Proportionate liability – changes coming to accountability for defective work

From joint and several liability to proportionate liability

Under proportionate liability, each party involved in defective building work will only be responsible for the costs of their own contribution to a fault. This is different from the current joint and several liability settings, where one party - often local councils as the building consent authority and ultimately ratepayers - can end up paying for others who can’t meet their obligations.

This change will bring greater accountability, efficiency and fairness to the sector, and aligns with practice followed in Australia. But it also means those working in and commissioning work in the sector need strong measures to protect homeowners when things go wrong.

Supporting measures

To reduce risks for homeowners and maintain confidence in the building system, the Government is introducing three key measures:

Home warranties

Home warranties will be required for all new residential buildings up to three storeys and renovations $100,000 or above that involve restricted building work and require a building consent. Having access to a warranty ensures homeowners' access to high-level protection against problems during the build and defects that may occur after the builder has retired or ceased trading. The home warranty market in Aotearoa New Zealand is well-established and will scale up to support the new requirements.

These warranties will cover at least a one-year defect period and a 10-year structural warranty. Home warranties in Aotearoa New Zealand include guarantees and insurance products. They cost around 0.5 per cent of the total build cost, which works out to be $120–$275 per year over 10 years for a $500,000 build.

Warranty providers will need to:

• register with MBIE
• meet minimum standards set in regulations
• report regularly to MBIE
• publish clear, easy-to-understand product information.

New offences under the Building Act 2004 will be introduced to deter non-compliance.

Professional indemnity insurance

Professionals involved in building design work, such as architects, designers and engineers, will need to hold professional indemnity insurance. This promotes accountability and ensures these professionals are financially able to stand by their work, giving homeowners confidence.

Indemnity insurance is already widely available in Aotearoa New Zealand and making it mandatory formalises good practice. Specific requirements will be set in regulations and new offences will apply for non-compliance.

Stronger penalties for Licensed Building Practitioners (LBPs)

Most LBPs meet high standards, but serious misconduct, such as working outside their area of expertise or undertaking work without a building consent, undermines trust.

Disciplinary penalties haven’t changed since 2007 and these are being increased to act as a stronger deterrent against poor practice, giving homeowners confidence in their investment and quality work.

• Maximum fine will increase from $10,000 to $20,000
• Maximum suspension term will increase from 12 months to 24 months

Timeline of changes

• Introduction of the Building Amendment Bill: The Building Amendment Bill to introduce home warranty and professional insurance requirements is expected to be progressed in 2026
• Transition period: The changes will become operational one year after legislation has passed, to allow smooth transition and stakeholder engagement.
• Stronger LBP penalties will be progressed through a separate Bill in 2026.

Confidence and accountability

Proportionate liability makes the system fairer and more efficient. These supporting measures ensure homeowners remain protected while encouraging greater responsibility across the sector.

Subscribe to Building Performance updates and keep an eye out for further messaging so homeowners, builders, and professionals understand the new liability settings, compliance obligations and where to find reliable information.

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