Questions mount over Nats’ red zone plan

Written By: - Date published: 10:04 am, June 27th, 2011 - 30 comments
Categories: disaster, Gerry Brownlee, john key - Tags: ,

As has been said since before the announcement, Option 1 isn’t enough to get people back into the situation they were in before the quake – which Key and Brownlee promised. A hell of a lot of land was valued well below market price. Not to mention un-notified or post-2007 upgrades to houses. Those aren’t caught by the 2007 GVs.

Brownlee simply refuses to acknowledge there is a problem. CERA boss Roger Sutton says “we haven’t written the rules yet” around these issues. What the hell? Govt has had months to come up with these rules. The hard part, surely, is the geotechnical work, not the buy-out rules. Can understand that there’s a big ‘orange/white’, actually ‘grey’, zone of houses that are in the ‘don’t know’ category. Can’t understand that the rules for each category aren’t in place.

Sutton also says: “There are only about 50 people uninsured among 5000, but you have to be careful. There are sad stories but you can’t start paying out to the uninsured.” Simple question: why not? The buy-out isn’t an insurance payment.

Next: problem with Option 2. Insurers refusing to payout for replacement on red zone houses that aren’t write-offs. Some red-zone homeowners are looking at suing the insurance companies. Might feel good. Wouldn’t work. Insurers are within their rights. They’ll argue a) the homeowners have the choice not to sell their land to the government’s or b) force majeure. Homeowners’ beef is with the govt, which should have fixed this obvious problem. How? By telling insurers to payout for replacement and then making up the difference between actual insured damage and that payout.

Government can’t argue they were ignorant of this issue. Not just because I thought of it straight away or because actual examples came out within a day of the announcement. Brownlee had been told about it by insurers: ‘insurance companies had been “quite clear about their position” during several months of discussions with the Government’ – according to The Press.

Get that clear: Brownlee knew about this issue for months and has done nothing about it. Sutton says “Decisions were only made two days ago and we haven’t written the rules yet”. But Brownlee has been sitting on this info for months doing nothing.

What happens if you refuse to be ripped off under options 1 or 2? The government will wait you out, then buy you out compulsorily. Andrew Geddis explains:

Let’s say you are unlucky enough to be in the “Red Zone” (which likely will expand, note, as the “Orange Zone” and “White Zone” land gets looked at more closely). And let’s say neither of the Government’s two offers work for you … in that you think they leave you in such a bad financial state that you can’t afford to take them. What then?

Well, one prospect is that you will end up as a lonely hold-out in a largely deserted area of demolished houses with little in the way of services. That in itself will be enough, I suspect, to get most people moving out irrespective of the financial hit they have to take.

But let’s say that, although it is in the Red Zone, your house is in reasonable shape, it still has services, and you just don’t want to (or really feel you can’t) leave. What then?

Well, at the moment, the Government is speaking the language of offers. According to the press release, “Residents will then have nine months to consider the offer of purchase.” Which may make it sound like the decision rests with the land owner – if you don’t like the offers, then you can just stay on living there.

Except … probably not. Because lurking behind the Government’s offers is the Canterbury Earthquake Recovery Act 2011, and in particular section 54. Under that section, “The Minister may acquire land compulsorily by causing a notice of intention to take land in the name of the Crown to be published in the Gazette and twice publicly notified … .”

Now, we can’t say for absolute certain, and the Minister himself may not yet know for sure, but I think it’s pretty clear that there won’t be anyone allowed to stay living in the Red Zone. That’s certainly the implication of this news story. So folks who won’t sell voluntarily will, I suspect, find themselves selling involuntarily after 9 months.

Except, here’s the rub. If your land is acquired compulsorily under the Canterbury Earthquake Recovery Act 2011, you get compensation under subpart 5. And that compensation is determined by the Minister in accordance with s.64.

And s.64 makes it crystal clear that “in the case of the compulsory acquisition of land, [compensation is determined] as at the date of the compulsory acquisition”; meaning “the Minister must determine compensation having regard to its current market value as determined by a valuation carried out by a registered valuer.”

It’s amazing how quickly this has gone from ‘we’ll stand beside you’, ‘no-one will be worse off’ to ‘screw you, take the crappy offer, or we’ll take the land at our own price’. But that’s what you get with a Tory government and an incompetent, non-empathetic minister.

30 comments on “Questions mount over Nats’ red zone plan”

  1. Colonial Viper 1

    “the Minister must determine compensation having regard to its current market value as determined by a valuation carried out by a registered valuer.”

    So I guess the important question is, what’s the likely “current market value” of fraked liquefaction strewn land that no one can build on again?

    Oh, right.

    “There are only about 50 people uninsured among 5000, but you have to be careful. There are sad stories but you can’t start paying out to the uninsured.” Simple question: why not? The buy-out isn’t an insurance payment.

    Translation: Uninsured = Second class citizen in the event of a major natural disaster.

    • Adolf Fiinkensein 1.1

      CV, don’t get too carried away with vituperation, now.

      In my view the uninsured should be treated in exactly the same way as the insured. That is to say, they should receive from the government what used to be known as the ‘unimproved value’ of their land as it was before the earthquake. Furthermore, I’d be interested to see if you can verify the claim that Messrs Brownlee and Key promised to “get people back into the situation they were in before the quake.”

      It is very easy for a competent registered valuer to establish such a figure.

      You guys really are pushing shit uphill on this one.

      • Colonial Viper 1.1.1

        Funny, asking that those who are uninsured do not lose all the equity they had saved up in their homes hardly seems to be pushing shit up hill. Those people are not shit, and they are not second class citizens.

        The Govt paid out $4M on an uninsured sports field for goodness sakes.

        Their position needs to be formally declared by the Government so they have certainty and that they aren’t bankrupted by any mortgage they might still hold.

        • Blue 1.1.1.1

          Isn’t the question WHY aren’t they insured? God, what is the point of getting insurance for just such an occurrence if you think the Govt should pay (with money they don’t have) for those that didn’t bother to insure their own house FFS. They gambled, for reasons i cannot understand and chose not to insure their biggest asset against loss, and they lost big time. Perhaps everyone should get a refund form their insurers and just send the rebuild bill to our broke Government.

          • Blighty 1.1.1.1.1

            “God, what is the point of getting insurance for just such an occurrence”

            your insurance doesn’t cover the government buying your entire neighbourhood and declaring it uninhabitable. That’s force majeure.

            Are the buy-outs of insured people tied to how much the government expects to recover from insurers? No, they are not. If you have home insurance and in the red zone, you can get full rates value on the property whether your house and land are a complete write-off and every cent is covered or if there is no insured damage at all.

      • Bright Red 1.1.2

        Adolf, if you want the uninsured to be treated the same as the insured, then they should have option 1 open to them – ie. they could sell their property to the govt at 2007 rateable value.

        That option isn’t open to them currently, and it’s not the option you have described.

        “He repeated that the Government would protect the equity in people’s homes.”
        http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/4745884/Real-prospect-of-large-scale-shifts

        amongst others.

        • grumpy 1.1.2.1

          Read what he said, then look up what “unimproved value” means.

          • Blighty 1.1.2.1.1

            unimproved value doesn’t count the value of any buildings. Adolf said:

            “In my view the uninsured should be treated in exactly the same way as the insured. That is to say, they should receive from the government what used to be known as the ‘unimproved value’ of their land as it was before the earthquake.”

            But, Option 1 gets people the value of their land and buildings:

            “the Crown makes an offer of purchase for the entire property at current rating value (less any built property insurance payments already made), and assumes all the insurance claims other than contents;”

            So, what Adolf is suggesting for the uninsured is not what the insured are able to get.

      • ghostwhowalksnz 1.1.3

        What happened to the uninsured part of Lancaster Park?

        Unlike other sports grounds they werent insured for the playing surface.

        No problem, Brownlee /Key said ‘we will pay to have it fixed ‘, even though it wont be used for RWC

        Then there is the $4.1 million pledged to fix AMI Stadium’s turf. The government stepped in because the turf was uninsured and it would take too long for the stadium owners, V-Base, to get the cash together. Apparently it’s not unusual not to insure the turf of a sports ground, but V-Base had never even looked into the cost despite the ground having scraped through a 7.1 quake unscathed.
        http://www.stuff.co.nz/sunday-star-times/opinion/4784931/Austerity-applies-everywhere-but-elite-rugby

        • Chris 1.1.3.1

          I still don’t understand why people on this site (really just CV and apparently you) are so upset at the government paying money for a council owned asset. I really don’t see how it is a big deal.

          • Colonial Viper 1.1.3.1.1

            Its a useless uninsured piece of property in the middle of a wrecked stadium which is getting no use in the Rugby World Cup.

            Yet the Government is happy to throw in a $4M bailout no questions asked while citizens living in filth and about to lose all the equity in their uninsured homes after losing their jobs due to the earthquake are told “no dice for you, just our rugby mates”.

            Its punitive and its BS.

            Shows who this Govt’s mates really are and the different treatment they get.

            • Chris 1.1.3.1.1.1

              Your anti-rugby bias is showing. Whether you like it or not many people in Christchurch do like rugby so they need a stadium.

              Additionally it’s not their rugby mates who are getting the bailout -they wouldn’t be paying for it. It is the people who own the stadium who have to pay for it i.e. the council.

              So yes the government’s mates the Christchurch City Council gets a bailout – not a big deal.

              • Colonial Viper

                Your anti-rugby bias is showing. Whether you like it or not many people in Christchurch do like rugby so they need a stadium.

                Yeah but I bet they love flushing toilets more than they love rugby.

                Plus that stadium is screwed, it won’t be operational for over a year. Those funds could be used to help people now.

                $4M for a sports field which isn’t even going to be used in the RWC, what a waste.

                • Chris

                  That’s all well and good except the $4 million has not detracted from the amount spent on other things in Christchurch. As you will be aware it is not $4 million which has already been spent. That is the amount they will pay overall not how much they have paid now. I get that you don’t like rugby and don’t see the need for the stadium but that doesn’t mean it should just be left alone.

                  Plus according to this the total estimated bill for the quake will be $8.8 billion:

                  http://www.starcanterbury.co.nz/business/news/quake-bonds-to-help-with-christchurch-rebuild/3952591/

                  Now I’m happy to admit the government has probably inflated this so even if we say the bill is $6 billion. You are upset because 0.0666% is being spent on a sports stadium?

                  Keeping in mind this is a sports stadium which when it is not broken runs at a profit (based on the fact that in 2010 VBase contributed around $1,000,000 to the Council).

  2. tsmithfield 2

    “Option 1 isn’t enough to get people back into the situation they were in before the quake – which Key and Brownlee promised. A hell of a lot of land was valued well below market price.”

    I have seen this repeated a lot here. Any evidence to back it up? Because my wife who is a real estate agent for Harcourts has been regularly selling properties in ChCh under the 2007 GV in the last several years. It has been a bonus for sellers if they have been getting over GV.

    “Brownlee simply refuses to acknowledge there is a problem. CERA boss Roger Sutton says “we haven’t written the rules yet” around these issues. What the hell? Govt has had months to come up with these rules.”

    Brownlee has said on TV a number of times that the government is willing to negotiate informally where for various reasons the GV is inequitable. Sure, a formal process would be good. However, the problem with a formal process is that people would be queued up for years waiting for justice.

    “Sutton also says: “There are only about 50 people uninsured among 5000, but you have to be careful. There are sad stories but you can’t start paying out to the uninsured.” Simple question: why not? The buy-out isn’t an insurance payment.”

    But under the rules, EQC payouts for both land and buildings are only for insured owners. The governments offer is simply an extension of what exists, and what Labour didn’t bother changing in 9 years.

    “Next: problem with Option 2. Insurers refusing to payout for replacement on red zone houses that aren’t write-offs. Some red-zone homeowners are looking at suing the insurance companies. Might feel good. Wouldn’t work.”

    Agreed it won’t work. Insurance policies have an exclusion clause for where the government acquires the land or orders destruction of buildings. Anyway, the two options give the most equitable solution. Essentially it puts owners into the same position as those in the green zone. If the same property was in the green zone, it would either be an old house fixed up or a completely new house in the case that the damage was not repairable. Thus, for both red zone and green zone houses, you are much better off if the house is totaled rather than repairable.

    “What happens if you refuse to be ripped off under options 1 or 2? The government will wait you out, then buy you out compulsorily…”

    I don’t think the government is interested in pissing around. They want things to happen so they will probably err on the side of generosity.

    Also, many people have a false idea of being ripped off. For instance, the government is not going to give full compensation where a property has been over-capitalised. Neither should it. Neither will it rescue people from their own stupidity, like in the case my wife tells me of, of a mortgagee sale in process at the moment where the owners paid $400000 for a house GV’d at $300000. She thought the paid a ridiculous price for it at the time and wasn’t surprised that it came up as a mortgagee sale.

    • vidiot 2.1

      For improvements to property post 2007 pre 09/10, the council will have records of these improvements and Bob was saying (TV3 press conference) they would be factored in to the option 1 settlements. I guess if the improvements were done on the sly and lack official recognition, this might bite a couple of the home owners.

    • Blighty 2.2

      Here’s one example of people who had a 2009 valuation that was more than their 2007 GV http://www.stuff.co.nz/marlborough-express/news/5190284/Red-zone-ruling-shatters-nest-egg-plan

      If this situation didn’t exist, there would be no need for option 2.

    • It looks like the government actually is happy to be ‘pissing around‘. Also, it will be a funny feeling for those reluctant to leave once new houses with new residents take over the area in ‘seven years’ or so on the remediated land:

      The Government is stopping short of compulsory acquisition, relying instead on the lack of infrastructure.
      Brownlee said: “Why would you want to stay if there’s no infrastructure in there for you? And there won’t be.”
      He was confident “safe and adjacent” properties to the so-called “residential red zone” would retain their value.
      It was suggested at yesterday’s press conference that nearby property owners would have to look towards a wasteland, but Brownlee said the abandoned areas would end up being “relatively attractive”.
      Government-contracted engineers have suggested some areas may have to be raised two metres before being remediated.
      Brownlee said it would be “at least seven years” before houses could sit on that land again.”

      • Puddleglum 2.3.1

        Also, not much chance of trying to recoup losses by ‘salvaging’ property from your ‘once was home’. Apparently, it’s more important that salvage firms get their bonus after presumably already being paid for the demolition work.

        Best not to try and take that door jarm (sp?) with your childrens’ heights marked on it, or the cooker you baked those savouries in for your husband’s funeral reception, etc….

  3. vto 3

    Oh deary me. Being in a whitey zone I have not followed the detail closely (too much more important stuff to attend to like making a dollar, keeping the family sanity bells alive, repairing the house and removing things from above our heads for the next quake).

    Seems like an instant quagmire, which was my initial reaction too. Too complex. And why the hell should the insured get paid out for uninsured components of their property and the uninsured not get paid out for uninsured components of their property?

    National are out come November.

    Also, initial thoughts re Roger Sutton are coming to pass. He is too personable and open and quick to verbalise for a job position which requires some considerable political skills. He lacks them and is already stepping in do-do up to his knees.

    Youch this is getting prickly.

    The biggest mess in New Zealand’s history is what we are witnessing.

    2c and out.

  4. tc 4

    This whole sad and sorry tale sums up sideshow John and his hollow backers better than Homer J could ‘just because I don’t care doesn’t mean I don’t understand’.

    Chch my heart goes out to you, looks like another one of those ‘choices’ our aspirational govt has made, shame on all you heartless moral vacuums led by the biggest leadership vacuum of all.

  5. Chris 5

    And Labour and Goff could do better ? Dreaming is free.

    • Colonial Viper 5.1

      Fuck yeah Labour and Goff would do better.

      For starters an annual levy for the rebuilding of Christchurch. Each year of the next 5 years on all those earning over $55,000 p.a.

      That would raise funds to immediately greenlight a massive replanning and rebuilding effort in Christchurch, independent of the bullshit manoueverings of the insurers and re-insurers.

      It would also be enough to quickly recharge the EQC.

      Too bad Brownlee, English and Key are just clue-less and plan-less.

      • MarkM 5.1.1

        Colonial Viper

        How many people in Christchurch earn over $55k p.a and how much are you proposing to tax them.
        How much are you proposing to give to EQC and how much to the massive ” planning and rebuilding effort” ?
        What will these funds be spent on?

        You have obviously thought this through based on your comments on others being cleless and planless

        • Colonial Viper 5.1.1.1

          Hey mate a levy exclusion zone around the worst hit areas of Christchurch would be implemented.

          As would reinstatement of the unemployment assistance to Christchurch workers made unemployed by the quake, through to Jan 1, 2012.

          You have obviously thought this through based on your comments on others being cleless and planless

          Hey give me Gerry Brownlee’s Ministerial job for $240K p.a. and i’ll sort it. Next.

          • Craig Glen Eden 5.1.1.1.1

            It wouldn’t take much to come up with some thing better than this, I wont call it a plan because it isn’t. I would bet Gerry’s lunch money CV could do a way better job than Gerry.

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