Proportionate liability: What you need to know
5 March 2026

Changes to the rules around who’s responsible when builds go wrong represent one of the biggest shake-ups the industry has seen in decades. This means the end of the current joint and several liability model for dealing with building defects, which will be replaced with proportionate liability, where each party will only be accountable for the work that they undertook.

The changes will likely come into effect in 2027. This will mean: 

 All new residential buildings three storeys and under and renovations worth $100,000 and above must have home warranties. This will cover a 1-year defect period and a 10-year structural warranty. 

• Professionals contributing to building design, such as architects and engineers, must hold professional indemnity insurance. These requirements will not apply to builders. 
• Tougher penalties for Licensed Building Practitioners (LBPs) by increasing the maximum fine from $10,000 to $20,000 and the maximum suspension period from 12 months to 24 months.

Why are the changes being introduced?

Delivering safe, well-built homes requires everyone in the system to play their part. After the leaky buildings scandal, many local councils found themselves wearing the costs of big repair bills, because the original contractors had gone out of business or couldn’t pay. As the ones who signed off the projects, councils found themselves in the position of “last man standing”. 

What are the implications for builders?

Builders or contractors will soon have to provide warranties for residential work. Home warranties cover the repair of defects for residential projects. The Ministry of Business, Innovation and Employment (MBIE) says these typically cost around 0.5% of the total build cost, which is around $120 - $275 a year over a 10-year term. 

At the moment, the vast majority of warranties in New Zealand are managed by Master Builders, via the Master Build 10-year Guarantee, and Certified Builders, with its Halo 10-year Residential Guarantee. Given builders must be members of one of these associations to qualify for their schemes, they’ll also have to meet the quality criteria for membership. Signature Homes also has its own scheme, and there are some private products on the market, such as Stamford Building Warranty Insurance. It is likely that other providers will enter the market before the changes become mandatory in 2027.  

These changes are part of a suite of Government reforms to consenting and product availability. For example, more overseas products are now entering the market. While this provides more choice, it also introduces additional risk. Builders now need more information about these new products, to understand how they perform and how they should be installed. At the same time, Building Consent Authorities are being asked to speed up the consenting process by completing at least 80 per cent of inspections within three working days. It’s crucial that support and clear guardrails are in place, as these changes are worked through.

A Bill to introduce this legislation is expected in early 2026. Once this has passed, the industry will have a year to get ready before the new rules take effect.