The government has planned to change the building and construction sector’s liability settings, as well as enabling Building Consent Authorities (BCA) reforms.
The coalition government has introduced some significant changes in the construction sector, from making overseas building products more accessible to attracting more infrastructure investments.
Recently, Building and Construction Minister Chris Penk has announced two other significant reforms in the pipeline, focusing on building liabilities and the voluntary consolidation of BCAs functions.
He states that these reforms are designed to “eliminate system blockages to speed up the delivery of new homes and infrastructure."
Construction liability changes
The government is planning to move from a joint and several liability setting to a proportionate liability setting in building construction. Under the current setting, councils and ratepayers are at risk of covering the whole cost of defective building work, particularly if a builder has gone under voluntary administration.
Minister Penk states that this could be an unfair burden on homeowners and their council, since they have a small part to play in the building process.
“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. 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 its often councils, with the deepest pockets and no option to walk away, that end up paying out. The risk-aversion this creates leads to frustrating delays and extra cost for builders and homeowners.”
Penk references a 2015 case in Queenstown, where a body corporate filed a $160 million claim for defects. The developer had to shut, leaving ratepayers facing a rate increase of $300 a year for 30 years.
Fortunately, the case had been settled privately.
“It’s time to put the responsibility where it belongs. Under this new model (proportionate liability), each party will only be responsible for the share of work they carried out.”
Penk also mentions that this will enable more personal responsibility in the building system and reduce risk for building owners in the event of defective work.
“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.”
Voluntary consolidation of the Building Consent Authorities (BCAs) function
Minister Penk also announced that the government is considering the possibility of councils voluntarily consolidating their Building Consent Authorities (BCAs) functions with each other.
Under this initiative, council BCAs can group together to better deliver their consent functions and services.
“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. 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.”
The government plans to achieve this by making changes to the Building Act 2004 and removing any unnecessary barriers that could slow down the consent process.
“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.”
What this means for builders
A draft Bill including the voluntary consolidation of BCA and the liability setting changes will be introduced to Parliament in early 2026. This news might signal more building activity to come, particularly in residential builds.
Construction companies are encouraged to secure their projects from risk with the right insurance, as this new proposal might introduce a new set of liabilities to their business.
Bonded NZ helps builders and contractors find the best insurance, warranties, and surety bonds that keep their best interests in mind. Whether it's a big or small project, our cost-effective options help them secure their projects at every angle.
For more information about our services, contact our team today.
