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Technical Category 3 - TC3 Blue

Rebuilding TC3 properties from the ground up

http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/6869760/Rebuilding-TC3-properties-from-the-ground-up

Green/Blue Land Zone for Ferrymead Brookhaven ;

Oct 28th 2011 we are Green Zone TC3 Blue
(Green Zone needing "site specific" solutions for moderate to severe damage)

A SUBURB 

looking for answers
(GeoTech Reports, what's involved, how long will they take, then what?)

in Recovery Mode
(We can't walk away, we can't sell, some can't live here, when can we rebuild or repair?)

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Land information - Technical Category 3 (TC3)

If you are TC3 and your land is damaged you should read this..............

EQC's broader FAQ there is a section where aspects of TC3 land are explained. The topics covered are listed below.

  • What exactly is TC3?

  • What’s the relationship between TC3 and damage to my land?

  • How does TC3 status affect my insurance claim?

  • How long will EQC take to complete geotechnical engineering work on TC3 properties?

  • Will the house still be insured if the foundations are undamaged and therefore not brought up to TC3 standard?

  • Some land claims issues

  • Will insurers still honour a policy and repair a house if the land underneath is considered uneconomic to repair?

  • What does EQC cover as part of a land claim?

  • Is EQC planning to stop covering land?

Read more here http://canterbury.eqc.govt.nz/land-information-technical-category-3

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Janine Starks looks at the various shades of grey in a green-blue zoning conundrum and sees nothing but red-tape and trouble.

By Janine Starks
(This article originally appeared in The Focus section of The Press on 16th February 2012 and recently published
http://www.interest.co.nz/node/57918/personal%20finance )

Dear Janine,

We own a home on ‘TC3’ land (the new green-blue zone), but we are not sure if our house is a repair or a rebuild.

The street fills with liquefaction with each big shake. We don’t have liquefaction on our lawn, but you don’t have to dig very deep to find the silt, so we put in a land claim.


We want to sell up and get out, but I’m getting increasingly worried that no one will buy our house if it only gets repaired. What difficulties do you think we face in selling the house? We have a large mortgage and don’t know how long we’ll be waiting for things to get sorted.

Green-blue trapped
 

This is a really tough one. The ability to sell a home on green-blue land (Technical Category 3 or ‘TC3’) could be very difficult. It all hinges on the actions of a number of groups of professionals; EQC, insurers, bankers, real-estate agents and lawyers. They all have the potential to increase the barriers to a sale.
 

The ‘TC3’ label could cause problems across the board, for re-selling. While the category only applies to houses with foundation damage, this is a bit of a farce. Even if you have no damage, your land may suffer “moderate to significant liquefaction” in a new event. That has got to be a big red flag to future buyers. The resale issue is not going to be isolated to the hard-hit areas, when we face a decade of seismic activity.

I hear so many people say “I’m on TC3 land, but we’re really lucky our foundations are fine.” I think that’s misguided. It is possible that a good number of TC3 home owners will end up worse off financially than those in the Red Zones – especially those who are not getting new foundations. The erosion of equity is a real risk.

Here's my thoughts on how the professions involved could impact the situation:
 

1. EQC:

While some TC3 landowners are pushing to become red-zoned, it’s questionable how wide the government’s purse will extend. An alternative could be another array of sub-categories within TC3. This is just a guess at how they might handle it, but it would classify some TC3 land as being sturdier and some as more dodgie. Those at the worst end of the scale could have their land written off as it’s too difficult or uneconomic to remediate. In effect, we’d have patches of red-zone by another name (minus any government offer on the house).



Under the legislation, EQC can make a payout equivalent to the value of a 450 metre section. Money wise, that’s quite different to the Red Zone offer of Rateable Value. The double whammy is if your home is repairable – insurers will just patch it up, leaving you with a land payout but no house payout.

It’s questionable what buyers will pay for a repaired home sitting on old style foundations on liquefaction-prone land which has not been remediated, or the land has been written-off.

Right now the only people getting individual geotechnical reports are those with damaged foundations. If your foundation survived and no geotech is carried out, the ostrich mentality can prevail – we can all just pretend there has been no destruction in value. In my view this still creates a web of problems for insurers, bankers, estate-agents and lawyers, when it comes to the home-owner selling (see below).

To top it off, there was a subtle suggestion recently that the government should review their role in providing land cover via EQC. If this was removed across New Zealand, it might seem like we are all in the same boat. However, those on TC3 land are in a much wobblier boat, with wobblier valuation outcomes if the reassurance of land protection is thrown overboard.

Does the government care?

There might be an uncomfortable uproar at some residents getting land offers at the Rateable Value, some getting 450 metre payouts, and others being totally ignored and suffering the market forces of a reduced valuation. But the Government has never been too bothered about inequitable outcomes.

Look at the leaky home debacle or the way South Canterbury investors were bailed out when vast numbers of others had to suck up the losses. Consider AMI policy holders versus Ansvar customers who have no earthquake cover beyond the EQC limit. Life isn’t fair, but gosh it would be nice to be wrong.

2. Insurers

If EQC writes off pockets of TC3 land, homeowners will look to their insurers to rebuild or buy elsewhere. The outcome is a good one – they can run far from the green-blue mud, albeit miffed that their land payout wasn’t as high as Red-Zoners.

But if the land is written off and the home is found to be repairable, will insurers come to the party and write off the house? I have it on good authority that they won’t. They will only carry out a repair. While Red-Zoners with repairable homes had the governments cash-offer to fall back on, Green-bluers would not. They would need to mount a legal challenge against their insurer and argue that the land condition renders the home a total loss and the house must be removed to allow remediation or written off. Insurers will chuckle at the cheek of the suggestion, but I’m not sure they’re on as steady ground as they think. The Red-Zone situation only went unchallenged due to the governments back-up offer.

Buyers of homes in all TC3 locations must contemplate a number of insurance issues:

•Will insurers continue to let them pass their insurance contracts onto another new buyer in future?
•Will they ever be able to increase their cover if they want to extend the home?
•Will TC3 areas suffer larger increases in their excesses than other locations?
•Will EQC land cover remain in place?

3. Bankers

Buyers need to negotiate mortgages and banks need to be happy with the quality of the security (liquefaction prone land and homes without foundations to withstand the risks). Banks will have to weigh up the chance of insurance levels sliding over the term of the loan and will want large deposits (so it’s the buyer’s money at risk, not theirs). I suspect there are conversations going on in banks right now about the sensibility of allowing loans on TC3 land – if they aren’t, they’re asleep at the wheel.

4. Real-estate agents

A quick drive around the Green-blue areas uncovers a good smattering of ‘For Sale’ signs and the odd new ‘Sold’ sticker. It’s difficult to believe properties on TC3 land are being actively marketed at the moment and it makes you wonder what warnings agents are giving to buyers. While they represent the seller there is surely some duty of care owed.

Hopefully the Real Estate Institute is pondering the legal ramifications of agents selling assets with “moderate to significant” risks. It could be a future misselling scandal given the situation is unusual and buyers are not used to analysing this type of market anomaly. Agents should think about covering their rears and document the risks to buyers.

5. Lawyers

Unlike agents, lawyers do represent the buyer. A good lawyer will go through the risks of buying a home on TC3 land. If they have any sense they’ll also ask their client to sign a legal disclaimer to prove they were made aware of these risks.

The waiting game

In terms of how long it could take to work through the issues, rumour has it that the queue to get land assessments from EQC could be up to two years and rebuild queues could be up to four years. Everyone can’t be first, so my guess is that total wait times will be in the two-five year range. Priority will go to those not able to live in their homes. Repairs will be quicker, but insurers are running risk-models and won’t start these until seismic activity settles.

Consider the emotional impact of the wait. Some people need to leave in order to keep their lives moving – new babies require extra bedrooms and those who want to retire might wish to live closer to family. Whatever the reason, if your home is still livable, consider renting it out and renting the type of home you need in the right location. Your finances might have to sit in limbo, but don’t assume your life must. Sometimes you must try and stick to your plans to stay sane. Source

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What happens if my property is TC3 (blue)?

Property owners in TC3 who need to carry out foundation repairs or house rebuilding will require site-specific geotechnical investigation and specific engineering foundation design.
The Department of Building and Housing is currently undertaking a research trial of foundation systems to test the feasibility and cost of innovation solutions for repairing or rebuilding foundations in Technical Category 3.
The trial is expected to be completed and internationally peer reviewed, with the results and available mid-December 2011. Updated guidance for repairing or rebuilding houses and design guidance in Technical Category 3 Is then expected to be issued by the end of February 2012.
Until these are available we may not be able to access those properties damaged deemed over the EQC cap for each event in TC3, as we will not know what repair options are available for foundation on this land. Source:  NZI Earthquake Update November 2011

WHAT DOES TC3 MEAN TO YOUR CLAIM

Geotechnical Investigations

If your land has been classified TC3, and deemed economic to remediate, you will require a site specific geothechincal engineering assessment. It's important that:

  • site specific geotechnical assessments are only required if your foundations are damaged
  • the Geotechnical investigation should be carried out in conjunction with a structural engineer who will design the foundations.

As geothechnical resource are scarce delays can be expected.

In TC3 site-specific engineering solutions will be required for repairing or rebuilding foundations, and a geotechnical engineer will be engaged to report on the ground conditions at the site.  Based on this report, and the type and style of your home, a structural engineer will design suitable foundations.  Building cost will most likely increase give a stronger foundation will be required, and these cost will be covered under your insurance policy. Source NZI Broker update 5 Dec

It is our understanding that geotechnical inspections will not take place before the new TC3 foundations are announced - scheduled for late February 2012.
There are over 6,000 properties to be assessed so it could be a long wait.

 

Rezoned owners have the new limbo blues (A balanced view?)

Most insurers said the announcement added "clarity", but some said the blue category remains "uncertain".

AMI chief executive John Balmforth said there had been a big step forward in the new yellow and grey categories.

Rebuilding in the blue area would stay on hold at least until new foundation designs are released by the Department of Building and Housing in February, he said.
"It is still in limbo as far as reconstruction and rebuilding goes till February," he said.

IAG executive Dean Macgregor said people were realising it wasn't as simple as "green is good to go".

"If you look at technical category three [blue] that is where most of the clarification is required," he said.
Other insurers said the tougher foundation standards will also condemn some homes that could have been repaired and that some blue properties could still be abandoned.

But Brownlee was scathing of insurers' claims of "uncertainty" in the blue category, claiming the foundation standards were no different from what was already required in the Port Hills and other New Zealand cities.

All green-zone properties could be rebuilt on and many blue homes would also eventually revert to the less stringent "yellow" or even "grey" foundation standards after an assessment, he said.

He also stressed most homes that did not need to be rebuilt or require foundation repairs did not have to worry about the new standards.

http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/5913015/Rezoned-owners-have-the-new-limbo-blues

 

EQC FAQ update: Land remediation timeframes and dwelling claims


The following is from the FAQ part of EQC's website which, this appears to have been updated since the new Land Zones were announced. How do you fancy having your land repairs managed by Fletchers or your insurer? Do you know if your land assessment has been done?

Read on:

LAND CLAIMS

The land claims FAQ is here.

What are the timeframes for land repairs, given that they will in some cases delay building repairs?

For repairs being managed through the Fletcher EQR programme, land repairs will be managed as part of the overall repair programme on each property, and the timeframe for land repairs is essentially the same as for other repairs. EQC and Fletcher EQR hope to make an announcement on specific timeframes soon, but this is a project on a very large scale, and it could be a matter of years before it all work is completed.

Who's doing land repairs (if under cap)? Is it Fletcher EQR?

For properties being managed by Fletcher EQR, all work will be done by accredited contractors, including land repairs.
Who organises the remediation of my land if I’m over cap?

Your land repairs are done as part of the total programme of repair to your house. If EQC is doing the repairs to your house through Fletcher EQR, EQC will organise the repairs to your land at the same time. If your house repair is being managed by your insurer then the land repair will either be managed by EQC or your insurer. The options will be discussed with you prior to your repair commencing.
Does my land need to be remediated before the foundation work can be done?

This will depend on the extent and nature of land damage. When are land assessments being done? Is there a list of suburbs where land assessments are being carried out? Land assessments will be completed by Christmas. If your land assessment has not been done yet, contact EQC. {NOTE: How would someone know of their individual land assessment had or hadn't been done?}


 

DWELLING CLAIMS

The dwelling claims FAQ is here.

What happens if repairs have already started/been completed but I’m in TC2 or 3 [yellow or blue], do they have to be stopped/redone to meet the new code?

This is a building consent issue, so you need to speak to Christchurch City Council.

Who pays for new or repaired foundations on TC2 or 3 [yellow or blue] land if the insurance policy doesn't cover it?

EQC covers damage to a building up to the limit of $100,000 per event, to bring it back to the state it was in prior to the event (so, for most Canterbury houses, prior to September 4, 2010). If new or repaired foundations are required as part of a consent EQC will cover it as part of the claim. In many cases, this is likely to mean the claim will exceed the $100,000 limit per event, and the homeowner or mortgagee will be cashed out.

Who pays for a geotechnical engineering report if my property needs it before foundations can be repaired/house rebuilt?

Depending on the policy, your insurer is likely to pay for a geotechnical report. Generally, EQC would only cover the cost of the report if the total cost of the repair/rebuild was less than $100,000. Source

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House in new Blue TC3  Category will all require new foundations

It will be February 2012 at the earliest before we find out more details...