Building associations cautiously optimistic about liability reform

Master Builders and New Zealand Certified Builders have backed the Government’s proposed shift to proportional liability but say the success of the regime will depend on mandatory guarantees and clearer protections for main contractors 

The Government intends to introduce a draft bill in 2026 to formally shift the sector away from joint and several liability to a proportional regime.  

Both Master Builders and New Zealand Certified Builders (NZCB) welcomed the shift – but not without caveats. Master Builders CEO Ankit Sharma said the move should rebalance a liability system that has unfairly targeted councils. 

“The current joint-and-several system has meant councils carry a disproportionate share of risk, which has made them overly cautious and slowed down consenting. Moving to proportionate liability has the potential to create a fairer and more balanced system, provided it is paired with strong consumer protections such as home warranties and appropriate practitioner insurance,” Sharma said. 

NZCB Chief Executive Malcolm Fleming said an industry-backed guarantee was the best way to make proportional liability work. 

“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.” 

Builders may carry greater risk under new regime 

Despite broad support, some in the sector are warning the shift could place more risk and compliance burden on builders – especially main contractors. 

Construction insurance specialist Ben Rickard of Builtin said proportional liability will reduce council exposure but may leave builders more exposed, particularly to subcontractor mistakes. That’s because, under the Implied Warranties in Section 362 of the Building Act, building contractors are deemed legally responsible for work carried out by their subcontractors. 

“Even in a proportional liability environment, the builder would still be held responsible for negligent work conducted by their subcontractors,” Rickard said. 

Rickard highlighted Australia’s Pafburn case, where the High Court ruled that a developer and main contractor could not shift liability to their subcontractors, even under a proportional system. The implication for New Zealand, Rickard said, is that contractors may still bear full responsibility for substandard work on their jobs – while councils cap their liability to just their direct involvement. 

Guarantees must do the heavy lifting 

To fill the gap left by joint and several liability, the Government has indicated that mandatory builder warranties or insurance will be investigated. 

“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,” said Building and Construction Minister Chris Penk. 

Sharma said he supported the move and “looked forward” to working with the Government on its implementation. 

“Our members have consistently highlighted consent complexity and liability rules as barriers to delivering more homes, more affordably. Today’s announcement signals that the Government is listening. Master Builders looks forward to working with officials to ensure these reforms are implemented effectively and deliver better outcomes for the sector and, most importantly, for Kiwi homeowners,” Sharma said. 

Fleming also supported this step in principle but warned that guarantees must be credible and accessible.  

“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,” he said. 

Rickard agreed that guarantees offer a path forward but questioned whether they would be sufficient. 

“The process for a homeowner to make a claim under their guarantee is likely to be significantly easier and cheaper than having to take the responsible parties to court,” he said. “Of course, that’s assuming the providers of those guarantees don’t put too many hurdles in the way.”