Chris Hutchings, National Business Review, reports that the High Court has for the first time held a district council liable for the information on its land information memorandum. The ruling, which may yet be appealed, has significant implications for councils around the country and for insurers.

In Altimarloch Joint Venture Ltd (3/7/08, Wild J, HC Blenheim CIV-2005-406-91), the vendors were sued along with several other parties for failing to identify changes to water rights on a property under sale.

A 2004 property valuation had identified the correct water rights for the property but when further confirmation was sought by other parties, the details were disregarded in favour of those provided by Bayleys Real Estate and by the Marlborough District Council as part of its Land Information Memoranda (LIM).

LIMs are comprehensive reports that should contain everything the council knows about a property or section. LIM information includes special land features including potential erosion, slippage and hazardous substances, storm water and sewage drains, unpaid rates, consents, certificates, notices, orders or requisitions affecting the land or buildings, district plan classifications, information about network utility supplies, and "other relevant information."

Justice Wild found that the Marlborough District Council acted both negligently and in breach of its statutory duty by issuing a LIM containing erroneous information.

The court, in apportioning liability, assessed that the council was 34% liable for the purchaser's loss which equated to $263,840 in monetary terms, although the the precise quantum to be awarded is yet to determined.

Many advisers and statutory organisations encourage property buyers to request LIMs. The cost for requesting a LIM is highly variable, with the maximum at some councils approaching $400.

If the High Court judgment stands, these costs are likely to rise as councils will be forced to devote more resources to their accuracy.