5: Other comments and observations

Inquiry into Christchurch City Council's five property purchases.

We make a number of further comments and observations that the Council may wish to consider. These do not detract from our overall findings that the decision-making process followed by the Council in this instance was sound and consistent with the principles of the Act.

Administration of Council business

In carrying out our review, a number of differing views have been given to us about the Council’s administration of its decision-making process in this instance. These comments were about:

  • the time frame within which Councillors had to make this decision, and the length of time devoted to its consideration;
  • the use of Council workshops, and the extent of notification to Councillors of the subject matter at workshops; and
  • the effect of confidentiality and urgency on the availability of advice, both internal and external, and the balancing of associated risks and opportunities.

The Council’s elected members took an active part in discussing the individual properties proposed for purchase at the Council meeting on 25 July 2008. A majority of Councillors decided that four of the five properties recommended by staff should be purchased. We make no assessment of the differing views expressed to us, but the Council may wish to consider how it addresses the concerns and expectations of its elected members in similar situations in future.


The Council’s 2006-16 LTCCP included some budget allowances for the Council to purchase and fund properties of this nature and for the broad purpose for which the Council decided to acquire them. However, these allowances had already been partially used for other purchases by the time this decision was being considered. Council staff highlighted to Councillors at the time of the decision that there was no budget available for the purchases.

The full details of available LTCCP budgets and their partial prior use, through the earlier property purchases, was not clearly presented to, or canvassed with, Councillors at the time of the decision to purchase the properties. We consider that doing so would have been useful.

Valuation matters

The Council resolution recording the decision to purchase the properties in question states that the Council instructed the Chief Executive to obtain valuations as the basis for the price to purchase the properties. The Chief Executive told us that the approach that was subsequently taken for the valuations was discussed by Council staff before the Council meeting on 25 July 2008, and with Councillors who were present at that meeting. The Chief Executive’s view is that the Councillors present at the meeting of 25 July 2008 were clear on what process was going to be undertaken in updating the valuations of the properties.

However, it is clear from our review that some Councillors, and observers, had different expectations as to how the appropriate values for the various properties would be ascertained. The wording of the Council’s resolution was not detailed enough to clearly record and remove any ambiguity about the actions the Council expected the Chief Executive to undertake in relation to the valuations.

Questions have been raised about the Council’s use (through a joint instruction) of the same valuers as used by the developer, and, in the case of the Sydenham Square property, the Council’s adoption of an existing valuation prepared for the vendor and without further instruction by the Council.

Clearly, where decisions are made and instructions issued to Council staff, these need to be clearly and unambiguously recorded in Council’s resolutions, and demonstrably executed as intended.

We were told that the Council’s usual approach to property valuations and purchases in such circumstances is either for the Council to obtain its own valuation, which can then be used to negotiate against a valuation obtained by the vendor; or to agree with the vendor on a valuer to jointly instruct, and for both the Council and the vendor to abide by the valuation received.

In this instance, the Council broadly took the latter approach. The Council was seeking to deal with the developer on a willing buyer/willing seller basis and did not seek to negotiate the purchase price of the properties.

It is normal practice for a property purchaser to take appropriate steps to be satisfied that valuation risks are adequately addressed. In this case the Council was aware that professional valuers had provided recent valuations for these properties solely for the vendor. We have been advised by the Chief Executive that Council was aware of this risk. In our opinion, Council should have recorded how it satisfied itself that the risk had been considered and mitigated.

For four of the properties, the Council did instruct the same valuers as those used by the vendor to update existing valuations and to provide them jointly to Council and the vendor. The Council was comfortable with the work of these valuers from its other dealings with them, and jointly instructed them in keeping with the Council’s usual approach. By instructing these valuers, the Council did achieve some contractual protection.

In the case of the Sydenham Square property, the Council did not commission any professional valuation, whether jointly or otherwise. It relied entirely on the recent valuation (it was about two weeks old at the time of the Council’s decision) prepared solely for the vendor and the Council’s general comfort with the work of the valuer.

While we understand that the time constraints in this case affected how valuations were obtained in practice, we nevertheless consider that the Council could generally have done more to document how it satisfied itself about the valuation risks relating to these properties. In the case of the Sydenham Square property, the Council should have contracted with a valuer if only to confirm the recent valuation that had been completed.

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