Building and Construction Minister Chris Penk said today the regime is “sluggish” and holding the building sector back.
“Right now, councils are hesitant to sign off on building consents and inspections because they could be held liable for all defects, leaving ratepayers to foot the bill.
“This often happens when one of the parties responsible cannot pay for repairs, for example, if a business goes bust.”
Penk said building owners could currently claim full compensation from any responsible party and it was often councils, with the deepest pockets and no ability to walk away, that ended up footing the bill.
“The risk-aversion this creates leads to frustrating delays and extra cost for builders and homeowners.”
The government is scrapping the existing ‘joint and several liability’ regime in favour of a ‘proportionate liability’ one. Under the new model, each party will only be responsible for the share of work they carried out.
“Building owners will be protected if things go wrong and we’re exploring options such as requiring professional indemnity insurance and home warranties, similar to arrangements in Australia,” Penk said.
“In terms of looking across the Tasman, we can copy their homework on it to a large extent. We can learn from Australia’s lessons in a positive way.”
The minister pointed to a 2015 case in Queenstown, where the the Oaks Shores body corporate filed a $160 million claim for weathertight defects as an example of system failure.
“The developer had been placed into voluntary liquidation and was not sued, leaving ratepayers exposed to the entire claim.
“If the case hadn’t been settled privately, ratepayers could have faced rates increases of $300 a year for 30 years. It’s time to put the responsibility where it belongs,” Penk said.
Councils get the green light to consolidate
The government also announced it will allow councils to voluntarily consolidate their Building Consent Authority (BCAs) functions with each other.
“It is ridiculous builders, designers and homeowners must navigate 67 different interpretations of the Building Code, because of the number of council BCAs across the country,” Penk said.
“Builders can be rejected on paperwork that would be accepted by a neighbouring authority simply because each BCA applies the rules differently.”
Many councils had asked for the ability to consolidate, he said.
“I expect they will seize the opportunity to consolidate, share resources like building inspectors and IT systems, and pass the savings on to ratepayers.
“We know the sector is behind us. New Zealand Certified Builders have said that this is the most significant change for the building industry in a generation, that it has been a long time coming and the change is welcomed by the industry.”
These changes would reduce the cost of building as the delays now were with building consents being issued, he said.
“If you reduce that delay you get better productivity.”
‘Massive impact’
Building Industry Federation chief executive Julien Leys told RNZ’s Midday Report programme a shift to proportionate liability in the building consents system would have a “massive” impact on the sector.
“We’re going to see builders that will have to have mandatory insurance, there’ll be auditing. That risk is going to be transferred. That means the councils will not be living under this fear of litigation and ultimately that’s going to enable much faster, more efficient processing of consents.”
Leys supported the move to open up consolidation for the country’s BCAs.
“I think the move is going to be to say, look we’ve got 67 Building Consent Authorities in the country – far too many – and we’re seeing far too much inconsistency between those councils.
“Let’s look at the options: we can either get those councils to consolidate, bring their resources together, we could have one big overarching national point of contact.
“I think the drive is to have consistency and reduce time. One of the options was to ensure we actually have 80 percent of consenting done in three days. It’s going to speed up the whole process and bring down cost.”
The building sector would welcome any changes that made it easier and cheaper to build, Leys said.
“It has certainly been a tough period that’s highlighted the fact that we need efficiencies in the sector. It’s been 21 years since we’ve had any major reforms of the code as well so it’s timely.
“Anything where we can address cost and delays is welcome. I say bring it on.”
High eligibility standards, mandatory insurance and ongoing auditing and bigger fines for non-compliance would ensure the changes didn’t lead to another leaky homes crisis, he said.
