Liability change confirmed

New Zealand’s building and construction liability settings will move from joint and several to proportionate in 2027 

The Government has agreed to change the liability rules in the sector to help protect building owners under a revised building consent system, says Building and Construction Minister Chris Penk. 

“Earlier this year, I announced a major change to the building consent system to tackle risk-averse behaviour that slows productivity and delays the delivery of new homes, public buildings and commercial developments,” Building and Construction Minister Chris Penk said. 

“This will be achieved by scrapping the current joint and several liability model for dealing with building defects and replacing it with proportionate liability.” 

Under proportional liability, each party involved in defective building work will only be responsible for the costs of their own contribution to a fault. In the current joint and several liability model, one party can often end up paying for others who can’t meet their obligations. 

Penk said this can result in councils being left to foot a bill for damages. 

“Councils have the deepest pockets and cannot walk away by filing for insolvency, meaning that ratepayers often end up paying for mistakes made by others, even when the local council’s involvement was limited to signing off the work.” 

New Zealand Certified Builders (NZCB) Chief Executive Malcolm Fleming welcomed the move – calling it “important” and “very necessary”. 

“The good news is we’re ready. The systems, guarantees, and expertise already exist – now it’s about making sure builders and homeowners understand how these protections work, and which options offer the strongest long-term security.” 

Alongside the liability shift, Penk also announced supporting measures designed to reduce homeowner risk and help maintain confidence in the building system.  

Mandatory home warranties 

Firstly, mandatory home warranties for all new residential building up to three storeys and renovations work $100,000 and above involving Restricted Building Work (RBW).  

“Having access to a warranty ensures homeowners’ access to high-level protection against problems during the build and defects that may occur after the builder has retired or ceased trading,” said the Ministry of Building, Innovation and Employment (MBIE). “The home warranty market in Aotearoa New Zealand is well-established and will scale up to support the new requirements.” 

Home warranties must cover at least a one-year defect period and a 10-year structural warranty. According to MBIE, they cost around 0.5% of the total build cost, or $120-$275 per year over 10 years for a $500,000 build. 

Warranty providers must: 

• Register with MBIE. 

• Meet minimum standards set in regulations. 

• Report regularly to MBIE. 

• Publish clear, easy-to-understand product information. 

Home warranties will only apply to residential construction involving RBW that requires a building consent. New offences under the Building Act 2004 will be introduced to deter non-compliance. 

Fleming also said home warranties will “set a standard for who can operate in the market”. 

“Now the responsibility sits squarely with builders and the protection products they use, and we’re well-placed to implement this change and educate homeowners on the best options available to them.” 

Professional indemnity insurance 

All professionals involved in building design work, such as architects, designers and engineers, will need to hold professional indemnity insurance. 

“Requiring professional indemnity insurance for building designers ensures these professionals are financially able to stand by their work, giving building owners confidence. This requirement does not extend to other building trades,” said Penk. 

Stronger penalties for Licensed Building Practitioners (LBPs) 

The Government is also updating disciplinary penalties for LBPs, which haven’t changed since 2007. Maximum fines will increase from $10,000 to $20,000 and the maximum suspension term will increase from 12 months to 24 months. 

Timeline 

The bill to introduce home warranty and professional insurance requirements is expected to progress in 2026, and the changes will become operational one year after legislation has passed. Stronger LBP penalties will be progressed through a separate bill in 2026. Changes are likely to take effect in late 2027. 

“Builders will need a plan for selecting a compliant home warranty provider, updating build pricing and client quote, integrating warranties into contract documentation and completing warranty process at practical completion,” said Alysha Hinton, Partner at full-service law firm Duncan Cotterill.