NZ plans building defect liability overhaul

New Zealand has announced building reform plans that include adopting proportionate liability and exploring options such as home warranties to address defects.

Building and Construction Minister Chris Penk says local councils are hesitant to sign off on consents and inspections because they could be held liable for all defects, leaving ratepayers to foot 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 – and it’s often councils, with the deepest pockets and no option to walk away, that end up paying out.”

Mr Penk says the government plans to scrap the “joint and several liability” framework and replace it 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, and we’re exploring options such as requiring professional indemnity insurance and home warranties, similar to arrangements in Australia.” 

The Insurance Council of New Zealand says it has held talks 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.” 

New Zealand also plans to allow councils to consolidate building consent authority functions with each other.

“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,” Mr Penk said.

Currently, builders, designers and homeowners must navigate 66 different interpretations of the code, with neighbouring authorities sometimes coming to different decisions, he says.

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Building Insurance Liability in New Zealand