.
Can you choose to stay?
Officially, the buyout offers are voluntary. Any homeowner can choose not to accept the offer and stay in their home.
However, homeowners who chose not to accept the offer face:
- the possibility of services including water, electricity, internet, and telephone becoming unavailable or prohibitively expensive;
- unavailability of other council services such as rubbish collection; and
- isolation, as other nearby houses are demolished.
What if you think your designation is wrong?
Some people will receive a buyout offer but want to stay in their home. Others will have been hoping to receive an offer but will not be included in the areas designated for buyout offers. At the moment there has been no indication that there will be a process for challenging these decisions, but our experience from the Canterbury earthquakes tells us a process for challenging the designation will be made available.
If you have received a buyout offer, or think you should have, and want to discuss your options, please contact a member of our disaster recovery team.
Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.