Major changes coming for the building and construction sector

The Government has announced major changes affecting the building and construction sector in New Zealand.

Under the current joint and several liability system, if a problem arises with a building after it has been completed, building owners are able to make a claim against various parties involved in getting a building designed, consented and built.

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 (NZCB) 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 like the Halo 10-Year Residential Guarantee.

NZCB Chief Executive Malcolm Fleming says 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.”

 

What happens next?

The Government’s announcements yesterday were about the policy direction they intend to pursue.

To make these changes, the Government intends to amend the Building Act 2004. The Government expects to introduce a Bill to Parliament in early 2026, so it might be mid-2026 before a new process takes effect.

The Government is investigating supporting mechanisms for proportionate liability, for example by requiring builders to offer home warranties like the Halo 10-Year Residential Guarantee.

NZCB and Halo Guarantees Limited will continue talking to MBIE officials about these proposals as they are developed, and will advise members on the likely direction in due course.

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