By: Jack Murison and Filip Nikolic

Background

On 18 August 2025, the New Zealand Government announced several proposed changes to the Building Act 2004 and the consent process as part of its wider plan to make building in New Zealand cheaper and more efficient. These changes are wide-ranging, targeting several steps, roles, and responsibilities across the consenting and building process (See ‘Biggest building consent reform in decades’).

One proposal is to introduce a proportionate liability regime which would usurp the current “joint and several liability” position.

Currently, where multiple defendants are liable for the same loss, that liability is “joint and several”. Each defendant can be required to pay up to the full amount to compensate the loss. Plaintiffs can seek the entirety of the established loss from any liable defendant of its choosing, usually the one with the deepest pockets. The liable defendant can then seek to recover portions of the loss from other defendants. This can be a fruitless exercise where those other defendants are not in a financial position to meet their share of the loss. In those cases, the unlucky defendant may be left to shoulder shares of the loss other parties might have otherwise borne.

The Government says the joint and several model is unfairly burdening councils. Because a council might be the only remaining solvent defendant when building projects go south, it has the greatest potential exposure to a prospective claim. This creates hesitancy to sign off building consents and inspections. Minister Penk argues this is both slowing down the consenting process and externalising the costs of defective building onto ratepayers. His announcement refers to the recent Oak Shores apartment complex dispute, where homeowners filed a NZ$160 million claim against the Queenstown Lakes District Council (amongst other parties) for weathertightness defects. Had the case not settled privately, ratepayers would have been exposed to rates increases of NZ$300 per year for the next 30 years. Further, councils are forced to insure against losses that do not represent their relative responsibility for defects as they arise. More broadly, joint and several liability can see low-fault (but solvent) parties bearing disproportionate costs.

Under the proposed proportionate model, liability is distributed amongst multiple defendants so that each is only liable for a court’s assessment of their relative share of fault. Once a court determines which defendants are liable it apportions the loss relative to the responsibility of each defendant for that loss. For example, a court may find a council liable for 15% of the loss, the builder for 50% of the loss, and a developer for 35% of the loss. Crucially, under this model the defendants do not shoulder the burden of loss recovery. Instead, it is the plaintiff that must recover each share from each defendant.

Proportionate liability: A solution or foisting risk on homeowners?

A proportionate model has clear attraction by offering a fairer model of risk allocation in principle. Most people would agree that it is unfair for an organisation to be required to pay for the negligent acts of others, and indeed that may be why there is cross-party support for the change (See ‘Prime Minister Christopher Luxon and Minister Chris Penk announce construction changes’).

However, this is not the first time that a shift to a proportionate model has been considered. In 2014, the Law Commission (Commission) released a report that investigated multi-party liability in New Zealand and considered whether a shift to a proportionate model made sense, particularly in the building sector (Law Commission Liability of Multiple Defendants (NZLC R132, 2014)).

Ultimately, the Commission was not convinced that a proportionate model was appropriate. It instead recommended retaining a joint and several liability model with modifications, such as capped liability for councils and greater discretion for courts to mitigate the full application of joint and several liability for defendants that only have a minor or limited responsibility for the plaintiff’s loss.

In the Commission’s view, a pure proportionate liability model creates more problems than solutions.

For example, if a liable defendant becomes insolvent under a proportionate model, then not only is the burden on the plaintiff to recover the loss itself (which may have hopeless prospects), but it can’t seek contribution from the other defendants for the insolvent defendant’s share. The Commission had several further concerns. First, a shift to proportionate liability simply moves the responsibility for the uncollected share from the liable parties, including building consent authorities, on to the blameless homeowner. The comparatively innocent plaintiff bears the risk. Second, the Commission was concerned prospects of non-recovery would incentivise plaintiffs to seek out defendants most likely be in a position to satisfy the judgment. To do so, plaintiffs may try to join as many parties as possible to reduce their exposure, the consequence being that litigation becomes more complex and costly.

To address these shortcomings, ‘hybrid’ models have been suggested. In these hybrid models, the potential injustice to plaintiffs is addressed by providing them with greater security. Options include requiring building professionals to carry compulsory professional indemnity insurance or the implementation of a building warranty scheme.

Australia utilises a hybrid model, opting to require building professionals to carry mandatory insurance and establishing home warranty insurance schemes for consumer protection purposes. Indeed, the Government is looking at the Australian system carefully when considering changes to building sector regulations. It is investigating mandatory professional indemnity insurance and a building guarantee scheme as mechanisms to support plaintiffs that would need to be made whole under a proportionate model.

A mandatory insurance scheme would require consideration of whether the New Zealand insurance market has (or could have, with the right changes) capacity for such a regime. The Commission looked favourably on the concept of a building warranty scheme in its report and acknowledged that it could lead to a functioning proportionate system, provided the scheme was adequately funded and competently operated.

When will the changes be implemented?

At this stage, all we can say is the Government expects to introduce a bill to Parliament in early 2026 and have the changes implemented by mid-2026 (See ‘Prime Minister Christopher Luxon and Minister Chris Penk announce construction changes’).

The details of those changes, such as which support mechanisms the Government will introduce to assist the shift to a proportionate model are yet to be confirmed. Given the impact of these changes, and the place the leaky buildings crisis has in the public consciousness, we would not be surprised if the amendments take longer to pass.

We will be keenly awaiting draft legislation alongside the industry as it becomes available.

Connect with Wotton Kearney

We hope you found this update useful. If you’d like to discuss how these proposed changes could affect you, or how Wotton Kearney may be able to assist you, please contact the author or a member of our Construction team, including Mathew Francis, Richie Flinn, Misha Henaghan, Sophie Lucas, James Dymock and Katie Shanks.