New Zealand Government announces further building reforms

In addition to the move to proportionate liability (see WW’s previous article on this here: Building consent reforms: move towards proportional liability), the Government has now announced that it will introduce mandatory home warranties, require all design professionals to have professional indemnity (PI) insurance and strengthen disciplinary penalties for Licenced Building Practitioners (LBPs).

The legislation is expected to be introduced in early 2026 and there will be a one-year implementation period before the new requirements will become operational. New offences will also be introduced for non-compliance.

The proposed move to proportionate liability and away from joint and several liability has been welcomed by Councils and Professional Indemnity insurers alike. However, this change will likely cause a shortfall in the amount that owners of defective buildings can recover. This is because historically councils and PI insurers have been left to top up insolvent defendants’ contribution towards remedial costs, but they no longer will be required to do so.

The latest changes include the following:

Professional Indemnity insurance requirements for design professionals

The Government has made some bold claims that this new requirement will ensure that professionals “are financially able to stend by their work, giving building owners confidence”. The reality is likely to be very different for several reasons:

1. The requirement to hold insurance only applies to design professionals, such as architects and engineers and those carrying out design and build contracts. It does not apply to those actually carrying out the building work such as developers, head contractors or subcontractors.
2. The majority of design professionals already hold PI insurance.
3. It is unclear what level of insurance design professionals will be required to have.
4. Design professionals will only be liable for their share of the remedial costs regardless of the amount of PI insurance they hold.
5. Design professionals can further limit their exposure through limitation of liability clauses in their contracts.

Mandatory home warranties for new residential builds

Home warranties for all new residential buildings three storeys and under, and for renovations valued at $100,000 and above, will now be required. The warranty is required to provide a one-year defect period and a 10-year structural warranty.

Where the contractor is solvent, the contractual defect liability period already applies. It is therefore unclear what value the warranty will have – other than when the contractor becomes insolvent prior to the expiry of the defects liability period (DLP).

Increased disciplinary penalties for Licensed Building Practitioners

The reforms will increase the maximum fine payable by a LBP who is found to have carried out non-compliant building work from $10,000 to $20,000 and will increase their maximum suspension period from 12 to 24 months.

While the LPB disciplinary process aims to disincentivise shoddy building work, it does not provide owners of defective buildings with any relief.