Councils around the country could end up forking out millions of dollars in compensation to the owners of leaky commercial buildings following a court ruling today.
The Supreme Court has overturned a decision which had previously stopped legal action by apartment owners in the Spencer on Byron Hotel.
It ruled that the owners of several leaky apartments in the luxury hotel complex could continue their battle to sue the former North Shore City Council and said the owners' appeal could be taken back to the High Court.
The tower in Takapuna has 250 owners. It is principally a hotel but also has six penthouse units and repairs for the tower are expected to cost upwards of $10 million.
The Court of Appeal had previously struck out the claim, ruling that the former council was not liable for the code of compliance it issued for the tower, because it was a mixed residential and commercial building.
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But the decision today says councils have a duty of care when approving plans and inspecting the construction of buildings that are not purely residential.
Lawyer Paul Grimshaw says the decision has the potential to affect tens of thousands of commercial buildings.
"If you own a commercial building or if you own a mixed use building and that building was built within the last ten years and the council inspected it, then council has a potential liability," he said.
"What this decision says is there is no distinction between
those who own it for residential and non-residential
The lawyers behind the claim believe councils will want to reach settlement deals without going to court.
Local Government New Zealand accepts the ruling may have wider consequences for councils.
And the Minister of Building and Construction Maurice Williamson says he is seeking legal advice on the matter.
Auckland Council took over the North Shore City Council in 2010.