Reform is the right move for the building and construction sector
Fairer liability rules in the building and construction sector is the right move says the New Zealand Institute of Building Surveyors.
Introducing proportional liability into the building and construction sector is a long-overdue step toward a fairer and more functional system.
The changes, which were announced last month by Building and Construction Minister Hon Chris Penk, represent the most significant shake-up of the building consent system in decades.
Among the reforms is a plan to move away from joint and several liability and adopt a proportional approach, where parties are held responsible only for the share of a defect they caused.
I was part of the roundtable discussion held earlier this year that helped shape the Government’s new direction. The meeting, which included legal and industry leaders as well as representatives from Australia – where proportional liability has operated successfully for years – explored various options before reaching consensus.
We were clear that proportional liability is the fairest way to allocate responsibility in construction.
It ensures that those who actually cause the problems are the ones who pay to fix them. That’s a major improvement on the current model, where blame often falls disproportionately on councils or parties with the deepest pockets.
The roundtable discussion group, which was convened by the Ministry of Business, Innovation and Employment and included stakeholders like NZ Certified Builders, unanimously backed proportional liability over the status quo or a hybrid model.
The Government’s decision reflects the strong consensus reached at that forum. However, proportional liability will only work if paired with other system changes, particularly around insurance and professional standards.
In countries where proportional liability works well, builders and contractors are required to hold professional indemnity insurance, and warranties are backed by insurance.
New Zealand’s construction insurance market isn’t currently geared for that. Without those foundations, the policy can’t succeed. We also need urgent reform of the Licensed Building Practitioner (LBP) scheme. A lot of the current workforce wouldn’t meet the standard needed to obtain cover. That tells you the LBP system isn’t working as intended. So, if we want proportional liability to work, the LBP scheme needs a serious overhaul. Overall, though, we applaud the direction.
Now the real work begins.
