New quake laws mean property shake-ups

5:00 AM Saturday July 29, 2017 Owen Vaughan, Bayleys Media Team

Christchurch’s historic Provincial Council Chambers building was substantially damaged in the February 2011 earthquake. Photo / Supplied

New legislation governing earthquake-prone buildings will bolster New Zealand’s commercial property sector in the long term; but experts say the market’s reaction depends on how quickly affected landlords bring their stock up to standard.

The legislation, which came into effect this month, will ensure central Government provides more leadership and direction for managing earthquake-prone buildings. Territorial authorities will no longer be required to develop individual policies for doing this, but will still be responsible for administering the new requirements in their district.

The legislation will:

  • Provide guidance from central government and reduces variability in the management of earthquake-prone buildings by territorial authorities;
  • Target high-risk areas and put vulnerable buildings first;
  • Keep the public informed through mandatory disclosure of earthquake-prone status; and
  • Achieve a balance between protecting people from harm, cost of strengthening or removing buildings, and the impact on heritage structures.

John Church, Bayleys’ national director commercial, says under the new rules territorial authorities will have between five and 15 years, depending on the risk zone, to identify structures that are potentially earthquake-prone buildings (EPBs) and require further assessment by the building owner.

If the owner does not engage an engineer and provide an assessment of their building to the territorial authority within the required 12-month timeframe, the authority is to proceed as though the building has been deemed as earthquake-prone.

Owners who do not meet the timeframe for strengthening could be convicted and fined up to $200,000.

Church says: “The effect of the legislation will undoubtedly strengthen the sector as a whole but the market’s reaction is dependent on how many buildings are deemed unsafe under the new legislation and how quickly owners bring them up to standard.

“The legislation should result in an even greater focus on building strength, and an expectation from tenants that landlords will be keep them informed about any issues with the buildings they occupy. There will, consequently, be clear rent and pricing differences between different strength grades of buildings.”

Church says the Kaikoura earthquakes last year and their effect on Wellington means there is risk component in everything now. “And the uncertainty around likely further amendments to building codes and standards means everyone will be more cautious about what they are going to design to or what they anticipate will be the likely design standards. This will potentially put the brakes on some projects.”

Peter Liu, director of structural engineering firm EQ Struc Group, which specialises in seismic assessment and retrofitting existing buildings, says earthquake-prone building notices serve two functions: (1) inform the public of the risk, and (2)  motivate building owners to act to remediate their buildings.

“Under the new legislation, an earthquake-prone building is one that would have its ultimate capacity exceeded in a moderate earthquake and, if the building were to collapse, would be likely to cause injury, death, or damage to another property,” Liu says.

“This definition applies to specific features of a building and the building as a whole. In practise, an earthquake-prone building is often referred to as one that meets less than 34 per cent of the new building standard (NBS).

“The seismic rating takes into account multiple factors such as the level of seismic risk around New Zealand, with the country divided into three seismic risk areas — high, medium and low.

“This results in a building at 33 per cent in Wellington being stronger than a building at 33 per cent in Auckland, where the seismic risk is significantly lower.”

Liu says the legislation gives territorial authorities the power to impose safety measures such as putting up hoarding around a building to prevent occupation of the building; carrying out strengthening works; and recovering the cost of the strengthening works from the building owner.

Transitional provisions will be included in the new legislation for engineering assessments already undertaken under the current system for managing EPBs.

The intention is to leverage off the work that has previously been done, rather than unnecessarily repeat work.

In response to last year’s quake damage, the Government has already used emergency powers to push through strengthening work on high-risk buildings in Wellington, Lower Hutt, and Blenheim.

True Commercial - Seismic risk map - colour coded.jpg

This colour-coded map depicts the levels of seismic risk and deadlines for action by owners. Photo / Supplied

Church says the main effect of last year’s earthquake in Wellington has been the squeeze on the supply of space that is available and fit to be occupied.

“The consolidation of space requirements combined with new developments had left Wellington looking at an oversupply of lower-grade office space, which could have potentially been converted to apartments or accommodation. But that process was halted by the rehousing of tenants while their damaged buildings are repaired.

“The best placed landlords are the ones with high seismic-rated, quality buildings. But owners of B and C stock in Wellington will need to upgrade to keep the tenants they do have.”

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John Church, Bayleys