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Questions and Answers (Q&As) about Increased Flooding Vulnerability

This section includes Q&As on the following topics:

Qualification for Increased Flooding Vulnerability (IFV)

What are the thresholds for IFV?

A property will only qualify for IFV where subsidence to the insured land has caused it to become more vulnerable to flooding as a result of the Canterbury earthquakes. If a property was already prone to flooding prior to the earthquake, and the flooding vulnerability has not changed, then it will not qualify.

To determine whether the insured land has potential IFV damage, the following thresholds are applied:

  1. The flood depth has increased by 0.2m or more as a result of the Canterbury earthquakes;

  2. The flood depth has increased by 0.1m or more as a result of a single earthquake;

  3. The land has suffered observed damage as a result of the Canterbury earthquakes; and

  4. The increase in flooding vulnerability has impacted on the market value of the property.

There are some exceptions to having to meet all the thresholds. See the following Q&A.

What if my property only meets some of the IFV engineering thresholds?

While EQC believes that the engineering thresholds (1-3 in the above Q&A) adopted will identify most properties with IFV damage, it recognises that some of these thresholds may exclude properties which have actually suffered IFV. Accordingly, the following exceptions have been created:

  • Properties that meet thresholds 1 and 3 but do not meet threshold 2 (i.e. exacerbated flood depth has increased by 0.2m or more across the sequence, but there is no single event where change is greater than 0.1m);

  • Properties that meet thresholds 1 and 2 but do not meet threshold 3 (i.e. meet numerical requirements for exacerbated flood depths but there is no record of visible land damage); and

  • Properties in areas of known tectonic uplift where there is differential subsidence (i.e. where the insured land is in an area where the land has lifted, but it has been shown that the different levels of subsidence within the area have increased the flooding vulnerability).

Examples of how EQC applies these thresholds and exceptions

 

Thresholds that have been met

Relevant Exception

What is the outcome of EQC’s engineers’ initial assessment?

Next step

Property A

1 and 3 (but not 2)

Event exception

This property did not meet all three thresholds.  It only met Thresholds 1 and 3.  But because an exception applies (the Event exception), the property still potentially has IFV.

Site-specific engineering assessment (see below)

Property B

1 and 2 (but not 3)

Land damage exception

This property did not meet all three thresholds.  It only met Thresholds 1 and 2.  But because an exception applies (the Land damage exception), the property still potentially has IFV.

Site-specific engineering assessment (see below)

 

Property C

2 and 3 (but not 1)

No exception applies

This property did not meet all three thresholds.  It did not meet Threshold 1.  No exception applies.  The property will nevertheless be subject to an area-wide review, and therefore may still be confirmed as potentially having IFV.

Area-wide review (see below)

Where the thresholds and the exceptions set out above have been applied and the insured land has been assessed as potentially having IFV, EQC's engineers next carry out a site-specific assessment. EQC’s engineers also carry out an ‘area-wide review’ (examining the patterns of qualification for both qualified and non-qualified properties in an area).

The valuation threshold (threshold 4 in the above Q&A) is the final step in determining whether the property qualifies for IFV land damage.

In the end, EQC must form a view on each IFV claim. The primary question is: On evaluating the information available (including any information from the customer), and using relevant and informed expert advice, can EQC properly conclude that the relevant land has suffered IFV?

Why is some land that is already flooding not receiving an IFV settlement?

There may be a number of reasons including:

  • IFV damage is where there has been an increased vulnerability to flooding because of the direct result of an earthquake. A property will only qualify for IFV where subsidence to the insured land has caused it to become more vulnerable to flooding. If the insured land was already prone to flooding prior to the earthquake and the vulnerability has not changed, then it won’t qualify for IFV.

  • If the IFV damage is to an area that is outside the land insured by EQC on a property, it will not be covered.

  • EQC does not provide cover for off-site factors. The IFV damage must be as a direct result of the changes to the insured area of land. This will exclude properties where an increase in vulnerability occurs solely, or primarily through off-site factors. Off-site factors can include such things as changes to river heights, narrowing of river banks, shallower river beds and damage to storm water drains.

If I’m in the Flood Management Area, do I automatically qualify for IFV?

No. The Christchurch City Council use Flood Management Areas in the City Plan and have mapped the flood risk for a 1-in-200 year flood event (or 1/200 Annual Exceedance Probability (AEP)) for some areas of Christchurch. Being in an identified Flood Management Area or identified flood zone for a 1/200 AEP does not automatically mean that a property might qualify for the IFV land damage category. This is because EQC:

  • considers only increases in flood vulnerability due to subsidence to residential land caused by an earthquake event;

  • assesses damage on the basis of an up to 1/100 Annual Exceedance Probability (i.e. a less severe flood);

  • does not factor in projected climatic changes into modelling, or changes to flooding caused by change to uninsured land (e.g. a change in the flow of a river, or the building or demolition of a stop-bank – these effects are not caused by the damage to the insured land); and

  • does not consider future development or apply a freeboard (or floor level height) in addition to mapped flood depths.

I understand that Christchurch City Council had a flood modelling issue in New Brighton area. Does this mean assessments for IFV land damage on some properties might be wrong?

EQC has investigated whether any IFV properties might be impacted by the Christchurch City Council modelling issue and concluded that no properties are impacted by this.

The models used by EQC to assess IFV land damage are a combination of existing City Council’s flood models and overland flow models which EQC developed. In cases where EQC uses the City Council’s flood models for the assessment of IFV land damage, it applies different criteria than when the Council uses them to assess floor levels in houses.

The criteria and reports describing EQC’s models used for the assessment of IFV land damage are available here on EQC website.

What happens after the initial engineering modelling identifies potential IFV properties?

EQC has undertaken an extensive flood modelling programme to identify the number of properties that may have an increased vulnerability to flooding (potential IFV properties). However these results need to be validated on the ground.

All potential IFV properties will undergo a site-specific investigation by an engineer and (where engineering review checks are passed) an assessment by a valuer. These steps will:

  • review the accuracy of the model – engineers will visit the property to confirm that the modelled ground levels/subsidence observed by LiDAR (aerial survey techniques) are representative of relative levels on the ground. This can often be achieved by viewing the property from the road.

  • review the location of the exacerbated flooding – IFV has been modelled via 5m x 5m cells across a property. Exacerbated flooding levels will indicate the change in flood depth for each of these cells and a property will provisionally qualify for IFV if any one of these cells meets IFV qualification thresholds. Engineers and valuers will review the location of these qualifying cells to assess the practical impact of this change in relation to the high-level IFV qualification principles.

  • assess whether the exacerbated flooding will cause a loss in value to the property – valuers will assess the location, size and frequency of any exacerbated flooding to determine if this change impacts the market value of the property.

EQC’s engineers will then carry out an area-wide review (examining the patterns for qualification for both qualified/non-qualified properties in an area). At the end of this review process, a property will either be confirmed as qualifying or not qualifying for IFV land damage.

I didn’t receive an IFV potential qualification letter – does this mean I don’t have IFV damage?

Yes, if you haven’t received an IFV potential qualification letter you are unlikely to have IFV land damage. Customers who received an IFV potential qualification letter in 2014  provisionally met the IFV qualification criteria (or exception criteria) based on initial modelling.

All potential IFV properties underwent a site-specific investigation by EQC's engineers. Additionally, engineers conducted an area-wide review of all qualifying and non-qualifying properties to review the appropriateness of the qualification status. This review included consideration of the following:

  • Spatial anomalies – this will consider cases where a pattern of qualification presents a spatial anomaly (e.g. one non-qualifying property in a street).  Anomalies may present situations where the flood modelling is under/over representing flood levels for a property;

  • Frequency anomalies – for qualification modelling, EQC has adopted a 1% Annual Exceedance Probability (AEP) rainfall event (i.e. an event which has a 1% chance of being exceeded in any one year). However, in some geographical locations analysis at a higher frequency event (2% or 10% AEP, e.g. a lower volume event) may show a more significant change which meets the thresholds. Vulnerability at these higher frequencies will also be considered;

  • Other – properties that have between 0.1m and 0.2m of exacerbated flood depth across the earthquake sequence.

Why have some people who were told their properties were potential IFV not received IFV settlements?

This could happen for two reasons:

  • It doesn’t qualify under engineering assessments. A closer, site-specific engineering site assessment or area-wide review could show that the property has not suffered IFV, even though it may meet some or all of the initial engineering thresholds.

  • EQC’s valuers may determine that the increase in flooding vulnerability did not impact the market value of the property. In that case, the property will not qualify for IFV land damage. This valuation judgement will take into account factors such as the likely location, depth and frequency of increased future flooding.

How would a site-specific assessment show that a property that was potential IFV does not qualify for this type of land damage?

The potential IFV properties were identified by modelling 5m x 5m cells across a property. A property will qualify for a site-specific assessment if any one of these cells meets the initial Increased Flooding Vulnerability thresholds or falls within the various exceptions.

The site-specific assessment could then find that, for example:

  • The increased risk of flooding is in fact unlikely to occur within the area of EQC insured land. For example, the slope of the land or a retaining wall may mean that the water will not flow onto the EQC insured land.

  • There is an error in the topographical information gathered in the initial LiDAR surveys. These surveys involved the scanning of the ground surface from an aircraft after each major earthquake to assess changes in ground height. The LiDAR surveys can give rise to inaccurate measurements for a number of reasons, such as the presence of a swimming pool on a property. This is why we have also carried out site-specific reviews of each property.

Once the site-specific assessment has been completed, an area-wide review (the final engineering review) is carried out. The purpose of this review is to see whether there are any properties in the area that have been inappropriately assessed. As a result, even if a property has been previously assessed as not having IFV land damage, it will be assessed again for consistency with neighbouring properties and areas.

Did EQC go to every potential IFV property to confirm whether or not it has that type of damage?

Yes. EQC's engineers assessed areas where properties had been identified as having potential IFV to confirm whether or not properties in the area had potential IFVed. Most assessments were made from the road (e.g. where exacerbated flooding occurred on the road-side area of the property) while a small proportion required physical access to the property. Where access to the property was required, EQC contacted the customer to arrange a time to enter the property. If the property met the criteria under the engineering assessment, then the valuation assessment followed.

When will I find out whether my property qualifies for an IFV settlement?

EQC expects outstanding IFV settlement packs to be out sent out in 2017. It’s taking time as these are complex claims and our focus is on the quality of the information customers receive so that they can have confidence our decisions are based on sound and robust engineering and valuation assessments.

Declaratory Judgment

Why did EQC ask the Court for a Declaratory Judgment regarding its IFV Policy?

EQC asked in October 2014 for a Declaratory Judgment from the High Court to confirm its IFV settlement approach, so customers can be confident their settlements are soundly based.

The Declaratory Judgment was delivered in December 2014 and confirmed that IFV is a form of land damage and Diminution of Value (DOV) is a lawful settlement option. See the Diminution of Value (DOV) due to Increased Flooding Vulnerability (IFV) land damage (for where the house is still in place) fact sheet and Diminution of Value (DOV) due to Increased Flooding Vulnerability (IFV) land damage (for where the house has been or will be rebuilt) fact sheet for more information.

Settlement of claims for IFV land damage

How are you going to settle properties confirmed as having IFV?

If it could, EQC would prefer to settle a land claim by providing a cash payment based on the amount it would cost to repair or reinstate the land. However, for properties with increased vulnerability to flooding it will often not be possible to identify a repair method to the land which is feasible or able to be done legally. Therefore, in some cases EQC proposes to settle based on Diminution of Value (DOV). There are different approaches for DOV assessments which depend on whether or not the house on a property before the 2010-2011 earthquakes remains in place. For more information see these questions and answers.

Where a property with IFV has been sold since the earthquakes, the settlement will also be on the basis of DOV.

What is Diminution of Value (DOV) in relation to IFV?

DOV is a settlement method that EQC will use, for example, for properties with IFV where a repair of that land damage may not be legal or feasible to carry out. The settlement is based on the long-term loss of market value of the insured land (and associated residential buildings in the case where the house on a property before the 2010-2011 earthquakes remains in place and is not to be rebuilt) due to the IFV damage.

Where a property with IFV has been sold since the earthquakes, the settlement will also be on the basis of DOV.

As part of the Declaratory Judgment, EQC asked the High Court whether this settlement method is permitted under the EQC Act. The Declaratory Judgment delivered in December 2014 confirmed that EQC is able to settle IFV land damage by paying the amount of DOV in appropriate cases.

What are the criteria for feasibility and consentability in regards to land damage repair?

Putting this question in context, the IFV and/or ILV Land Damage Consolidated Policy Statement outlines several situations in which a settlement of IFV land damage will be based on DOV rather than the cost of the repair. These situations include the following:

  • If the residential building has to be removed in order to enable repairs to the land to address the IFV land damage (e.g. where the damage is on the house footprint);

  • If a resource consent is required under the Resource Management Act to enable repairs to the land to address the IFV damage. 

However, if the customer can show that they can in fact obtain a resource consent for the land repair (i.e. that it is consentable) and that they will carry out the land repair (i.e. that the repair is feasible and will be done), then the settlement amount may be amended to be based on cost of repair. This is unless the cost of repair is disproportionate to the amount of the DOV. This comparison will be determined on a case by case basis.

The High Court Declaratory Judgment has concluded that these terms of the EQC IFV Policy are consistent with EQC’s obligations under Earthquake Commission Act.

All settlement amounts are subject to the land cover cap amount which is set out in section 19 of the Earthquake Commission Act. The EQC land cover cap is generally the value of the area of damaged land or the value of a parcel of land that is the minimum lot size under the relevant District Plan, whichever is the smaller.

Why is there no indexing of the DOV assessments to reflect the increase in property market valuations in general in the Christchurch market in the last five years? 

When doing the DOV assessment, EQC starts by assessing:

  • in the case of a property where the house that was on the property before the 2010-2011 earthquakes is still in place and is not to be rebuilt, the market value of the insured land and the associated residential buildings, such as the house, garage and garden shed;

  • in the case of a property where the house that was on the property before the 2010-2011 earthquakes has been or will be rebuilt on the property, the market value of the insured land only.

In each case, that market value is assessed immediately before the earthquakes (3 September 2010). EQC then uses this value as the base for calculating the reduction in value (DOV) that has occurred since that date as the direct result of the IFV damage caused by the earthquakes.

In accordance with the Earthquake Commission Act, EQC assesses the base land value from the date immediately before the damage occurred. There is no scope under the Act to choose a base value as at a future date (i.e. after the date of the damage), or somehow apply an index to increase the amount of the base value.

EQC has assessed the base valuation as at 3 September 2010 for all the earthquakes that have caused the IFV damage. This is to ensure that the base valuation is a fair market valuation and is not distorted by the effects of the earthquakes on the property market since 3 September 2010.

I want to get a copy of the map that shows all properties that have been assessed for IFV and have been confirmed as having or not having IFV land damage.

Here you can download a map that shows all potential IFV properties that have been assessed for IFV so far.

Why is it taking so long to confirm IFV?

It is the first time anywhere in the world that IFV land claims have been recognised and are being settled. A huge amount of flood modelling and analysis by engineers and assessments by valuers has been undertaken to enable EQC to assess and settle IFV claims.

EQC also tested its proposed approach by seeking a Declaratory Judgment from the High Court to confirm that IFV was a form of natural disaster damage under the EQC Act, and that DOV is an appropriate form of settlement in certain situations. This was so that EQC customers could be confident their IFV settlements are soundly based.

What happens if I have already had a settlement for land damage or was told I would not receive a payout for land damage?

This previous settlement related to visible land damage only (such as cracking or undulation), and you may receive an additional settlement should your land be confirmed as having IFV damage. At the time the settlements for visible land damage were made, EQC was unable to confirm which properties had potentially suffered IFV damage.

I’ve received my new rating valuation and the value of my land has dropped. Why isn’t my EQC land settlement for the amount of the drop?

EQC’s valuers determine the loss of market value due to the IFV damage. EQC cannot use changes in ratings valuations by themselves to determine its EQC land settlements. Rating valuations are undertaken by local councils every three years to reflect all factors affecting a property’s value, not just earthquake damage. EQC does not cover any loss of value that the property may have suffered for other reasons, which do not arise from earthquake damage to the property.

If it could, EQC would prefer to settle a land claim by providing a cash payment based on the amount it would cost to repair or reinstate the land up to the EQC cap. The EQC cap is generally the value of the area of damaged land or the value of a parcel of land that is the minimum lot size under the relevant District Plan, whichever is the smaller.

Payment of the cost to reinstate will enable you to return your land to its undamaged state, which will also remedy any loss of value due to earthquake damage.

However, for some types of land damage it will not always be possible to identify a repair method to the land which is feasible and able to be carried out legally. This is most likely to be in cases where the property has suffered complex land damage like IFV. In these cases EQC may elect to settle by paying a customer the long-term loss of market value that the property has suffered as the direct result of the additional vulnerability that the property now has to flooding as a result of the earthquake damage to the property.

What happens if I am still waiting for my earthquake settlement and I have experienced further damage by flood?

EQC covers earthquake damage to your house. Your private insurer would normally cover flood damage to your house. The settlement amount that EQC will pay will generally be for the earthquake-related damage only and not for flood damage.

Can my house be repaired within the Canterbury Home Repair Programme (CHRP) if I’m still waiting to get my land confirmed as having IFV?

EQC has given homeowners who are within the Canterbury Home Repair Programme (CHRP) and identified as potential IFV a choice about whether they would like to:

  • have their property repaired through the repair programme ahead of the confirmation of their land damage;

  • receive a cash settlement and manage their own repairs; or

  • be placed on hold within the CHRP programme until such time as their land damage has been confirmed and they can make a more informed choice.

For those CHRP customers who asked to have their repairs to be put on hold, we will be back in touch to discuss your dwelling repair once your Increased Flooding Vulnerability status is confirmed.

How is EQC deciding on whether to raise floor levels in my house?

If EQC is repairing earthquake damage to the building, it is required to complete a lawful repair. Where there is a resource management requirement or a building consent requirement which applies to the building repair, we will complete all work that is needed – including raising the floor level of the building if that is a requirement. Where the building repair does not legally require the floor level to be raised, then EQC does not pay for or undertake this work.

Why doesn’t EQC pay for homes to be raised so they don’t flood in future?

The High Court in its Declaratory Judgment confirmed that IFV is a form of land damage and not building damage. Raising the floor level of a house is not a method of compensation for IFV land damage available to EQC under the EQC Act. Raising floors does not repair the physical change to land that has caused its increase in vulnerability to flooding, nor stop the water from coming onto the customer’s land.

If it could, EQC would prefer to settle claims for IFV land damage by providing a cash payment based on the amount it would cost to repair or reinstate the land. However, where it is not possible to identify a repair method for the land which is feasible or able to be done legally, EQC is basing the settlement of Increased Flooding Vulnerability land damage on the DOV of the property. This method of settlement is consistent with the Declaratory Judgment delivered by the High Court.

Should the customer wish, they may themselves apply their cash settlement payment for IFV land damage towards raising the floor level of the house.

Is there an excess for the IFV land payments?

Each claim for IFV land damage is subject to the excess applied to EQC’s land settlements. If the total amount of the land claim for a specific event is $5,000 or less, EQC will deduct an excess of $500. If the claim is greater than $5,000, EQC will deduct an excess of 10 percent up to a maximum of $5,000 per claim. Details of the excess deducted for each claim will be set out in the customer’s Land Settlement Summary.

What do I have to do with the settlement amount calculated on the basis of DOV?

A DOV settlement amount is paid for example where there is no feasible repair available for the IFV land damage, or because the repair is not able to be done legally. While a customer may wish to use the settlement amount to mitigate the effects of any future flooding, there is no requirement to do so.

If customers do not use the DOV settlement amount to repair the IFV damage, it will not affect future EQC cover for the property.

Depending on how much the settlement amount is, it may be paid to the customer's mortgage provider of the property.

Will a property be insurable if the customers get confirmed that their land has IFV damage?

In general, if the customer has valid fire insurance with a private insurer then the property is covered by EQC. A customer should discuss with their private insurer whether their future insurance is impacted by the land being confirmed as having suffered IFV damage.

Will flooding information go on my LIM?

EQC does not decide what information goes on the LIM. This is a question for local authorities.

Do some properties have both IFV and ILV land damage and if so when will they be settled?

EQC began making settlements for customers with both IFV and ILV land damage in September 2016. It is likely these settlements will continue for the remainder of 2016 and early 2017.

Review process

I disagree with my IFV settlement decision – how can I get it reviewed?

Information about the review process is available on the Increased Flooding Vulnerability main page.

What is the length of time EQC customers have to challenge a settlement for a claim made under the EQC Act?

See here for more information on limitation legislation.

Increased Flooding Vulnerability Policy

What is the Increased Flooding Vulnerability policy?

The IFV and/or ILV Land Damage Consolidated Policy Statement outlines the way that EQC will approach the assessment of IFV and how EQC will settle claims for IFV land damage.

Increased Flooding Vulnerability land damage on properties where the house has been or will be rebuilt

What does “has been or will be rebuilt” mean?

For IFV land damage assessment purposes, EQC considers that the house on a property “has been or will be rebuilt” where either:

  • the insured land on the property is currently a vacant site; or  

  • the house that was on the property before the 2010-2011 Canterbury earthquakes:

    • currently remains on the property but is intended to be rebuilt on the property; or

    • is currently being rebuilt on the property; or 

    • has already been rebuilt on the property. 

How do you determine that a customer intends to rebuild their house on the property?

EQC determines the customer’s intent by taking into account relevant information, such as for example, statements made by the customer and/or their private insurer, and consent information obtained from the local authority.

How would the DOV assessment as a result of IFV land damage be different if the house that was on the property before the 2010-2011 earthquakes remains in place and is not to be rebuilt?

In that case, the DOV assessment would be based on a different valuation methodology, which is used where the house that was on the property before the 2010-2011 earthquakes remains in place and is not to be rebuilt. The DOV would apply to the insured land and the associated residential buildings, such as the house, garage and garden shed. See IFV DOV methodology (relevant for where the house remains in place and is not to be rebuilt).

By contrast, where the house has been or will be rebuilt, EQC’s valuers use a valuation methodology developed for that situation. The DOV reflects the loss of value of the insured land only. The assessment of the DOV takes into account the impact of IFV land damage on the future use of the insured land, including as a building platform for a house. See Diminution of Value Methodology for Increased Flooding Vulnerability (for where the residential building has been or will be rebuilt) (October 2016).

Why is DOV assessed differently for IFV properties where the house that was on the property before the 2010-2011 earthquakes has been or will be rebuilt (as compared to where the house remains in place and is not to be rebuilt)?

For properties where the house remains in place and is not to be rebuilt, the customer has a damaged asset (insured land) that is associated with a house that will stay on the land. The reduction in market value (DOV) will apply to the insured land as well as the house as a result of the IFV land damage. 

However, where the house has been or will be rebuilt, the pre-earthquake house no longer is, or will be, associated with the insured land. In this case, DOV cannot be assessed by reference to the pre-earthquake house as it will be replaced by a house that may have different characteristics and value. The potential characteristics and value of a new house will be reflected in the value of the insured land. The DOV will therefore be assessed for the insured land value only. This DOV assessment will take into account the likely impact of the IFV land damage once a new house is rebuilt.

Increased Flooding Vulnerability (IFV) of Unit Title Developments

Settlement of claims for IFV land damage

How is EQC settling properties that are Unit Title Development and are confirmed as having IFV?

If it could, EQC would prefer to settle a land claim by providing a cash payment based on the amount it would cost to repair or reinstate the land. However, for properties (including unit title developments) with IFV land damage it will often not be possible to identify a repair method to the land which is feasible or able to be done legally. Therefore, in some cases EQC proposes to settle based on Diminution of Value (DOV).

As part of the Declaratory Judgment, EQC asked the High Court whether the use of DOV as a settlement method is permitted under the EQC Act. The Declaratory Judgment delivered in December 2014 confirmed that EQC is able to settle IFV land damage by paying the amount of DOV in appropriate cases.

You can find out more by reading the Increased Flooding Vulnerability for unit title developments fact sheet.

What are the criteria for feasibility and consentability in regards to land damage repair?

The IFV and/or ILV Land Damage Consolidated Policy Statement outlines several situations in which a settlement of IFV land damage will be based on DOV rather than the cost of the repair. These situations include the following:

  • If the residential building(s) have to be removed in order to enable repairs to the land to address the IFV (e.g. where the damage is on the units’ footprint);

  • If a resource consent is required under the Resource Management Act to enable repairs to the land to address the IFV damage.

However, if the Body Corporate can show that it can in fact obtain a resource consent for the land repair (i.e. that it is consentable) and that it will carry out the land repair (i.e. that the repair is feasible and will be done), then the settlement amount may be amended to be based on cost of repair. This is unless the cost of repair is disproportionate to the amount of the DOV. This comparison will be determined on a case by case basis.

This settlement approach is consistent with the Declaratory Judgment.

All settlement amounts are subject to the land cover cap amount which is set out in section 19 of the Earthquake Commission Act. The EQC land cover cap is generally the value of the area of damaged land or the value of a parcel of land that is the minimum lot size under the relevant District Plan, whichever is the smaller.

How does EQC work out the DOV for each unit?

EQC starts by assessing the market value of the principal unit and any accessory unit(s) (together referred to here as a “unit”) immediately before the earthquakes (3 September 2010). EQC then uses this value as the base for calculating the market reduction in value (DOV) of the unit that has occurred since that date as the direct result of the IFV land damage caused by the Canterbury earthquakes 2010-2011.

In accordance with the Earthquake Commission Act, EQC assesses the base value from the date immediately before the damage occurred. There is no scope under the Act to choose a base value as at a future date i.e. after the date of the damage.

EQC has assessed the base valuation as at 3 September 2010 for all the earthquakes that have caused the IFV land damage. This is to ensure that the base valuation is a fair market valuation and is not distorted by the effects of the earthquakes on the property market since 3 September 2010.

You can find out more by reading the Diminution of Value (DOV) due to Increased Flooding Vulnerability (IFV) land damage - Unit Title Developments fact sheet.

How does EQC work out the DOV for common property, for example, foyer of the building, lifts?

The DOV has been assessed by EQC’s valuers on a unit by unit basis. The impact of the IFV land damage on common property of a unit title development has been taken into account in determining the loss of value to each unit caused by the IFV land damage.

Why are the DOVs for each unit different?

The DOV for units on the same unit title development are usually different. This is because the impact of IFV on the use and amenity of each individual unit varies. For example, in a two-unit development, where the area of IFV land damage is at the rear of the property and does not affect the front unit at all, the front unit may have no DOV, whereas the rear unit may have DOV. The same is true in larger developments as the impact of IFV land damage may vary from unit to unit.

How can a DOV for one unit in the building be zero if other units in the building are assessed as having a reduction in market value (DOV) as a result of IFV land damage? Will the values of all units not be affected if some values drop?

EQC’s valuers assess the impact of ILV land damage on each individual unit. This is consistent with the approach to standalone properties. Some houses in a street will qualify for IFV land damage and be assessed as having a reduction in market value (DOV), whereas other houses will not have IFV land damage.

Why are payments for IFV, and other land damage, made to the Body Corporate?

The Body Corporate holds the insurance policy in respect of the residential building and land, and has obligations around the use of insurance proceeds that it receives.  

Can I as a unit owner get information about IFV settlement, including the settlement pack from EQC, given that the Body Corporate is the claimant?

EQC provides information to the Body Corporate because they are the entity that holds the insurance policy. However, unit owners can ask the Body Corporate to nominate them as a contact point so they can talk directly to EQC. The Body Corporate does this by calling or emailing EQC to nominate the unit owner/s as an alternative contact.

What should the Body Corporate do with the IFV DOV payment and any other land damage payments?

A DOV settlement amount is paid, for example, where there is no feasible repair available for the IFV land damage, or because the repair is not able to be done legally.

The Body Corporate must determine how it wishes to use and allocate the settlement. However, the information provided in the settlement letter includes a breakdown of the IFV settlement amount on a unit by unit basis prior to any excess deduction. This breakdown may assist in deciding how to distribute the payment to the unit owners, if the Body Corporate resolves to do so.

If the Body Corporate, or the individual unit owners, do not use the DOV settlement amount to repair the IFV land damage, it will not affect future EQC cover for the property.

On the other hand, it is important that the cost of repair payment related to visible land damage, including damage to retaining walls, bridges and culverts, as well as land cracks, undulation, ponding or silt removal, is used for repair of damaged property. A Body Corporate’s future entitlement to EQC cover may be affected if the payment related to visible land damage is not used for this purpose.

If the Body Corporate is unsure of what it should do with land damage payments, then it may wish to seek legal advice. 

Is the Body Corporate allowed to hold onto all the settlement money?

All unit owners are members of the Body Corporate and are generally entitled to a say in how the settlement money is applied. It is most likely that the Body Corporate chairperson would call a general meeting at which a special resolution is made as to how the money will be applied. EQC has no say in how this money is allocated by the Body Corporate.

 

Claim Process

How can I review the qualification decision and/or the settlement amount?

The Body Corporate can ask EQC to review its qualification decision and/or the settlement amount. Unit owners can request a review through the Body Corporate, or they can be nominated by the Body Corporate to ask for a review themselves.

EQC will carry out a review when the Body Corporate or its nominated representative(s) provides EQC with new information or a different interpretation regarding these decisions. To trigger a review, information may be provided about, for example:

  • the change in flood depths the property has experienced since the earthquakes; or

  • whether the Body Corporate is going to obtain a consent to repair the IFV land damage.

To ask for a review, please email us at info@eqc.govt.nz or call on 0800 326 243 between the hours of 7am to 9pm, Monday to Friday, and 8am to 6pm on Saturday.

What if a customer whose settlement for IFV land damage was based on DOV, believes their land can be repaired?

If a customer can show that they can in fact obtain a resource consent for the land repair and that they will in fact do the land repair, then the settlement amount may be changed to be based on repair cost. This is unless the repair cost is disproportionate to the amount of the DOV. This comparison will be determined on a case by case basis.

Where a property with IFV land damage has been sold since the earthquakes, the settlement will also be based on the DOV. This settlement approach for IFV land damage is consistent with the Declaratory Judgment which was delivered in December 2014.

Settlement amounts are also subject to the land cover cap amount which is set out in section 19 of the Earthquake Commission Act (EQC Act). The EQC land cover cap is generally the value of the area of damaged land or the value of a parcel of land that is the minimum lot size under the relevant District Plan, whichever is the smaller.

 

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