Changes to liability settings for construction in the building consent system and allowing councils to share resources are designed to eliminate system blockages and speed up the delivery of new homes and infrastructure
Construction Minister Chris Penk says he plans to ease the cost burden on ratepayers for defective building work in the biggest changes to the consenting process since the Building Act came into force in 2004.
“The Government will scrap the current framework, known as joint and several liability, and replace it with proportionate liability,” he says.
Under the new rules building owners will remain protected if things go wrong. “We are exploring options such as requiring professional indemnity insurance and home warranties, similar to arrangements in Australia.
“New Zealand’s sluggish consenting system is delaying projects and driving up costs, making the average standalone house here 50 percent more expensive to build than in Australia. Under this new model, each party will only be responsible for the share of work they carried out, says Penk.
“The building sector has the potential to be an economic powerhouse, yet productivity has stalled since 1985 despite major advances in building methods and technology.”
Long overdue
Liability into the building and construction sector is a long-overdue step toward a fairer and more functional system, says the New Zealand Institute of Building Surveyors (NZIBS).
Past president Darryl August was part of the roundtable discussion with MBIE earlier this year that helped shape the government’s new direction. The meeting included legal and industry leaders as well as representatives from Australia – where proportional liability has operated successfully for years.
“The roundtable discussion group included stakeholders like NZ Certified Builders and unanimously backed proportional liability over the status quo or a hybrid model,” August says.
“Clearing blockages in the building consent system to make it easier and more affordable to build is an important part of this government’s economic growth plan.
“We know the sector is behind us. New Zealand Certified Builders have said that this is the most significant change for the building industry in a generation, that it has been a long time coming and the change is welcomed by the industry.
“The government’s decision reflects the strong consensus reached at that forum. We were clear that proportional liability is the fairest way to allocate responsibility in construction,” August says. “It ensures that those who actually cause the problems are the ones who pay to fix them.”
“We are determined to get the building and construction sector firing on all cylinders, and that requires bold change.
“This government is making that change.”
Further support
NZIBS cautions that proportional liability will only work if paired with other system changes, particularly around insurance and professional standards that Penk has agreed to look at.
“New Zealand’s construction insurance market is not currently geared for that. Without those foundations, the policy cannot succeed. In countries where proportional liability works well, builders and contractors are required to hold professional indemnity insurance, and warranties are backed by insurance,” he says.
The Institute also points to the need for urgent reform of the Licensed Building Practitioner (LBP) scheme.
“A lot of the current workforce would not meet the standard needed to obtain [insurance]cover. That tells you the LBP system is not working as intended.
“So, if we want proportional liability to work, the LBP scheme needs a serious overhaul. Overall, we applaud the direction. Now the real work begins,” he says.
Consolidate functions
The second major change announced by Penk was to allow councils to voluntarily consolidate their Building Consent Authorities (BCA) functions with each other.
“It is ridiculous builders, designers and homeowners must navigate 66 different interpretations of the Building Code, because of the number of council BCAs across the country,” says Penk.
“Builders [currently]can be rejected on paperwork that would be accepted by a neighbouring authority simply because each BCA applies the rules differently.
“Many councils have asked for this, and I expect they will seize the opportunity to consolidate, share resources like building inspectors and IT systems, and pass the savings on to ratepayers.
Changes to liability settings and measures to enable voluntary BCA consolidation will be made by amending the Building Act 2004. The Government expects to introduce a Bill to Parliament in early 2026.
Regulatory changes to support BCA consolidation will include removing the requirement for a Territorial Authority (TA) to be a BCA providing they transfer their building control functions to another accredited BCA.
This removes restrictions on TA transferring their building consent functions to a non-TA organisation, and updates and standardises regulations to eliminate duplication and incentivise collaboration.
