The Government is scrapping the current building consent framework in a major shake-up for the industry.
The Government has announced what it is calling the biggest change to the building consent system since the Building Act came into force in 2004.
Building and Construction Minister Chris Penk says, “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.
“We must eliminate system blockages to speed up the delivery of new homes and infrastructure. We are announcing plans to ease the cost burden on ratepayers for defective building work.
"Right now, councils are hesitant to sign off on building consents and inspections because they could be held liable for all defects, leaving ratepayers to foot the bill.”
He says this often happens when one of the parties responsible cannot pay for repairs, for example, if a business goes bust.
“Currently, building owners can claim full compensation from any responsible party – and it’s often councils, with the deepest pockets and no option to walk away, that end up paying out.
Penk says the risk-aversion this creates leads to frustrating delays and extra cost for builders and homeowners, citing a case in Queenstown that shows the scale of this issue. In 2015, the Oaks Shores body corporate filed a $160 million claim for weathertight defects. The developer had been placed into voluntary liquidation and was not sued, leaving ratepayers exposed to the entire claim.
“If the case hadn’t been settled privately, ratepayers could have faced rates increases of $300 a year for 30 years,” Penk says.
“It’s time to put the responsibility where it belongs. The Government will scrap the current framework, known as joint and several liability, and replace it with proportionate liability. Under this new model, each party will only be responsible for the share of work they carried out.
“Building owners will be protected if things go wrong and we’re exploring options such as requiring professional indemnity insurance and home warranties, similar to arrangements in Australia.
The second major change Penk announced will allow councils to voluntarily consolidate their Building Consent Authorities (BCAs) 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,” he says.
“Builders 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.
“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.
“We are determined to get the building and construction sector firing on all cylinders, and that requires bold change.”
Building Minister Chris Penk has said that the Government will replace this current liability system with what is known as proportionate liability.
“Under this new model, each party will only be responsible for the share of work they carried out,” Minister Penk says.
“Building owners will be protected if things go wrong and we’re exploring options such as requiring professional indemnity insurance and home warranties, similar to arrangements in Australia.
New Zealand Certified Builders Association says it welcomes the Government’s decision to introduce proportional liability for construction projects. However, this change will only deliver genuine protection for homeowners if every build is backed by a mandated home warranty product, it says.
NZCB Chief Executive Malcolm Fleming said an industry-backed guarantee that provides cover specific to new building projects is the best way to make proportional liability work in New Zealand.
“Proportional liability ensures that each party in the design, consenting, and building process is allocated their share of responsibility when something goes wrong. But for this to work, each party has to have a form of cover that underwrites their performance, or the performance of the building work.
“To successfully implement this shift in liability here in New Zealand, industry-backed guarantees provided by building associations are the best option for homeowners. They come at a lower cost, provide faster resolution of claims, and are well established and proven to work.
“A guarantee for an average sized new build (value $480,000) costs around $1,500. When you consider a new home build or renovation is the largest investment most of us will ever make, it’s a small price to pay for peace of mind.
“If you have a guarantee and a problem develops with work done on your build, your first port of call is your builder, who fixes the issue themselves in eight cases out of ten – cutting out delays, conflict, and unnecessary cost.”
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.
