Proportionate Liability and Mandatory Home Warranties—What Could Change?

 

The Government introduced the Building Amendment Bill to Parliament on 2 July 2026.

Two of its most significant proposals are a move towards proportionate liability and mandatory warranties for qualifying residential building work.

These changes could alter how risk is allocated between builders, designers, engineers, councils, subcontractors, developers and property owners.

They are especially relevant to multi-unit construction, where defects can affect several properties and involve many project participants.

Because the Bill is before Parliament, the changes should not yet be treated as fully implemented law.

The current liability problem

Under joint and several liability, a party found partly responsible for defective work can potentially be required to meet more than its direct share of the loss when other responsible parties cannot pay.

This can leave financially secure defendants carrying costs attributed to insolvent or unavailable parties.

Councils have often become significant defendants because they remain available and insured after contractors or developers have ceased trading.

The Government argues that this system does not distribute responsibility fairly.

What proportionate liability means

Under the proposed proportionate liability system, each party would be responsible for the share of the damage it caused.

A contractor responsible for a defined portion of defective work would not automatically carry the unpaid share attributed to another responsible party.

Building Performance describes the reform as a rebalancing of responsibility across the sector.

This may create a more direct relationship between a party’s decisions and its financial exposure.

However, it also creates a risk for owners. If one responsible party has failed or lacks insurance, the owner may not recover the full cost through litigation alone.

That is why the liability reform is linked to proposed warranty requirements.

Proposed mandatory warranties

The Building Amendment Bill proposes mandatory home warranties for:

• New houses.
• Multi-unit residential buildings up to 10 metres in height.
• Renovations valued at $100,000 or more where the work includes restricted building work and requires building consent.

Warranty providers would need to register with the Ministry of Business, Innovation and Employment.

The proposed minimum cover includes at least one year for defects and 10 years for structural defects.

Detailed terms, exclusions, premiums and claims processes will be important. The value of a warranty depends on more than its existence. It depends on the provider’s financial strength and how clearly the cover responds.

Existing protections remain relevant

New Zealand already has implied warranties under the Building Act.

These apply automatically to most residential building work and can protect homeowners for up to 10 years.

Contractors also have responsibilities relating to defective work after the 12-month defect repair period.

The proposed insurance-backed warranty system would add another layer of protection rather than simply replacing workmanship obligations.

Builders should not interpret proportionate liability as permission to reduce standards. Parties would still remain responsible for the work and losses attributed to them.

Effects on contractors

A commercial construction company undertaking residential or multi-unit construction may face new insurance, documentation and contractual requirements.

Warranty providers are likely to assess the contractor’s experience, financial position, quality systems and claims history.

Contractors with weak records or poor defect management may find warranty access expensive or restricted.

This may encourage greater professionalism, but costs may also flow into project pricing.

Builders should prepare by improving:

• Contract documentation.
• Subcontractor scopes.
• Quality-control records.
• Product approval records.
• Inspection evidence.
• Defect response procedures.
• Insurance disclosure.

Effects on designers and consultants

Proportionate liability would increase the importance of clearly identifying who designed, reviewed and approved each element.

Consultants may need to demonstrate how their services contributed to the completed work and where their responsibilities ended.

Producer statements can support consent and completion processes, but Building Performance notes that a producer statement is a professional opinion rather than a product warranty or guarantee.

Project records should therefore include more than signed certificates. They should show the underlying design, inspections and communications.

Multi-unit construction risk

Defects in multi-unit buildings can be unusually expensive because the same detail may be repeated across several homes.

Waterproofing, cladding, fire separation and structural connections are common areas where repeated failures can create widespread damage.

Quality assurance must begin before repetitive work accelerates.

A commercial construction company experienced in multi-unit construction should use benchmark installations, documented inspections and photographic evidence.

Defects should be corrected at the first occurrence rather than carried through the entire development.

Contractual clarity

Proportionate liability will make scope definition even more important.

Contracts should clearly describe:

• Design responsibilities.
• Product-selection responsibilities.
• Inspection requirements.
• Subcontractor obligations.
• Temporary works.
• Coordination between trades.
• Completion documentation.
• Defect-response procedures.

Ambiguous scopes make it harder to determine which party caused a loss.

Developers should avoid dividing work into disconnected packages without establishing overall coordination responsibility.

Financial strength still matters

A warranty system may protect homeowners, but project participants should still complete financial checks.

The Companies Office recorded 710 liquidator appointments in the first quarter of 2026, up from 677 in the corresponding quarter of 2025.

An insolvent contractor can create programme disruption, unpaid suppliers and incomplete defects even when eventual warranty recovery is possible.

Clients should assess financial capacity alongside price, experience and technical capability.

Preparing for reform

Until the Bill completes the parliamentary process, businesses should continue complying with current law and contracts.

They should also prepare for likely change by improving risk management and consulting insurance advisers.

Developers should ask how proposed warranty premiums may affect feasibility, particularly for townhouse and apartment projects.

The objective should be better consumer protection without creating false confidence. A warranty is a final safety net, not a substitute for competent design and construction.

Savannah Construction provides commercial and multi-unit construction services throughout the Waikato. Information about its work, systems and contact details is available at www.savannahconstruction.co.nz.