Building Reform Plans in New Zealand: Understanding Proportionate Liability

Exploring the New Changes

New Zealand has announced significant building reform plans. These plans include adopting proportionate liability and exploring options like home warranties to address defects. These changes aim to protect both builders and homeowners.

Building and Construction Minister Chris Penk explains that local councils are often hesitant to sign off on consents and inspections. They fear being held liable for all defects, which can leave ratepayers with the bill.

“This often happens when one of the parties responsible cannot pay for repairs, for example, if a business goes bust,” he said. “Currently, building owners can claim full compensation from any responsible party. It’s often councils, with the deepest pockets and no option to walk away, that end up paying out.”

What is Proportionate Liability?

Mr. Penk states that the government plans to scrap the “joint and several liability” framework. This will be replaced with proportionate liability.

“Under this new model, each party will only be responsible for the share of work they carried out,” he said. “Building owners will be protected if things go wrong. We’re also exploring options like requiring professional indemnity insurance and home warranties, similar to arrangements in Australia.”

This shift is crucial. It ensures that builders and other parties are only liable for their specific contributions. This change could lead to a more balanced approach to liability in the building sector.

Insurance Council's Involvement

The Insurance Council of New Zealand has engaged in discussions with the government about moving to proportionate liability under the Building Act reforms.

“These included some of the challenges for insurers around this approach,” a spokesperson said. “We look forward to having further discussions with them as the policy is developed.”

These discussions are vital. They help ensure that the reforms are practical and beneficial for all parties involved.

Consolidating Building Consent Authority Functions

New Zealand also plans to allow councils to consolidate building consent authority functions. Many councils have requested this change.

“I expect they will seize the opportunity to consolidate, share resources like building inspectors and IT systems, and pass the savings on to ratepayers,” Mr. Penk said.

This consolidation could lead to more efficient processes. It would also reduce the burden on individual councils, allowing them to focus on their core responsibilities.

Navigating the Current Landscape

Currently, builders, designers, and homeowners must navigate 66 different interpretations of the code. This can lead to confusion, especially when neighboring authorities make different decisions.

Mr. Penk emphasizes the need for a more unified approach. By streamlining these processes, we can create a more consistent and reliable building environment.

Conclusion

In summary, New Zealand's building reform plans are a significant step forward. The shift to proportionate liability will help protect all parties involved in construction. It’s essential to stay informed about these changes and how they may affect your building projects.

If you have any questions about liability or need assistance, call SUN INSURANCE. We are here to help you keep your business and directors safe.

Contact Information:

• Office: 09 360 5555

• Mobile: 0273 000666

• Email: info@suninsurance.nz

  
  

Building Insurance Liability in New Zealand - Sun Insurance