Govt announces big changes for building consents
Building and Construction Minister Chris Penk said today the regime is "sluggish" and holding the building sector back.
"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."
Penk said building owners could currently claim full compensation from any responsible party and it was often councils, with the deepest pockets and no ability to walk away, that ended up footing the bill.
"The risk-aversion this creates leads to frustrating delays and extra cost for builders and homeowners."
The government is scrapping the existing 'joint and several liability' regime in favour of a 'proportionate liability' one. Under the new model, each party will only be responsible for the share of work they carried out.
"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," Penk said.
"In terms of looking across the Tasman, we can copy their homework on it to a large extent. We can learn from Australia's lessons in a positive way."
The minister pointed to a 2015 case in Queenstown, where the the Oaks Shores body corporate filed a $160 million claim for weathertight defects as an example of system failure.
"The developer had been placed into voluntary liquidation and was not sued, leaving ratepayers exposed to the entire claim.
"If the case hadn't been settled privately, ratepayers could have faced rates increases of $300 a year for 30 years. It's time to put the responsibility where it belongs," Penk said. Councils get the green light to consolidate
The government also announced it will allow councils to voluntarily consolidate their Building Consent Authority (BCAs) functions with each other.
"It is ridiculous builders, designers and homeowners must navigate 67 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."
Many councils had asked for the ability to consolidate, he said.
"I expect they will seize the opportunity to consolidate, share resources like building inspectors and IT systems, and pass the savings on to ratepayers.
"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."
These changes would reduce the cost of building as the delays now were with building consents being issued, he said.
"If you reduce that delay you get better productivity." 'Massive impact'
Building Industry Federation chief executive Julien Leys told RNZ's Midday Report programme a shift to proportionate liability in the building consents system would have a "massive" impact on the sector.
"We're going to see builders that will have to have mandatory insurance, there'll be auditing. That risk is going to be transferred. That means the councils will not be living under this fear of litigation and ultimately that's going to enable much faster, more efficient processing of consents."
Leys supported the move to open up consolidation for the country's BCAs.
"I think the move is going to be to say, look we've got 67 Building Consent Authorities in the country - far too many - and we're seeing far too much inconsistency between those councils.
"Let's look at the options: we can either get those councils to consolidate, bring their resources together, we could have one big overarching national point of contact.
"I think the drive is to have consistency and reduce time. One of the options was to ensure we actually have 80 percent of consenting done in three days. It's going to speed up the whole process and bring down cost."
The building sector would welcome any changes that made it easier and cheaper to build, Leys said.
"It has certainly been a tough period that's highlighted the fact that we need efficiencies in the sector. It's been 21 years since we've had any major reforms of the code as well so it's timely.
"Anything where we can address cost and delays is welcome. I say bring it on."
High eligibility standards, mandatory insurance and ongoing auditing and bigger fines for non-compliance would ensure the changes didn't lead to another leaky homes crisis, he said.
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Homeowners could be left with costs after consent changes
A property lawyer says homeowners could be left vulnerable to costs when building projects go wrong under changes to the building consents regime. The government is moving to a proportionate liability system for the Building Act, so each party is liable for the share of work they carry out. It says councils have been reluctant to sign off building consents because they're liable for defects, causing unnecessary delays in the construction process. Building and Construction Minister Chris Penk said the government would be exploring mechanisms to protect homeowners, such as indemnity insurance or home warranties. Property lawyer James Wollerman told RNZ it was not clear how that would work. Under joint and several liability a homeowner could claim full compensation for a botched building project from the council, he said. Under the new scheme of proportionate liability - if the council and builder were sharing liability by 50 percent each - the homeowner would be left carrying that 50 percent if the builder went missing. He said there was an option of an insurance scheme, but it was not clear who would underwrite that insurance. "We've seen that insurers are not generally prepared to insure for weather-tightness defects. "So there's a big question out there as to what the government's going to be able to put forward in terms of an insurance scheme that would provide some sort of protection for homeowners." Deputy Prime Minister David Seymour said Australia had had a proportionate liability scheme since the 1990s. He said it made sense to shift liability away from councils, which was creating high rates for ratepayers and a risk-averse culture in construction. "If you're a council, and you know that you can end up liable for an entire project, then you get increasingly stressed and often obstructive, when it comes to allowing more innovative building materials, more innovative techniques. "And as a result, we end up with high rates and little innovation in building and high building costs," Seymour said. He said the shake-up of the building consents regime would cut delays and costs for construction projects. "Moving to a regime where the various people involved, those who provide the materials, those who do the work, perhaps those who do the design, and those who do the consent, have liability when things go wrong, is not a scary or different thing. "It takes us to where most of the world is." Labour Party leader Chris Hipkins told RNZ the current rules were introduced in the early 2000s during the leaky home saga. "Are they slowing things down? Yes they probably are. So I think the government are making the right steps, you know they are heading in the right direction. "The issue will be getting consumer protection right." Hipkins said that the government believed if it pushed house prices up the economy would be fixed. "House building sure creates jobs but the housing market is not the totality of our economy."
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an hour ago
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RNZ News
4 hours ago
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Councils, builders pleased with liability changes, but insurers warn of challenges
Building and construction minister Chris Penk (R) and prime minister Christopher Luxon. Photo: RNZ / Samuel Rillstone Councils, builders, and the opposition are largely in favour of Building Act changes that would signal a move towards proportionate liability. But insurers say there could be "challenges" in the approach, and want further discussions with the government as the policy is developed. Under the status-quo, the building framework operates under a 'joint and several' liability, meaning liability is shared between all parties, regardless of the cost or responsibility. It has meant councils, and therefore ratepayers, have been left with an often disproportionate level of risk for any defects or repairs, as they are seen as the party with the deepest pockets. The government plans to replace the model with a proportionate system, with each party only liable for the share of work they carry out. It is something Local Government New Zealand (LGNZ) has long called for. "Councils have ultimately been holding the bag at the end of the process when things go wrong. If you were to have work done on your home or a house built, that hasn't really come top of mind for people because they know they can go to council," said LGNZ's vice president Campbell Barry. He said with lower risk exposure, councils could be more confident in their consenting processes. "It'll encourage not as much of the overly-cautious behaviour that maybe has developed over time, due to that liability falling on councils." LGNZ vice president and Lower Hutt mayor Campbell Barry. Photo: RNZ / Reece Baker Announcing the changes, building and construction minister Chris Penk said the "risk-averse" behaviour from councils had led to "frustrating" delays, and extra costs for builders and homeowners. "Once you reduce that delay, then you get better productivity, and costs will reduce." Penk said councils had paid out $330 million over 10 years for defects for which they were not responsible. Registered Master Builders said the "unfair" liability system was one of the biggest challenges the industry faced, and was pleased it was being addressed. "I think you always want a fair system," said chief executive Ankit Sharma. "You don't want a system where one party ends up taking an unfair burden of risk. If they do, then they put protections in place which then creates red tape, and slows everything down. It takes longer, and costs us more, to build houses." Legislation to change the liability settings will not be introduced to Parliament until early 2026, with a view of passing it by the middle of that year. Between now and then, the government would explore "supporting mechanisms" for proportionate liability, to protect homeowners under the new system. Professional indemnity insurance and home warranties were both mooted, but Penk wanted more time to work it through. He indicated the government would talk to councils, insurers, and consumers about what consumer protection measures would work best, and whether they would be compulsory or voluntary. "We don't want the problem of the empty chair, where there is a gap in terms of what the homeowner might be left with," he said. "But we also know that if we have a proportionate liability system, where all the key players in the system are either required to have the protections in place themselves, and are also motivated not to make the errors in the first place, then we'll have a more productive and efficient and better system overall." Labour was "broadly supportive" of the changes but wanted to see more detail around the consumer protections to ensure there was no repeat of the 'leaky homes' saga. "We want to see the detail around the extra support, or the extra, I guess, reassurance that's going to be available to first-home buyers, that they're not going to be left with a liability with no-one else willing to pay if something goes wrong," said Labour leader Chris Hipkins. "But we broadly think that the changes are heading in the right direction." Hipkins said there had been several reviews of the Building Act, and all had found that consumer protection was the key issue. Labour leader Chris Hipkins. Photo: RNZ / Marika Khabazi Master Builders, which was singled out by Penk as already offering a 10-year guarantee cover policy, was in favour of mandating warranties and insurance. Sharma also called for other consumer protection measures, such as tougher entry requirements for builders, a stronger licensing system with real enforcement, and a register of liquidations and penalties so homeowners could make informed decisions when choosing a builder. "The combination of all of that with the right insurance scheme, I think lifts the standard enough for consumer protection so that we can move to a proportional system." The Insurance Council of New Zealand said it had held discussions with the government about the "preliminary thinking" on the move to proportionate liability. "These included some of the challenges for insurers around this approach," a spokesperson said, adding ICNZ looked forward to further discussions with the government as the policy developed. Penk said there had been some appetite from the insurance sector, but acknowledged it was a "chicken and egg" situation, as everyone needed the comfort and certainty before they were willing to step up. Streamlining the Building Consent Authority (BCA) model has been long-signalled by the government, with Penk first announcing he was taking a look nearly a year ago. He said 66 different interpretations of the same Building Code had led to frustration in the sector, and added cost and delays. Sharma was in favour of the consolidation, saying over half of Registered Master Builder members had experienced delays and "consenting inefficiencies" due to working with multiple BCAs. "It's common, when you have different BCAs, they have different systems. So that creates, from a business owner perspective, inconsistency in the way different systems are operating. And also, in some cases, how different inspectors can interpret rules differently." Registered Master Builders chief executive Ankit Sharma. Photo: Supplied The government had looked at other options like a single point of contact or establishing large regional BCAs to replace the existing ones. Ultimately, it has landed on a voluntary model, allowing councils to pool resources like their accreditation processes or staff if they chose to. Barry, who is also Lower Hutt mayor, said councils in the Wellington region had already discussed creating consenting efficiencies across the region. He said the voluntary approach was preferable, as councils were already grappling with reforms like Local Water Done Well and other pressures. "I would say the proof will be in the pudding over the next 12 to 18 months, and how many councils actually take that up, and what it looks like," he said. "I suspect it's something that will be revisited later in the future, but at the same time I think a voluntary approach and encouraging councils and providing the right settings for them to work together is a good thing." Penk would not put a number on how many BCAs he would like to see. "Any number smaller than 66 would be a win. But I suspect at a regional level, we'll see perhaps as many as half a dozen moves made quite promptly," Penk said. 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