Homeowners of Category 3 houses feel cornered by what one of them has described as an “unfair buyout process” involving the district council, with two owners claiming payments being offered are well below valuation.
Gisborne District Council is in the process of buying out homes deemed uninhabitable due to the risk of future flooding or landslides — classified as Category 3 properties — following Cyclone Gabrielle in February 2023.
One of those belongs to Shane Fell, who speaks fondly of his riverside property on Fitzherbert Street — recalling good times of drinks on the balcony in summertime while enjoying the river view.
Mr Fell is frustrated by a council valuation (done by Lewis Wright) he says is over $300,000 below independent valuations he had done.
“It’s prime real estate. There’s no way it’s worth the council’s valuation,” he says.
A property investor and builder by trade, Mr Fell paid for two independent valuations.
“You would expect a price difference of around 5 to 10 percent with these valuations, which is what you see with my two independent valuations — not in excess of $300,000.”
A council spokesperson said they had not seen Mr Fell’s valuation so were unable to comment as they did not know whether his valuation had been done in accordance with the Voluntary Category 3 Buyout Policy.
Mr Fell said he had shown his valuations to Align, the company the council hired to negotiate once there was an agreed valuation. He plans to send these on to the council.
Mr Fell said he felt misled and unsupported through the buyout policy, and would consider taking it to court if “council do not do the right thing”.
“People are exhausted by the cyclone and now with the buyout process, they are being backed into a corner.”
The Gisborne buyout policy includes $1500 towards legal fees associated with the sales and purchase agreement.
In comparison, the Napier and Hastings councils’ buyout policies reimburse the owner for the costs of a registered valuation and legal advice up to $5000.
They will also pay all legal costs related to finalising the sale and purchase agreement to a maximum of $5000.
“Most people cannot afford to pay for their independent valuations and GDC is not incentivising or supporting people to get their properties independently valued,” Mr Fell said..
The Gisborne council spokesperson said their buyout policy reflected the needs of the region.
The contribution for legal fees was lower than other regions, but Category 3 property owners were fortunate to be offered 100 percent of the property valuation, the spokesperson said.
“This is not the case in some other regions.”
The council said it worked to get the best outcome for category 3 owners while balancing the cost of buyouts for ratepayers and taxpayers.
However, Mr Fell said the council used a valuation consultant who also did valuations for ratepayers. He believes this is a potential conflict of interest he was not notified about.
The council spokesperson said “they do not believe there is a conflict of interest”.
LDR also spoke with another Category 3 homeowner, whose property is at Makorori, who also questioned the difference in a valuation he had done compared to that of the council.
His independent valution was in excess of $150,000 than that of the Lewis Wright valuation.
Under the council policy, if an agreement cannot be reached between valuers, the council appoints a third valuer to make a final decision.
However, Mr Fell said after his experience, he does not trust the council to do the right thing.
“The policy states that the third valuer will make the final call, which means there is no room for disputes,” he said.
Sixty-three houses are listed as Category 3 and the council said six property owners were disputing the council’s valuations.
The council was allocated $204 million from the Government support package, which includes “the purchase of Category 3 properties, along with funding flood mitigation and road and bridge repair”.
The council has a 50-50 cost share agreement with the Government to fund the voluntary Category 3 buyouts.
“Although the exact cost won’t be known until all the settlements are finalised, the estimated total cost is about $30m, with the council contribution estimated at $15m,” the council spokesperson said.
The council can renegotiate with the Government if the costs for Category 3 property purchases are greater than estimated.
“If the buyout costs exceed $30m there will not be an impact on the amount council will offer property owners. This will remain 100% of the market valuation.
“Council outlined the projected impact on rates as being 1.1% in the 2024/25 financial year and 0.5% in the 2025/26 year.”
