Fletcher Homes Ltd and Residential Mortgages Ltd (RML) have agreed with the Commerce Commission about how they will address the concerns of homeowners who believe their properties may have been over-valued.
Commission Chairman Dr Alan Bollard said the Commission had initiated a case in the Christchurch High Court alleging that Bennett and Associates Ltd, Fletcher Homes and RML had breached the Fair Trading Act by using misleading valuations in a first home ownership package.
Bennett and Associates is a Christchurch-based valuation firm, and Fletcher Homes and RML are Fletcher Challenge subsidiaries.
Dr Bollard said it is important to realise that the settlement is in two parts. One deals with the case the Commission has taken to court, and the other applies to anyone else who bought a house from Fletcher Homes and is concerned that they may have been misled over the valuation of their home.
"I am pleased with the attitude Fletcher Homes and RML have displayed in this settlement," he said. "They are taking a responsible attitudes to their customers' concerns."
Fletcher Homes and RML have initiated a resolution process to address the concerns of the 10 Christchurch homeowners on whose complaints the Commission's court action is based. The Commission understands that these issues have been resolved with the homeowners.
Fletcher Homes and RML have agreed to implement a similar process to address the concerns of homeowners not included in the court action but who believe their houses may have been over valued, and who have a proper basis for complaint. Where appropriate, this process will use independent mediators.
Homeowners could use their own lawyers, valuers and any other experts they might want to help present their arguments.
If Fletcher Homes and RML decide that a homeowner does not have a proper basis for complaint, the homeowner will have the right to have an independent reviewer assess the decision. The independent reviewer will be retired Chief Youth Court Judge Mick Brown.
"I am very pleased that Judge Brown has agreed to take on this role," Dr Bollard said.
The process would take away none of the legal rights anyone already has. If it did not produce a result all parties were prepared to accept, then homeowners, Fletcher Homes, RML and any valuer involved would still have all their existing rights to formal legal action.
The Commission will have full access to the details of the resolution process and will receive reports and other information it requires.
The Commission will withdraw its court action when it is satisfied that the process is being carried out and is working.
"I am pleased with this settlement," Dr Bollard said. "It gives concerned homeowners more, better and simpler options than they would otherwise have, without taking away any of their existing rights."
A major concern the Commission has is that the Fair Trading Act has a three year statute of limitations. Neither the Commission nor anyone else can use the Act if the alleged breach occurred more than three years ago.
Fletcher Homes and RML have agreed that people who bought their house more than three years ago can use the dispute resolution process.
"This is a successful outcome," Dr Bollard said. "These homeowners' only other option would have been to take individual contract law or tort cases to court. The dispute resolution process is much simpler and quicker, but, if they do not want to use it or do not accept the result, they can still take legal action."
Dr Bollard stressed that each homeowner's case will be looked at individually.
"A drop in value may not mean that the house was over-valued," he said. "Property prices go up and down. It is possible that in some cases changes in the property market, not an over valuation, were the reasons a house decreased in value.
"If, after the dispute resolution process, the parties cannot agree, then they would still have all their legal rights to take whatever further action they chose."
