Billions in remediation works cannot be levied on responsible builders, report finds

Boomtime builders responsible for defective homes cannot be made to pay for remediation works which will cost billions and take years to complete, a landmark report has found.

The report of the working group on defects in housing, commissioned by Minister for Housing Darragh O’Brien and published on Thursday, says “it will take many years to address all buildings affected”.

While an industry levy has been considered, the report states “that it is not feasible retrospectively to impose a penalty on the individual firms that were responsible for the defects”. It says a general industry levy would target those who did not cause the issue and would face legal issues and knock-on impacts on the current construction costs.

The wide-ranging faults are down to “defective design, defective or faulty workmanship, defective materials or any combination of these” and are “replicated throughout the country”, the report states.

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It outlines how, before 2014, opinions of compliance were issued widely without inspections by professionals and “on the basis of non-invasive viewings at completion, without any inspections during construction to assess if the building was constructed” in line with requirements.

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‘Common thread’

It finds the “common thread” to the origin of defects was a lack of understanding of the complexities of constructing the buildings that ran through construction professionals, developers, insurers, financiers and lenders, with limited regulatory oversight at local authority level.

The report finds that from 1991 to 2013 up to 100,000 units impacted by defects were constructed. The bill will come to between €1.56 billion and €2.5 billion to fix the issues, at an average cost of €25,000 per apartment.

Owners, the report finds, are left with a dearth of legal options – despite the statutory position being “clear” that primary responsibility for making sure works are compliant “rests with the owners, designers and builders of buildings”.

However, it warns that “the likelihood of success in legal actions is low, and the costs of action are considered to be prohibitive”, adding that many complexes were built by shell companies where it is not possible to pursue the former owners or directors.

Between 40 and 70 per cent of properties with defects may have fire safety failings, the report finds, with water ingress impacting between 20 and 50 per cent and structural safety defects in between 5 and 25 per cent.

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State risk

Sinking funds set up to maintain properties are “often stretched” and are “not a permissible or a likely source of funding for addressing defects”, it says.

Low-cost loans from banks, according to the report, would be “a high-risk loan and unlikely to be considered commercially viable” and therefore risk-sharing with the State would be needed. This, in turn, would expose the State to risk and, even then, high administrative costs might make the works unviable even with a Government guarantee. It also examines State-funded grants, direct State payment and taxation measures to pay for the works.

It finds that the majority of properties are out of their period of insurance cover and would be unlikely to be covered in any event.

“Insurance is not a significant source of funding available to… meet the costs of defects remediation,” it says.

The report recommends that a central organisation provide assistance to owners’ management companies and apartment owners with remedial works, and a register of building professionals be established to carry these out.

The report was based on 1,790 responses to an online survey, covering over 28,000 units. It estimates more than half the apartments built at the time are rented, with a quarter owner-occupied. It finds small landlords with one or two rental properties could face costs of between €753 million and €1.2 billion, and owner-occupiers between €391 million and €625 million.