The Coalition Government has announced significant amendments to the Building Act (expected introduction early 2026) aimed at shifting liability away from Councils and mandating insurance cover for residential projects. The reforms signal a move from joint and several liability (where Councils often bore 100% of the risk as the "last man standing") to a proportional liability model, supported by mandatory warranties and professional indemnity insurance.
Key Legal Reforms & Implications:
Mandatory Home Warranty Insurance:
Scope: Required for all new residential builds up to 3 storeys and alterations valued at over $100,000.
Coverage: Policies must provide a 1-year defect period and a 10-year structural warranty period.
Implication: This creates a statutory home warranty to act as the primary recourse for homeowners, reducing reliance on Council liability.
Professional Indemnity (PI) Insurance:
Scope: Mandatory for building design professionals (architects, engineers) to ensure financial capacity to stand by their design work.
Implication: This codifies what is currently best practice into a statutory requirement, ensuring that design professionals cannot operate without adequate cover for their share of liability.
Shift to Proportional Liability:
Scope: The reforms intend to dismantle the "joint and several" liability framework in favour of proportionate liability.
Effect: Parties will be liable only for their specific contribution to a defect. This is a critical risk-shifting mechanism designed to relieve ratepayers/Councils of disproportionate liability for private construction failures.
Disciplinary & Compliance Updates:
Fines: Maximum fines for Licensed Building Practitioners (LBPs) will double from $10,000 to $20,000.
Suspensions: Maximum suspension periods for LBPs increase from 12 months to 24 months.
Strategic Considerations for Clients:
For Homeowners: The warranty provides a defined safety net, but "shopping around" for cover (as suggested by the Minister) implies policy terms may vary. Reviewing policy exclusions (e.g., weather-tightness specifics) will remain a critical legal step.
For Contractors/Designers: Proof of valid warranty and PI insurance will likely become a precondition for building consent approval.
For Warranty provider: The market will need to scale rapidly. There remains uncertainty regarding underwriting criteria and industry capacity, particularly for weather-tightness issues, which have historically been uninsured.