Section notices

There are two key types of notice that may be put on a property's record of title that could affect EQCover. Section 74 notices can affect the outcome of EQCover claims, and section 28 notices can limit or cancel natural hazards cover. As a homeowner or homebuyer, it's important to understand what they mean for your insurance.

Section 72 notices

A section 72 notice on a property’s record of title can affect claims for natural hazard damage. This notice can be placed on a property that is known to be affected by or at risk of a natural hazard. It is intended to make anyone with an interest in the property (such as potential buyers, banks, lenders and insurers) aware of the risk, as well as specifying what that hazard is.

If a claim is made for damage caused by the same type of hazard (or hazards) that is specified on in the section 72 notice, EQC Toka Tū Ake have the right to fully or partly decline that claim.

In the past, a section 72 notice was also called a:

section 36(2) notice if it was applied under the Building Act 1991
section 641a notice if it was applied under the Local Government Act 1974.

Section 36(2) and 641a notices have the same effect as a section 72 notice on a record of title, but do not always identify the natural hazard concerned.

How a section 72 notice is issued

Property owners who want to build on land or make significant alterations to an existing building will usually need to apply to their local council for a building consent.

If the land has been or is likely to be affected by a natural hazard, or the building work is likely to make worse, or result in a natural hazard the council will often issue a conditional building consent.

One of the conditions may be to add a hazard notice to the record of title, noting the natural hazard that has been identified. The Registrar-General then places a section 72 notice on the property’s record of title.

You can find more detailed information about this process through your local council. For more information refer to sections 71-75 of the Building Act 2004.

How section 72 notices affects claims

Section 72 notices on a property record of title can affect claims for natural hazard damage. If a claim is made for damage that was caused by the same type of natural hazard (or hazards) that made the building consent conditional, we can decide to:

accept the claim in full
partly accept the claim, or
decline the claim.

This type of claim is assessed on a case-by-case basis, taking into account the individual situation and all the relevant facts.

If a claim is made for damage that is caused by a different natural hazard than what is specified in the section 72 notice, then the normal claims process will apply, and the claim may be met in full.

For more information refer to clause 3(d) of schedule 3 of the Earthquake Commission Act.

Examples of how a section 72 notice might affect a claim

Landslide examples

A conditional building consent is issued that allows a home to be built in an area that is known to be at risk of landslips. A section 72 notice that specifies landslip risk would be put on the property’s record of title at that time. If the home or land is then damaged by a landslip, EQC Toka Tū Ake may partly or fully decline that claim.

If a property without any existing section 72 notice is damaged by a landslip, and a building consent is required to repair the landslide damage, the council might only grant a conditional building consent for the repairs because of the newly identified natural hazard risk. A section 72 notice that identifies the landslip risk is placed on the property’s title at the building consent stage of the remediation work. EQC Toka Tū Ake may then partly or fully decline any future claim for landslip damage to the home or land.

Flooding example

A conditional building consent is issued that allows a home to be built in a flood prone area. A section 72 notice that specifies the flooding risk would be recorded on the property’s record of title at that time. If the property is later damaged by a flood, EQC Toka Tū Ake has the right to partly or fully decline the claim for damage to the land. Because flooding damage to the home is not covered by EQC Toka Tū Ake, it is the responsibility of the private insurer to decide the outcome of any building claim for flood damage.

Natural hazards that might be specified on a section 72 notice

The natural hazards that appear in section 72 to 74 of the Building Act 2004 and could be specified on a section 72 notice are:

erosion – includes coastal erosion, bank erosion and sheet erosion
falling debris – includes soil, rock, snow and ice
subsidence
inundation – includes flooding, overland flow, storm surge, tidal effects and ponding
slippage.

Contact your council for more information about any natural hazards specified on your property’s record of title.

Removing a section 72 notice

In some situations, section 72 notices can be removed from your record of title by the council. You should contact your local council for more information. EQC Toka Tū Ake has no input into this process, and we can’t ask for these section 72 notices to be removed.

Section 28 notices

There are some specific situations that could lead to EQC Toka Tū Ake limiting or cancelling your EQCover after cash settling a claim, if the property is not repaired to our satisfaction.

In these situations, we will first ask to see that progress is being made repairing or replacing the property. If we are not satisfied with progress, we will notify the homeowner in writing of our decision to limit or cancel cover.

EQCover for the property is either limited or cancelled from the time that we notify the homeowner in writing. We will then ask the District-Registrar of Land to place a section 28 notice on the property’s record of title. A section 28 notice can only be removed if the homeowner provides us with evidence of work being done, and we are satisfied with the repairs or replacement of the property.

For more information about how section 28 notices are issued, refer to section 28 of the EQC Act.

Cancellation of cover

We might cancel EQCover if the settlement included:

the maximum payment for a building claim (the building cap), and/or
the maximum payment for a land claim (the land cap), based on the minimum size for a building site that is allowed under the District Plan where you live, or a 4000sqm in the case of larger blocks of land, and
the property is not being repaired or replaced to our satisfaction. For example, within a reasonable timeframe.

We might cancel the land cover, or both building and land cover.

We will assess whether cover should be cancelled on a case-by-case basis, and take into account the individual situation and all the relevant facts when making a decision.

When we have cancelled cover, the homeowner won’t be able to make another EQCover claim for any type of natural disaster damage until we reinstate the cover. If we have cancelled EQCover for a property, it’s likely private insurers will also refuse cover.

For more information about the cancellation of cover refer to clause 4, schedule 3 of the EQC Act.

Limitation of cover

We might limit EQCover if:

damage has occurred to a home or land as a result of a landslip, or
damage has occurred to land as the result of a storm or flood, and
the property is likely to suffer similar damage again, and
the homeowner has not not taken reasonable and available steps to avoid similar damage again. For example using settlement funds to repair the natural disaster damage to the property.

We will assess whether cover should be limited on a case-by-case basis, and take into account the individual situation and all the relevant facts when making a decision.

When we have limited cover, if a claim is made for natural disaster damage that relates to the reasons of the limitation, EQC Toka Tū Ake can decline some or all of the claim.

For more information about the limitation of cover, refer to clause 5, schedule 3 of the EQC Act.

Removing a section 28 notice

A section 28 notice will stay on a property’s record of title until we decide that the limitation or cancelation should no longer apply. The limitation or cancellation will continue to apply, even if the homeowner takes out a new insurance policy, the insurance policy is renewed, or the property is sold.

To have the notice removed the homeowner must apply to us in writing, and provide evidence that the notice should no longer apply, such as evidence that work has been done to repair or replace the building or land.

This could include:

a copy of a Code Compliance Certificate, if a building consent was required
copies of contractors’ invoices that have been paid
engineering reports
consent documents
photographs of the repairs.

If we are satisfied with the evidence, we will reinstate access to EQCover. Once we decide to remove the limitation or cancellation of cover, we will request the section 28 notice be removed from the record of title, and let the homeowner know once that’s been done.