Reforms will impact liability settings, allow voluntary BCA consolidation
The government has announced its intent to amend the Building Act 2004 to replace joint and several liability with proportionate liability and permit councils to voluntarily consolidate their building consent authorities (BCAs) functions with each other.
In a news release, the government said it expected to introduce the bill making these amendments to Parliament early next year.
Chris Penk, building and construction minister, called these the biggest reforms to the building consent system since the Building Act took effect in 2004.
“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,” Penk said in the news release. “We are determined to get the building and construction sector firing on all cylinders, and that requires bold change.”
In the news release, Penk said the new proportionate liability framework will limit each party’s responsibility to the share of work they performed.
Penk said this change seeks to relieve ratepayers’ cost burden for defective building work and transfer responsibility to where it belongs.
Penk noted that the current joint and several liability framework allows building owners to seek full compensation from any responsible party, which makes councils hesitate to sign off on building consents and inspections for fear of being deemed liable for all defects.
Penk stressed that this risk aversion resulted in frustrating delays and extra costs for builders and homeowners, with ratepayers footing the bill.
“A case in Queenstown shows the scale of this issue,” Penk said. “In 2015, the Oaks Shores body corporate filed a $160 million claim for weathertight defects. The developer had been placed into voluntary liquidation and was not sued, leaving ratepayers exposed to the entire claim.”
Penk emphasised that if this “case hadn’t been settled privately, ratepayers could have faced rates increases of $300 a year for 30 years.”
In its news release, the government said it is considering adding mechanisms to support proportionate liability. These include requiring home warranties for some building projects, providing an option to opt out, and mandating professional indemnity insurance.
Regarding enabling voluntary BCA consolidation, Penk said this amendment aims to address obstacles in the building consent system, hasten the delivery of new homes and infrastructure, and make it easier and cheaper to build.
“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,” Penk said. “Builders can be rejected on paperwork that would be accepted by a neighbouring authority simply because each BCA applies the rules differently.”
In the government’s news release, Penk shared that many councils supported this amendment and would likely take the opportunity to consolidate, share resources such as building inspectors and IT systems, and shift the savings onto ratepayers.
The government identified these possible regulatory adjustments to support BCA consolidation:
