With the Government’s planning reforms dominating the pre-Christmas announcements, Building and Construction Minister Chris Penk’s overhaul of the building consent system attracted less attention.
That is a pity. Penk’s reforms confront a serious problem. A problem that should never have arisen – a building consenting system that has become the bane of every builder, architect and homeowner who has ever tried to navigate it.
The difficulties have been decades in the making. And they trace their way back to an over-zealous judiciary that created council liability for building defects where none existed before.
What’s more, under New Zealand’s joint-and-several liability rule, owners of defective buildings have been able to recover the full cost of repairs from any negligent party. When builders or developers become insolvent – and many do – councils, with the deepest pockets and no ability to walk away, have been left paying not only for their own mistakes but for everyone else’s as well. Ratepayers became the insurers of last resort for private construction failures. In Auckland alone, the legacy of the leaky-homes era has cost billions of dollars.
Faced with risks like these, councils behaved as any rational actor would. They turned cautious. The system seized up.
Council liability for building defects is not the product of any statute. It was created by judicial decisions in the late 1970s and 80s that expanded negligence law well beyond its traditional boundaries.
Britain’s House of Lords acknowledged this wrong turn in the early 1990s and pulled back. Australia’s High Court never went down the path at all. Our courts pressed on. The result is a system so paralysed by liability risk that getting a building consent has become an ordeal.
This is the environment Penk set out to reform. In August, he announced that joint-and-several liability would be replaced with proportionate liability. In November came the second leg of the package: mandatory home warranties for new homes up to three storeys and major renovations, compulsory professional indemnity insurance for designers, and stronger penalties for Licensed Building Practitioners.
Together, these changes amount to the most substantial update to the building consent system since the Building Act came into force in 2004.
The shift to proportionate liability is the core of the reform. Councils will, in future, be liable only for their share of a defect – typically between 10 and 20 percent – rather than 100 percent because others have vanished. This restores basic fairness and removes the extreme tail risk that has distorted consenting behaviour for so long.
But will it transform the system overnight? Sadly, no. Councils will still owe a duty of care to homeowners. They will still face litigation when they make mistakes. Risk aversion will ease, but not disappear. Penk’s reform corrects the most irrational part of the framework. But it does not eliminate the underlying incentives entirely. To do that would require undoing the judicial manoeuvres that invented council liability in the first place.
But the second part of the package may matter more. New Zealand currently has 66 councils issuing building consents, each interpreting the Building Code differently. Builders and architects moving between districts find themselves adjusting to dozens of systems, forms and internal expectations. No efficient system would design itself this way.
Allowing councils to consolidate their building control functions or contract them out to private firms introduces performance pressure the current model lacks. Private consenting authorities will face commercial rather than political incentives. Fewer consenting authorities does not mean fewer councils – just more competition to serve them.
International experience suggests private certification works best for standardised residential work – so it is not a complete solution. But it is a pragmatic step toward more consistent and predictable consenting.
Mandatory home warranties fill the gap created by proportionate liability. If a builder becomes insolvent, homeowners building new homes or undertaking major renovations will have access to one-year defect cover and ten-year structural warranties. The scheme will not cover owners of older homes or undertaking small renovations. But for new builds, it provides clearer recourse and shifts insolvency risk out of the public sector.
These reforms sit alongside the Government’s wider planning agenda, which aims to free up land supply and simplify the rules determining what can be built and where. That work will matter more for housing affordability overall. But Penk’s package removes one of the pressures that has slowed the delivery of homes for far too long.
They are a long-overdue correction to a judge-made problem that has plagued the building industry for decades. They will not, by themselves, make homes affordable. But they should reduce unnecessary caution, improve building consents, and ensure ratepayers are no longer underwriting the failings of others.
As with all regulatory reform, much will depend on implementation. But Penk’s reforms promise to restore a semblance of sense to a system that lost it long ago.
An edited version of this column first appeared in The Post on 25 January 2026
Roger Partridge is chairman and a co-founder of The New Zealand Initiative and is a senior member of its research team. He led law firm Bell Gully as executive chairman from 2007 to 2014. This article was sourced HERE
That is a pity. Penk’s reforms confront a serious problem. A problem that should never have arisen – a building consenting system that has become the bane of every builder, architect and homeowner who has ever tried to navigate it.
The difficulties have been decades in the making. And they trace their way back to an over-zealous judiciary that created council liability for building defects where none existed before.
What’s more, under New Zealand’s joint-and-several liability rule, owners of defective buildings have been able to recover the full cost of repairs from any negligent party. When builders or developers become insolvent – and many do – councils, with the deepest pockets and no ability to walk away, have been left paying not only for their own mistakes but for everyone else’s as well. Ratepayers became the insurers of last resort for private construction failures. In Auckland alone, the legacy of the leaky-homes era has cost billions of dollars.
Faced with risks like these, councils behaved as any rational actor would. They turned cautious. The system seized up.
Council liability for building defects is not the product of any statute. It was created by judicial decisions in the late 1970s and 80s that expanded negligence law well beyond its traditional boundaries.
Britain’s House of Lords acknowledged this wrong turn in the early 1990s and pulled back. Australia’s High Court never went down the path at all. Our courts pressed on. The result is a system so paralysed by liability risk that getting a building consent has become an ordeal.
This is the environment Penk set out to reform. In August, he announced that joint-and-several liability would be replaced with proportionate liability. In November came the second leg of the package: mandatory home warranties for new homes up to three storeys and major renovations, compulsory professional indemnity insurance for designers, and stronger penalties for Licensed Building Practitioners.
Together, these changes amount to the most substantial update to the building consent system since the Building Act came into force in 2004.
The shift to proportionate liability is the core of the reform. Councils will, in future, be liable only for their share of a defect – typically between 10 and 20 percent – rather than 100 percent because others have vanished. This restores basic fairness and removes the extreme tail risk that has distorted consenting behaviour for so long.
But will it transform the system overnight? Sadly, no. Councils will still owe a duty of care to homeowners. They will still face litigation when they make mistakes. Risk aversion will ease, but not disappear. Penk’s reform corrects the most irrational part of the framework. But it does not eliminate the underlying incentives entirely. To do that would require undoing the judicial manoeuvres that invented council liability in the first place.
But the second part of the package may matter more. New Zealand currently has 66 councils issuing building consents, each interpreting the Building Code differently. Builders and architects moving between districts find themselves adjusting to dozens of systems, forms and internal expectations. No efficient system would design itself this way.
Allowing councils to consolidate their building control functions or contract them out to private firms introduces performance pressure the current model lacks. Private consenting authorities will face commercial rather than political incentives. Fewer consenting authorities does not mean fewer councils – just more competition to serve them.
International experience suggests private certification works best for standardised residential work – so it is not a complete solution. But it is a pragmatic step toward more consistent and predictable consenting.
Mandatory home warranties fill the gap created by proportionate liability. If a builder becomes insolvent, homeowners building new homes or undertaking major renovations will have access to one-year defect cover and ten-year structural warranties. The scheme will not cover owners of older homes or undertaking small renovations. But for new builds, it provides clearer recourse and shifts insolvency risk out of the public sector.
These reforms sit alongside the Government’s wider planning agenda, which aims to free up land supply and simplify the rules determining what can be built and where. That work will matter more for housing affordability overall. But Penk’s package removes one of the pressures that has slowed the delivery of homes for far too long.
They are a long-overdue correction to a judge-made problem that has plagued the building industry for decades. They will not, by themselves, make homes affordable. But they should reduce unnecessary caution, improve building consents, and ensure ratepayers are no longer underwriting the failings of others.
As with all regulatory reform, much will depend on implementation. But Penk’s reforms promise to restore a semblance of sense to a system that lost it long ago.
An edited version of this column first appeared in The Post on 25 January 2026
Roger Partridge is chairman and a co-founder of The New Zealand Initiative and is a senior member of its research team. He led law firm Bell Gully as executive chairman from 2007 to 2014. This article was sourced HERE
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