Building consent reforms must include strong consumer safety net: expert

Saturday, 23 August 2025

The Government has announced plans for the biggest reforms to the building consent system in decades.

New Zealanders should be worried about the Government’s plans to rejig the building consent system because they could end up with less protection if something goes wrong, a leaky home owners advocate says.

On Monday, the Government announced the biggest reforms to the building consent system since the Building Act came into force in 2004.It plans to amend the legislation to allow councils to merge their building consent functions, allow private operators to do more consenting work and scrap the current building liability regime.

Home Owners and Buyers Association president John Gray says the proposed system has the potential to remove the ability for people to get resolution and compensation for a defective home.

“If it was mandatory for all parties to have insurance, and there was an independent warranty system in place, that would be a decent safety net.

“But without it, there’s still the problem that the core parties responsible for defects tend to disappear like rats from a leaky boat when people try to hold them accountable.”

The Government is changing the rules around who pays when buildings are faulty, and letting councils combine their consenting work.

He is concerned the Government will move to push through a new system without having an appropriate safety net in place.

Building and Construction minister Chris Penk says it is necessary to “eliminate system blockages to speed up the delivery of new homes and infrastructure”.

That includes replacing the current consumer protection framework, known as joint and several liability, with proportionate liability.

Under the proportionate liability model councils will only be accountable for the share of the work they carried out - not the mistakes of other builders or sub contractors, he says.

Parties responsible for building defects often disappear like rats from a leaky boat when people try to hold them accountable, John Gray says.

The plan to consolidate building consent authorities has been welcomed by the building industry, but when it comes to the move to proportionate liability the response has been more cautious.

Many in the industry agree it’s a good idea in theory, but have questions about how it would work in practice. The caution is exacerbated by a lack of detail.

Penk says options such as requiring professional indemnity insurance and home warranties, similar to Australian systems, are being explored.

When asked for more detail, he said he was confident there would be appropriate consumer protection based around a builder guarantee or bond system and insurance.

He has been talking to Insurance Council head, Kris Faafoi, and they are committed to working together to understand what insurers have appetite for, he said.

But he would not commit to making insurance mandatory for builders to back up guarantee systems, and said it was unlikely central government would step into the risk underwriting position currently occupied by councils.

Gray says there are issues with existing builder guarantee programmes, such as those of Master Builders and Certified Builders, and he knows of many cases where they did not protect homeowners.

“We don’t believe the various Australian models, which are underwritten by state governments, fit our needs as there are holes in them.

There is a lack of insurers offering building warranty insurance in the New Zealand market, Builtin’s Ben Rickard says.

“And our licensed building practitioner regime is gutless, and needs to have more teeth.”

Overseas experience shows that when insurers are involved it drives building standards up, and builders need to realise the premiums are not that onerous if they do quality work, he says.

For Builtin Insurance Brokers director Ben Rickard, the big problem with the proposed system is the lack of insurers in the local market who offer the type of insurance required.

Over the past 10 years, overseas insurers had come into this particular market, and then left again, and local insurers do not have the experience or interest in doing it, he says.

“That’s because it is a specialist market and to take on a warranty risk for 10 years is a big thing.

“It might be eight years in, and an electrical cable fault or a cladding material issue arises, and then tens of thousands of homes might have the same problem. That’s a huge risk.”

Currently, his company does not provide a 10-year warranty product, but it is hopeful it will be able to later this year. There is just one company, Stamford, which offers a building warranty insurance product.

Rickard says if the Government says insurance is mandatory it would increase the appetite for insurers to come into the market, he says.

Change must come with choice for the reforms to work, Combined Building Suppliers’ Carl Taylor says.

“But there are questions that need to be addressed, including whether there will be cover for the completion phase of a project, which is where most of the risk is, as well as for defects, and what will really happen if a builder goes bust.”

Introducing something that is comprehensive and stable to replace joint and several liability will be challenging, he says.

“It is not as easy as saying you can get this insurer to come and set up here. They may need to look at a system similar to ACC to make it work, if they can’t get a viable insurance scheme going.”

Combined Building Suppliers (CBS) Co-operative represents about 1800 builders. The organisation’s chief executive Carl Taylor says they support the reform, but that change must come with choice.

“Consumers should be able to access home guarantees that are independent of membership groups, and builders must be able to obtain the right insurance cover to protect themselves and their clients.

“For this to work, the insurance industry needs to play its part. Only then will these reforms deliver on their promise to create a fairer, safer, and more sustainable construction sector.”

Meanwhile, Certified Builders chief executive Malcolm Fleming says the minister has talked about professional indemnity insurance and home building warranties, but the two are very different things.

Industry-backed guarantees are the best way to make proportional liability work, Certified Builders’ Malcolm Fleming says.

While groups such as architects, engineers, and building surveyors have it, builders can not get it because insurers do not have the appetite to provide it because there is too much risk, he says.

“That’s why an industry-backed guarantee that provides cover specific to new building projects will be the best way to make proportional liability work.

“Industry-backed guarantees provided by building associations come at a lower cost, provide faster resolution of claims, and are well established and proven to work.”

But they need to be mandatory because if they are not most homeowners will not take them out, he says.

“At Certified Builders, 100% of members can offer our Halo guarantees, but only 40% of homeowners take them out. Yet a guarantee for an average sized new build (value $480,000) only costs around $1500.”

A guarantee means that if the builder can not, or will not fix the problem, building associations can use their leverage to require them to do it, or find another builder in the association who can, he says.

“Most homeowners want problems fixed promptly and with minimum stress, which is what industry-backed guarantees do.

“It avoids a drawn-out and antagonistic process that is often what happens when you deal with insurance companies.”

*CLARIFICATION: The paragraph that refers to issues with existing builder guarantee programmes should have been attributed to John Gray from the Home Owners and Buyers Association. (Amended Monday August 25, 2025. 10.56am)