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New Zealand's building liability rules are set for a major overhaul. The Government has announced plans to replace the current joint and several liability regime with proportionate liability, fundamentally changing how responsibility for defective building work is allocated.
When defects are discovered in a building project, responsibility often extends beyond a single party. Under New Zealand's current liability regime, one defendant can be left carrying the full cost of a claim, even when others were responsible for the problem. The proposed reforms seek to change that by ensuring each party bears responsibility for its own contribution to the loss.
The changes could reshape risk allocation across the construction sector, with implications for homeowners, developers, contractors, consultants, councils, and insurers. This article outlines what is changing, why it matters, and what those involved in building projects and disputes should be aware of as the reforms progress.
For decades, liability for defective building work in New Zealand has been governed by joint and several liability. Under this system, when multiple parties (such as builders, architects, engineers, and councils) are responsible for defects, any one of them can be held liable for the entire cost of fixing the problem, even if their role was minor. The defendant who pays must then try to claw back contributions from the others, assuming those parties still exist and can pay.
In practice, councils often end up absorbing losses well beyond their slice of fault because they are solvent and have “deep pockets”. This has long been criticised as an unfair burden on ratepayers and a driver of highly risk-averse decision-making in the consenting process. Councils, fearing disproportionate liability, often take a conservative approach to approving building work, which slows down projects and increases costs.
The Government has pointed to real-world cases illustrating the stakes. In Queenstown’s Oaks Shores litigation, an eye‑watering weather‑tightness claim risked flowing through to decades of rate increases if the council ended up on the hook for everyone else’s failings. The matter ultimately settled, but it underscored how the status quo can load disproportionate risk onto ratepayers.
This system was designed to ensure homeowners weren’t left short when a builder folded or a developer disappeared. However, over time, it has created inefficiencies and inequities that have prompted calls for reform.
In August 2025, the Government announced a landmark shift to proportionate liability, described by Hon Chris Penk (Building and Construction Minister) as “the biggest change to the building system since the Building Act.” The goal is simple: put responsibility where it belongs by ensuring each party pays for its own mistakes rather than covering for others who cannot meet their portion of the bill.
The reform aims to achieve several objectives:
This change is philosophical as much as it is practical - it shifts the legal framework from collective responsibility to individual accountability.
Under the new regime, each party involved in defective building work will be liable only for the share of loss the court determines they caused. For example, if a builder is found 40% responsible and a council 20%, they pay those proportions. If another responsible party is insolvent or has ceased trading, their share doesn’t automatically shift to the remaining defendants.
To address the risk that homeowners could be left out of pocket if some parties cannot pay, the Government is introducing supporting measures to safeguard consumers:
These measures aim to balance fairness with consumer protection, ensuring homeowners are not left exposed under the new liability regime.
The benefits of proportionate liability are clear. By ensuring that each party is responsible only for its own failings, the system creates a fairer allocation of risk. Councils, no longer burdened with disproportionate liability, may take a more balanced approach to consenting, which could help reduce delays and lower costs for projects. At the same time, builders and designers will need to maintain robust insurance and stronger quality controls. These changes have the potential to lift professional standards across the entire sector.
However, the reform is not without challenges:
In short, while the reform promises fairness and efficiency, it also introduces new risks and complexities that the industry will need to manage carefully.
This change brings New Zealand into line with Australia, which has operated under proportionate liability for decades. The Australian model has generally improved fairness and reduced costs, but it also highlights the importance of complementary measures such as mandatory professional indemnity insurance and home warranty schemes. These safeguards ensure that homeowners are not left exposed to unrecoverable losses when a party becomes insolvent or disappears.
Australia’s approach also demonstrates that proportionate liability is not a silver bullet. While it addresses inequities under joint and several liability, it introduces new complexities in litigation and insurance markets. New Zealand will need to adapt these lessons to its own context to ensure the reform delivers on its promise of fairness and efficiency.
The Government plans to introduce the Building Amendment Bill in 2026, with the new regime expected to take effect in 2027 after a transition period.
If you have questions about how these changes may affect your projects, current or future disputes, or liability exposure, our team can help you navigate the transition and protect your interests.
New Zealand's building liability rules are set for a major overhaul. The Government has announced plans to replace the current joint and several liability regime with proportionate liability, fundamentally changing how responsibility for defective building work is allocated.
When defects are discovered in a building project, responsibility often extends beyond a single party. Under New Zealand's current liability regime, one defendant can be left carrying the full cost of a claim, even when others were responsible for the problem. The proposed reforms seek to change that by ensuring each party bears responsibility for its own contribution to the loss.
The changes could reshape risk allocation across the construction sector, with implications for homeowners, developers, contractors, consultants, councils, and insurers. This article outlines what is changing, why it matters, and what those involved in building projects and disputes should be aware of as the reforms progress.
For decades, liability for defective building work in New Zealand has been governed by joint and several liability. Under this system, when multiple parties (such as builders, architects, engineers, and councils) are responsible for defects, any one of them can be held liable for the entire cost of fixing the problem, even if their role was minor. The defendant who pays must then try to claw back contributions from the others, assuming those parties still exist and can pay.
In practice, councils often end up absorbing losses well beyond their slice of fault because they are solvent and have “deep pockets”. This has long been criticised as an unfair burden on ratepayers and a driver of highly risk-averse decision-making in the consenting process. Councils, fearing disproportionate liability, often take a conservative approach to approving building work, which slows down projects and increases costs.
The Government has pointed to real-world cases illustrating the stakes. In Queenstown’s Oaks Shores litigation, an eye‑watering weather‑tightness claim risked flowing through to decades of rate increases if the council ended up on the hook for everyone else’s failings. The matter ultimately settled, but it underscored how the status quo can load disproportionate risk onto ratepayers.
This system was designed to ensure homeowners weren’t left short when a builder folded or a developer disappeared. However, over time, it has created inefficiencies and inequities that have prompted calls for reform.
In August 2025, the Government announced a landmark shift to proportionate liability, described by Hon Chris Penk (Building and Construction Minister) as “the biggest change to the building system since the Building Act.” The goal is simple: put responsibility where it belongs by ensuring each party pays for its own mistakes rather than covering for others who cannot meet their portion of the bill.
The reform aims to achieve several objectives:
This change is philosophical as much as it is practical - it shifts the legal framework from collective responsibility to individual accountability.
Under the new regime, each party involved in defective building work will be liable only for the share of loss the court determines they caused. For example, if a builder is found 40% responsible and a council 20%, they pay those proportions. If another responsible party is insolvent or has ceased trading, their share doesn’t automatically shift to the remaining defendants.
To address the risk that homeowners could be left out of pocket if some parties cannot pay, the Government is introducing supporting measures to safeguard consumers:
These measures aim to balance fairness with consumer protection, ensuring homeowners are not left exposed under the new liability regime.
The benefits of proportionate liability are clear. By ensuring that each party is responsible only for its own failings, the system creates a fairer allocation of risk. Councils, no longer burdened with disproportionate liability, may take a more balanced approach to consenting, which could help reduce delays and lower costs for projects. At the same time, builders and designers will need to maintain robust insurance and stronger quality controls. These changes have the potential to lift professional standards across the entire sector.
However, the reform is not without challenges:
In short, while the reform promises fairness and efficiency, it also introduces new risks and complexities that the industry will need to manage carefully.
This change brings New Zealand into line with Australia, which has operated under proportionate liability for decades. The Australian model has generally improved fairness and reduced costs, but it also highlights the importance of complementary measures such as mandatory professional indemnity insurance and home warranty schemes. These safeguards ensure that homeowners are not left exposed to unrecoverable losses when a party becomes insolvent or disappears.
Australia’s approach also demonstrates that proportionate liability is not a silver bullet. While it addresses inequities under joint and several liability, it introduces new complexities in litigation and insurance markets. New Zealand will need to adapt these lessons to its own context to ensure the reform delivers on its promise of fairness and efficiency.
The Government plans to introduce the Building Amendment Bill in 2026, with the new regime expected to take effect in 2027 after a transition period.
If you have questions about how these changes may affect your projects, current or future disputes, or liability exposure, our team can help you navigate the transition and protect your interests.
