Court hearing “Quake Outcasts” vs CERA, also comments on proposed covered sports stadium

(UPDATED 26/8/13, Quake Outcast info at bottom)

I could simply say that “Wednesday was taken up with legal argument… ” However this whole hearing has been one big legal argument.

I am of course referring to the judicial review hearing about the Wellington based government’s offer to buy “Red Zoned” land in Christchurch, for just half of it’s previous value.

That value was calculated by using the 2007 valuations-for-ratings-purposes. Note that properties sometimes sell for somewhat less than their “RV” and sometimes more. Often houses on freehold land sell for more than their RV, some examples have sold for double their RV. It is important to note though that these government Red Zone offers were for the land component only, and not for any house, or other structure or improvements on the land.

(However, especially in the case of brick construction, it is neither practical nor economically viable, to move an existing house or other structure. Wooden houses with corrugated iron rooves and similarly built garages are by comparison cheap and easy to move, ie it only costs a few, tens of thousands of dollars, to move and re-site them).

Some suburbs, due to underlying soil conditions, suffered more during the earthquakes of late 2010 and 2011. Liquifaction damage often caused a sandy watery mud to rise to the surface in many areas, sometimes overflowing not just gardens and streets, but also entering low lying homes. In some areas land has slumped and is now more low-lying than it was, and therefore subject to greater risk of flooding during spells of sustained wet weather or high-tides.

The Christchurch suburbs in the eastern and north-eastern parts of the city, sit on soil types which are more susceptible to liquifaction. Underground infrastructure such as local council owned water and sewerage pipes, and houses’ foundations can also be damaged.

The government claimed that some areas simply weren’t worth fixing up, and indicated it would like to see entire suburbs abandoned. One assumes that the land will then be turned over to be a large park. (Great, another hang-out for winoes and for dumping abandoned burnt-out stolen cars).

So the government designated certain areas “Red Zones” and most people in those areas took offers from their insurance company for a total payout on the grounds that their house was a “write-off”. Note that in many cases, houses had minimal or zero damage.

(However I have my personal suspicions that, before long, the government will claim that land remediation and/or by the use of appropriate technologies, such as lightweight small and modular house constructions and a more flexible infrastructure design, re-settlement would be feasable and economically viable and then they will re-zone Red Zone, and on-sell the land, and for VERY much greater than the price they paid.)

The whole reason for the judicial review is because many people only got offered HALF the RV for their Red Zoned land.

Land that was uninsured at the times of the various earthquakes, only got an offer for half of RV. Now it is true that some people choose to “self insure”. They chose to have no insurance, and if a reason for a claim comes along, like a house-fire or an earthquake, then they will bear the risk and costs themselves.

However many property owners were UNABLE to get insurance coverage for their land. Examples can include people who bought empty sections (in some countries referred to as a block or plot) intending to build a new house later. Commercial premises, such as a shop or petrol service station, and charities like churches are also uninsured for land.

In New Zealand, residential houses which are covered by insurance, have automatic coverage for land damage under the government’s Earthquake Commission scheme; the insurance company submits to the government a small proportion of the insurance premium to cover that scheme.

The government claimed that land designated “Red Zone” had, overnight become virtually worthless anyway. The price a house in the Red Zone could be sold for was very much less and they would be almost impossible to insure and therefore almost impossible to get mortgage finance on.

(The government conveniently side-steps the fundamental issue, that as it was the government that simply decreed certain areas “Red Zone” anyway. There is nothing stopping them from simply re-designating all Red Zone land as Green Zone land tomorrow, and suddenly the houses and land there will be instantly returned to their former value. Remember that especially around the fringes of Red Zone areas, there are many houses which are totally undamaged, or which have only minor cosmetic damage. While next door could be a Green Zone house which has been deemed a total write-off by the insurance and will be rebuilt. Foundations for a typical single-storey family house, onywhere in Christchurch, before the earthquakes, would have usually cost about $10,000. Houses needing to be rebuilt on land now recognised as less stable (during earthquakes) would cost about $80,000. The insurance company is required to pay the extra cost for more expensive foundations if they are required. Keep in mind that in some places the land designated Red Zone is some of the most highly regarded and desirable city land. Houses with a riverbank frontage just across the road and much of the Southshore spit. Prime coastal and beachside real estate in anyone’s books.)

The hearing was brought by two groups. One called themselves “Quake Outcasts” and is 68 people who own 45 properties in various Rwd Zone areas. A separate group of claimants, “Fowler” owned 11 commercial or industrial properties in the Red Zone.

Quake outcasts were represented by three counsel at the hearing and Fowler by two. There were three counsel acting to represent the crown.

Named in the proceeding was the Minister for Canterbury Earthquake Recovery Gerry Brownlee and the chief executive of the Canterbury Earthquake Recovery Authority (CERA) Roger Sutton.

Neither man actually appeared in the courtroom in person.

The arguments made by counsel for the various parties were all highly technical legal mumbo-jumbo that means nothing to those of us without advanced legal training.

However reference was made as to whether the offers to buy the land designated Red Zone were legal in all respects.

Reference was also made to an Australian case where the government wanted to stop development of private land that was close to a national park at Jervois Bay. They made, what could be considered “low-ball” offers to the private landowners. Those offers had a strict time limit and were limited to the first 800 people who applied. A sliding scale meant that the slower people were to accept the “voluntary” offer, the lower the price they would get. The government didn’t necessarily threaten to take the land completely, but suggested it could change zoning laws to prevent people from ever being able to use their land for any real and useful purpose.

Legal counsel pointed out similarities and differences with the New Zealand government’s Red Zone buyout offers.

It is worth noting that in the original media reports, the government had ALWAYS said that Red Zone buyout offers, were COMPLETELY VOLUNTARY and people could choose to stay in their homes if they wanted to. (Keep in mind many of these homes are undamaged or have minimal cosmetic damage only).

Later the comments were expanded to say that the government may later take the people’s Red Zoned land and houses by Compulsory Acquisition anyway. Further, and I think sinisterly, the government said that if it got to compulsory acquisition, then the compensation offered would be almost nothing as the land was almost worthless because it was Red Zoned. (Again, completely avoiding the elephant in the room, that it is only Red Zoned because they it is. They can simply re-classify the land as Green Zone, and whoopee suddenly it is Green Zoned again.)

(In Australia when land is taken by the government whether you agree to it or not, this is called “resumed” and in USA “eminent domain”. Curiously, in the state of Western Australia, politicians have many years back, passed a law, saying that THEIR houses will never be subject to being “resumed” by the government. It’s alright for some, isn’t it?).

Note in considering the impact on the lives of people who only got the 50% of RV Red Zone land offers, consider one of Christchurch’s leading businessmen and landowners. “Old money” perhaps one might say.

So this landowner, who owns or controls large amounts of land in that part of the Western part of Christchurch’s CBD which the govt in Wellington ISN’T planning to steal (by “compulsory acquisition”) from it’s owners. ie along the Oxford street “strip” where insurance is, one assumes, largely funding the $ 140 Million rebuild for cocktail bars and swanky cafes… he’ll be making a fat profit out of that I reckon. Yet he speaks out against landowners in the Eastern CBD who have complained that govt offers of compensation for their land (taken for “The Frame” or “major projects” like the covered sports arena that most people don’t want, and nobody wants to pay for), are only being offered less than a third the independant valuations, which is often less than their outstanding mortgages. I’ve heard him quoted in recent media (Christchurch Press I think) as saying they shouldn’t be spoil-sports and should be happy to move elsewhere and start again. But I’d ask, how can they when compensation for their land to be taken doesn’t even pay out exisiting loans, plus buying replacement land will cost them more than 3 times what they get. Remember too that purportedly, the main idea behind the govt’s idea to take 60% of the CBD land, most of the eastern part, is because the govt claims there is a land surplus and it is “too cheap”. Sorry ? how many millions of dollars per quarter-acre do you consider that land is too cheap ?

The three days of hearings concluded just after 3pm on Wednesday 24 July 2013. A decision by Justice Panckhurst is not expected for some weeks.

If the decision ultimately favours the Quake Outcasts and Fowler, then the government will be in the gun for a few million dollars of compensation, over and above what they were planning to pay anyway.

Considering the total rebuild costs of an estimated 20 to 40 billion dollars, or the previous, and ongoing “leaky building crisis” of $ 20 billion, or even the proposed roofed sports stadium which will have a nett cost of between $ 200 million and $500 million, added on to Christchurch residents’ rates bills; it does seem to me like the government is fighting a court-case over what amounts to chicken-feed. By my count, if the government had voluntarily offered the 56 claimants, their full land RV (I considered $125,000 extra for each, as an average), the total cost would only be some $7 million.

Just a side-note about the sports stadium. Christchurch already has an open roofed stadium. Known as AMI (that is a paid sponsorship name, for decades it was previously called Lancaster Park because it sits by the end of Lancaster Street). The AMI stadium and grounds suffered badly in the earthquakes, but the insurance company have said they can repair it completely for $ 45 million, which will be entirely covered by insurance. The nett cost to the city’s ratepayers would effectively be NIL. In the meantime a “temporary” stadium, intended to last many years, has been built adjacent to the Addington (horse) Raceway. However the power-brokers within the Christchurch City Council (CCC) seem to be going hell-for-leather for a new fully enclosed sports stadium, despite the huge extra cost which this will dump on ratepayers for decades to come. Keep in mind that in the last five years, residential rates (in some countries called ‘property taxes” or “school district fees”) have gone up by double or triple the rate of inflation (CPI, Consumer Price Index) every single year. For the last couple of years, council rates have increased by something closer to five times the rate of CPI inflation EACH YEAR. Keep in mind that most Christchurch workers during this time have had little if any wage increase, and very few people have had wage increases that equal the CPI. The Christchurch City Council do not currently own any land to build the proposed new covered stadium on, but the CCC are set to “inherit” from the national government in Wellington, some of the land it intends taking by compulsory acquisition (“if you don’t accept our voluntary offer”) in it’s “East Frame”.

The current proposal is to take and demolish the fully restored and earthquake strengthened “NG Gallery” building. This building is the sole surviving example of its type in Christchurch, and the gallery building also houses many other small businesses, and the thriving and apparently successful Cassells bar.

Dunedin is a city of some 125,000 people, (about one third that of Christchurch). Situated some 400 kms (250 miles) south of Christchurch it is a noticably colder and wetter climate. Recently a new covered sports stadium was built (called the Forsyth Barr stadium). The Dunedin public were told how great it would be, and it was widely reported that the cost to ratepayers would be reasonable because it would be part funded by private interests and donations.

Not surprisingly most of the private financing and donations failed to eventuate, the project ended up costing squillions, and Dunedin’s ratepayers are facing decades of crippling extra rates to cover the cost. A covered stadium does have more opportunities for various uses other than football, such as a music venue for rock concerts. But just how often and how likely are big names like Madonna, likely to visit Dunedin ? I fear Christchurch ratepayers will get lumped with a similar, and very expensive, white elephant.

UPDATED… QUAKE OUTCASTS DECISION ANNOUNCED 26 August 2013. Below is a brief excerpt today’s Fairfax/Stuff website.

The Government has been handed an embarrassing defeat in the High Court over its contentious offers to buy red-zoned land from homeowners.

A group of disgruntled red-zone residents, calling themselves the Quake Outcasts and Fowler Developments Limited, have won their High Court battle against the Government over the Crown’s offer for their land.

http://www.stuff.co.nz/national/9089018/Outcasts-win-High-Court-battle

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s