Owners of earthquake-prone buildings (EPBs) have been faced with impending deadlines to carry out remedial work required to bring their buildings up to scratch, some of which comes with a significant price tag. However, a recent announcement by the Government has taken the heat off owners of EPBs who now have an additional four years to complete any required remedial works What do we know about the potential changes to the regime?

Background

The Building (Earthquake-prone Buildings) Amendment Act 2016 (the Act) introduced a number of changes to how EPBs are identified and managed in New Zealand. The Act categorised New Zealand into three seismic risk areas and set corresponding timeframes to identify and remediate EPBs within an area. ‘Priority buildings’, such as hospitals, schools, and buildings located on high-volume thoroughfares, have shorter timeframes for identification and remediation to recognise the impact of failure of such buildings in an emergency.

The Act defines an earthquake-prone building as a building that would have its ultimate capacity exceeded in a moderate earthquake, and if the building were to collapse, the collapse would be likely to cause injury or death or damage to other property. In practice, a building is earthquake-prone if it does not exceed 34% of the new building standard.

Changes to the EPB process

On 18 April 2024, the Government announced a review of the EPB system which commenced on 20 June. The review will include a cost-benefit analysis of the current system and explore options for managing seismic risk in existing buildings, including consideration of comparable approaches overseas. The terms of reference set out key aspects of the review as:

• considering society’s expectations and willingness to pay for mitigating the risk of injury and death in the event of an earthquake, and for improving the resilience of buildings over time;
• recommending regulatory responses for managing seismic risk in existing buildings that are workable, equitable, and balanced to the risk posed – balancing life safety risks against the costs of regulation and impact on private property owners;
• identifying barriers to meeting regulatory requirements and the types of support or incentives that would help building owners to better manage seismic risk;
• considering how outcomes from seismic risk requirements align with broader Government objectives.

The review will also consider how seismic risk in buildings should be assessed and measured, and any alternatives to the current metrics used, namely the new building standard (NBS) threshold.

Extension to remedial timeframes

In what will be a welcome reprieve for owners of EPBs, the Minister has granted a four year extension to all current deadlines for remediation. This extension will apply from 2 April 2024 but will not apply to any EPBs that have already passed their remediation deadline at that date. Legislation to formally enact the extension is expected to be passed before the end of the year. While this will take the pressure off many owners facing significant remediation bills in coming years, it will be of little comfort to those who have already commenced remedial works and associated planning or investigations required to meet their respective deadlines.

Where to from here?

The review team is expected to report back to the Minister for Building and Construction with initial findings by the end of 2024, with a final report expected by mid-2025. The terms of reference indicate a detailed analysis of options and public consultation will follow, along with any required legislative changes (which are not expected to commence until 2026).

While EPB owners will welcome news of the review and deadline extension, these remedial works represent a significant pipeline of construction work nationwide that will likely stall for some time. Owners are now in the uncertain position of waiting for the outcome of the review and any subsequent legislative changes while also needing to plan for any future remedial works from both a tenant and cashflow perspective. There will be significant interest in the review team’s initial findings later this year and any signalled changes to the regime moving forward.