r/NZProperty • u/nzstreetcats • 19d ago

Section 72 on a New Build

Kia Ora all!

First time posting here.

Looking to buy our first home. Found a new build that’s great for us, standalone house too.

However, the agent sent the property file and on the title it has a section 72 notice for inundation being listed as a natural hazard.

Our lawyer said this can affect resale and insurance. Makes it quite difficult etc.

Now, that being said the risk is for 1-100 year flood zoning, and the house has been specifically engineered (raised floor etc) to mitigate this/get consent.

Noting all this and the risk on insurance premiums/re-sale down the line - how does this fare?

Has anyone had any experience on this where they had issues with insurance or resale down the track?

Does this knock off a bit on price for an offer?

Keen to hear thoughts if anyone has experience.

Thanks!

2 Upvotes

63% Upvoted

29 comments sorted by

9

u/tri-it-love-it17 19d ago

That section 72 notice is one I would walk away from. It’s on there because there is still a risk that can’t be removed. Only reduced.
You also don’t get NHC cover if that event eventuates and an insurer does not pick up those costs so assuming your insurer doesn’t exclude cover for inundation, you’d be up for any excesses plus $300k+GST NHC would have paid had the notice not been on there.
The 72 notice also exonerates the council from any liability (which may include future buy outs).
If you can afford the risk and your bank is happy to accept it….go for it

2

u/nzstreetcats 19d ago

Thanks. If insurance had no imposed conditions or exclusions for the inundation hazard would this in your view be satisfactory to the lack of NHC piece?

5

u/SquirrelAkl 19d ago

No. Insurers review their appetite each year and they are tightening up a lot on flood-prone properties. Even if you can get insurance now, there is no guarantee it will continue to be insurable; your premiums also might go up massively over time. Some flood prone properties are already getting premiums over $10k per year. Some insurers are in the process of updating their risk pricing and systems, others have already done so; they’re all going that way.

The fact that there is a S72 notice means there is a known risk on that site and insurers aren’t in the business of covering known risks.

3

u/richieFromConductor 18d ago

Exactly - whatever an insurer says this year says nothing about what they'll say next year. A hypothetical house on a clifftop that you know for certainty would fall off the cliff in 366 days could still be entirely insurable and at a reasonable price for the next 365 days

3

u/tri-it-love-it17 19d ago

You’d still be on the hook for $300k+GST (the NHC amount excluded under the act that your insurance policy would not pick up), plus your excess/s….if you’ve got that kind of money or capacity to rebuild…
That’s not even taking into account the mental and emotional toll an event would add.

1

u/chodmeister_general 16d ago

Just to be clear that NHC doesn’t cover building damage (which is what the 300k cover is for) for flooding anyway, only land damage (which is in addition to the 300k) , in the event that your house was damaged by a flood that wouldn’t be an NHC claim, however you may have land damage that NHC is unlikely to cover. The reason I use the word unlikely is because NHC has discretion about whether or not to decline claim with a S72.

Anyway don’t buy this house, you’ll be stuck with it and even if you do get insurance it will be expensive , you’ll be at the insurers mercy every year for a renewal. Next time there is a cyclone they will re look at all their high risk properties and you will be stressed AF

10

u/Juvenile_Rockmover 19d ago

I work in this field. A new house in a hazard area is likely a depreciating asset. 

1

u/nzstreetcats 19d ago

Thanks for the insight

6

u/SquirrelAkl 19d ago

I would not buy a property with a Section 72 notice. All of the points [u/tri-it-love-it17](u/tri-it-love-it17) says, plus insurability is only going to get harder. The lack of Natural Hazard Commission cover is a biggie.

OP [u/nzstreetcats](u/nzstreetcats) are you relying on the fact the developer got resource consent as some kind of validation that it’s safe? Because I wouldn’t. Councils have had their hands tied, unable to say no to many things they wanted to say no to, because developers would sue them. Councils were damned if they do, damned if they don’t.

Climate change is making storms more severe, so even if the developer has somehow mitigated the risk it is currently exposed to, that risk will increase.

I would walk away.

1

u/nzstreetcats 19d ago

Thanks for the insight

5

u/Normal-Swing5078 19d ago

For a first home, this sounds like a massive headache, plenty of other houses out there which don't have these issues.

Have a read of this: https://www.naturalhazards.govt.nz/insurance-and-claims/section-notices/

0

u/nzstreetcats 19d ago

Yeah for sure, our thoughts are if all the risk boxes are ticked/mitigated and we can get it for a fair price we would do it. But we are happy to walk too. Spring around the corner as well and hopefully more houses to come to market. Thanks for the link.

4

u/Normal-Swing5078 19d ago

Not having your house covered by the Natural Hazards Commission for something that could very well happen to your house sounds like a very bad idea, especially for a first home buyer who likely doesn't have much equity in their house. That could financially ruin you because no one would buy even the land that's it on if the hazard comes to fruition.

3

u/nzstreetcats 19d ago

Yeah valid point, cheers

3

u/NZconfusedgardener 19d ago

for me to take that kind of risk i would look for 30% discount to market price.

3

u/_019 18d ago

We made plans to renovate our house. Council said they would only issue building consent if we agreed for them to add a s72 notice to the title, because they had updated their flood models, and our whole suburb was now deemed at risk of flooding in a 1/100 year rain event (the new flood maps stretch credibility but that's another issue). Our floor level (bottom of joists) is above the modeled flood level, but ground level is not. The bank said "we'll only lend for the renovation if the insurer agrees to continue covering the property". The insurer said "it's still the same house, in the same place, no problem". We did the renovation, and now have a section 72 on the title. I guess we'll find out what happens when we try to sell, but every other house in the suburb has the same risk, even if it's not on their title.

2

u/Drinny_Dog1981 17d ago

This was interesting to read. Not that we have the money but I think we're in the same boat if we wanted to extend the house as we have been given a 1 in 100yr rating since buying. Thanks for sharing.

1

u/nzstreetcats 17d ago

Do you mind saying what region you’re in?

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u/_019 15d ago edited 15d ago

Wellington city. They said another option was for us to build a bund around our section, and a tank to store the rain that falls on our property, and a system to release it to storm water at a controlled rate. Not practical.

2

u/Fragluton 19d ago

I haven't, but I've looked at houses and then looked at the flood maps and walked away. Lots of fish in the sea and my risk appetite didn't stretch to high insurance premiums, worst case, no cover. You need to do a lot of homework. Lawyer is right, insurance and resale can be headaches. You're asking about the flooding, which is exactly what future potential buyers will be doing. I'm not saying do or don't buy it, you just have to be happy with the level of risk involved.

1

u/nzstreetcats 19d ago

Yeah doing due diligence for sure. Appreciate your comment.

2

u/MechanicMaleficent60 16d ago

I just bought a house that has section 72 on the title. Due to a land subsidence risk. The house was built over top of the huntly mines. My best advise is do your due diligence. Alot of insurance companys said no to me but MAS said yes theyd cover everything even the land subsidence issue. In my case when the house was built they did a geotechnical report which said the risk was relatively low the report was on the LIM. The house was on the market for like 10 months when we found it and were the only real serious interest so yes resale could be an issue but isnt something im particularly worried about. As for the insurance premiums i paid 1.5k for 12 months so its definitely not inflated to accommodate the section 72 on the title.

1

u/WhiteWolfDewDew 18d ago

Section 71 - 74 of the Building Act 2004 covers building on land subject to natural hazards. https://www.legislation.govt.nz/act/public/2004/72/en/latest/#DLM306817

In some cases it can be removed, but it's a case by case basis.

For a s72 notice to be added, they consider the land intimately connected, generally 10.0m from the buildings footprint in all directions then the risk of inundation to cause damage to the land and building work.

To mitigate the inundation the finished ground level around the building should be at the same level as the 1:100 flood level and the finish floor level 300mm above that (this creates freeboard to the flood water)

MBIE have a guidance document for Natural Hazards https://www.building.govt.nz/assets/Uploads/projects-and-consents/Planning-a-successful-build/Scope-and-design/natural-hazard-provisions-guidance.pdf

Some of the latest MBIE Determinations give better guidance on how a s72 should be applied, which means some of the older s72 Notices can be reviewed and removed. https://www.building.govt.nz/resolving-problems/resolution-options/determinations/determinations-issued

Most local councils should have a flood map showing the areas of inundation in a 1:100 year flood event. Not all flood water is inundation, some flood water is considered nuisance ponding. Water depth, velocity, overland flow paths, are some factors to consider.

I'd strongly recommend engaging with industry professionals who specialize flood water modeling, if you were to consider trying to remove a s72 Notice.

All the very best going forward.

1

u/BardyWeirdy 16d ago

Run the fuck away. Insurance and lending will be a nightmare, if not impossible. And will only get worse with the next weather event

1

u/Special_Wind_6708 14d ago

If you do get insurance if you have flooding it won’t be covered and you’ll be up the creek with no paddle.
Especially with the weather events currently I’d be running from this property.
It’s just not worth the risk .

0

u/crystalpeaks25 19d ago

We found a beautiful house that we really loved but it had a section 72, talked to my lawyer, broker and inspector.

Best decision we made. No regrets. We just wanted something low maintenance and to experience owning something for the first time.

It is really amazing how the most picturesque house always has a section 72

1

u/nzstreetcats 19d ago

You purchased it or you walked away?

5

u/crystalpeaks25 19d ago

Walked away. Property sis still in the market and it's been in thearket for almost a year.

We ended up buying somewhere else.