I have a walkout basement and a stone veneer chimney that starts at the first floor(not ground level) and extends above the roof line. I discovered water was leaking into the framing in the basement and assume the stone veneer was waterproofed improperly. I never liked the fieldstone anyway so I was planning to tear it off and use a drystack next time. Since I will probably have to replace osb sheathing, would zip system be more appropriate for this application and would it pay to use ice and water shield on the entire chimney instead of felt paper?

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[1] http://forums.finehomebuilding.com/members/user-429319
[2] http://forums.finehomebuilding.com/breaktime/construction-techniques/water-leaking-through-stone-veneer
[3] http://forums.finehomebuilding.com/members/danh
[4] http://forums.finehomebuilding.com/comment/2233148#comment-2233148
[5] http://www.quittintime.com/
Keep in mind that the water
Keep in mind that the water may be leaking in through the top.
Of all the preposterous assumptions of humanity over humanity, nothing exceeds most of the criticisms made on the habits of the poor by the well-housed, well-warmed, and well-fed. --Herman Melville
Possible, but there is a
Possible, but there is a stainless steel cap on the top that seems to be pretty well sealed
user
Top, flashing at roof to stone (how's the counter flashing set up with that stuff)?
Up there too-is there any kickout flashing on the low side of the roof/at the chimney?
Then there's the whole wall all the way down?
I can understand why you're thinking tearing off the veneer.
It sounds like there are many possibilities for entry and the resultant trapping of the water.
All of your suggestions for new work make sense, but you'll find that if done properly, what was there would have lasted. Downside, a faux masonry chimney has wood products behind it to soak up any leakage, get punky and rot.
The cause though is the same-poor flashing. Take care of that and you could sheet it with anything and lay over felt paper, Ice and water, etc.
Hows the flashing up top detailed (cap on top and stone to shingles)?
and how is the siding to stone detailed?
You don't mention seeing any water damage within the house envelope-only it's appearance in the basement. The source could be at the chase / sidewall or all the way up at the flue/cap.
You have a picture of this thing?
A Great Place for Information, Comraderie, and a Sucker Punch.
Remodeling Contractor just outside the Glass City.
http://www.quittintime.com/ [5]