New liability rules for the construction sector to improve consumer protection

In August, the Government announced that the liability rules for New Zealand’s building and construction sector will shift from the current ‘joint and several’ model to ‘proportionate’ liability, which will deliver greater accountability, fairness and efficiency in the sector.

Joint and several liability creates pressure for local councils and makes them risk-averse, leading to frustrating delays and extra costs for building owners and tradies. Local councils often need to be the ambulance at the bottom of the cliff, footing the bill for companies or individuals who are responsible for defective work but cannot pay to fix their mistakes.

Proportionate liability will enable a fairer approach when things go wrong with a building project, as those involved are only required to pay their fair share for any defective work they contributed to. However, the right supporting measures need to be in place to ensure building owners and professionals have their financial risks covered under the new rules.

The Government has agreed to a suite of supporting measures to address this gap in consumer protection, including:

• Mandatory home warranties for all new residential buildings 3 storeys and under and renovations $100,000 and above, covering a 1-year defect period and a 10-year structural warranty.
• Requiring professionals contributing to building design, such as architects and engineers to hold professional indemnity insurance. These requirements will not apply to builders.
• Strengthening disciplinary penalties for Licensed Building Practitioners (LBPs) by increasing the maximum fine from $10,000 to $20,000 and the maximum suspension period from 12 months to 24 months.

Home warranty and professional indemnity insurance changes will be progressed alongside other reforms through the Building Amendment Bill, which is expected to be introduced in early 2026. Once legislation is passed there will be a 1-year implementation period before proportionate liability and the new requirements become operational.

Increased disciplinary penalties for LBPs will be progressed via a separate Bill, with changes expected to come into effect in 2026.

Read Minister Penk’s press release.

Building reforms deliver consumer protections(external link) — Beehive.govt.nz

Learn more about the new requirements.

Proportionate liability – changes coming to accountability for defective work(external link) — Building Performance