The Government's building law reforms are being sold as a major win for homeowners, but a crucial detail in the fine print means that promise may not hold when it matters most.
Minister for Building and Construction Chris Penk. Photo/ RNZ, Marika Khabazi
Under the proposed changes, the current "joint and several" liability regime will be replaced with a proportionate liability model, and homeowners will be required to have warranties or insurance in place for new builds and renovations, alongside mandatory professional indemnity insurance for building professionals. This is meant to ensure each party covers its share of any defects, and to reduce the long‑standing problem of councils ending up as the "last man standing" payer when others go bust or disappear.
What the Minister did not say, however, is that Cabinet has quietly given itself a power to suspend these mandatory warranty and insurance requirements for up to two years at a time – and to extend that suspension for a further two years. That power is triggered precisely in the scenario where protections are most needed: if warranty and insurance capacity dries up or becomes prohibitively expensive, for example because overseas reinsurers pull back after systemic defects or major natural disasters. In other words, when the private insurance market steps away, the legal requirement for consumer protection can simply be put on hold.
Publicly, the reforms are framed as: "We are removing joint and several liability, but don't worry, homeowners will be protected by mandatory warranties and insurance." Privately, the Government has ensured it can switch those protections off if, as officials and the industry have already warned, the market cannot or will not provide them at scale.
The practical consequence is stark. Under the new proportionate liability regime, if a builder goes into liquidation and there is no warranty or insurance in place (because the requirement has been suspended), the homeowner may be left carrying the loss for defective work. Under the current joint and several model, other solvent parties – including councils – can still be pursued to make the homeowner whole. Officials previously acknowledged that proportionate liability would leave homeowners struggling to prove each party's share of responsibility and could make recovery more complex and costly, yet the reform now proceeds on the assumption that market‑provided warranties will fill that gap.
The history of this market does not justify such optimism. New Zealand's builders' warranty space has long been thin, with only a small number of providers and heavy reliance on a single Lloyd's of London syndicate. That capacity has already exited and re‑entered the country once, and key industry voices have consistently warned that cover will remain selective and constrained. Even today, only a minority of new builds are understood to carry defects cover, and groups such as Master Builders and Certified Builders can only extend protection to projects within their own membership.
Seen in this light, the new suspension power is more than a technical back‑stop. It effectively allows the Government to remove homeowners' primary replacement for joint and several liability at the very moment systemic risk or financial strain appears in the sector. That is a policy trade‑off that should be openly debated, not buried in Cabinet papers. Homeowners, lenders, and industry participants are entitled to clarity: will Parliament stand behind the promise of universal consumer protection, or will that promise evaporate the minute the insurance market becomes uncomfortable?
Home owners could be left exposed as Govt gives itself an out on requiring new-build warranties (Premium NZH article)