On 30 June 2026, the Government introduced the much-anticipated Building Act Amendment Bill including the proposal to move away from ‘joint and several’ to ‘proportionate’ liability for claims relating to building defects.
This shift will mean that a party who is liable for a building defect will no longer face the risk of needing to cover the shares of other parties liable for the same defect. Liability of each party will be capped at what a Judge or adjudicator considers to be just and equitable based on the responsibility of that party.
The Bill has passed its first reading and is now at Select Committee stage. Submissions close on 15 November 2026. The timing means that it will not be reported back until after the general election so it will be interesting to see how the proposed legislation plays out.
Current system – last party standing face the entirety of the claim
Currently, if all the parties responsible for a building defect are before the Court, a Judge will apportion the respective liability of each on a ‘joint and several’ basis. If, for example, a council and a builder are both liable for the defect, and both are solvent, the council’s relative apportionment is usually around 15% to 20%. However, if the builder is insolvent and cannot pay its share, the ‘insolvency gap’ falls on the ‘last party standing’, even where its own proportionate responsibility is relatively minor – which is often the Council.
A new system – a defendant is only responsible for its own share of the liability
Under the new proposed system, the liability of any defendant to the claim is limited to an amount that reflects the proportion of the plaintiff’s loss that the Court (or an adjudicator) considers to be just and equitable. Under the new proposal:
- It will not matter whether all the liable parties are before the court, or whether some of the parties cannot contribute. The other parties will not be required to cover this ‘insolvency gap’.
- There is no fixed cap on a council’s liability, it will be determined on a case-by-case basis.
Consumer protections measures, will they fill the ‘insolvency gap’?
The Bill contains some consumer-protection measures. For single houses, low-rise multi-unit residential developments (up to 10m) or significant renovations, each costing $100,000 or more:
- Mandatory home warranties will provide a one-year cover for non-structural building work, and a ten-year structural warranty.
- An applicant for building consent will need to provide a copy of the warranty, and BCAs need to check that cover is in place and attach a copy to the issued building consent.
- Design professionals such as architects and engineers cannot limit their liability by contractual provisions, must have ‘adequate’ insurance cover, and must provide details to the customer.
For apartment blocks and commercial buildings, there are no minimum requirements in relation to warranties or insurance, and design professionals can limit their liability by contractual provisions.
Risky business – relief to ratepayers, risk to property owners
For councils and their ratepayers, the proposed new liability settings will offer welcomed relief from being seen as a defendant with deep pockets.
Design professionals will need to alter their current practices of limiting liability for all the work that they are engaged to do and will also need to consider the level of insurance cover for houses and low-level apartment buildings. The reality is that repairing defective design work years after the original construction often costs significantly more than the original building work.
For property owners, risks will increase. Most building defects are not discovered within one year of completion, so the mandatory warranty for general building work, including weathertightness, has limited value. It will be crucial for property owners to choose their builder carefully.
At the lower end of the scale, if an owner of a house or low-level apartment building discovers defects within one year, then mandatory warranties should apply and the matter can be resolved at no loss to the owner.
At the higher end of the scale, if unit owners in a high-rise apartment block discover defects, they are reliant on any insurance cover that might be available, the solvency of parties themselves (unlikely to be sufficient to cover multi-million-dollar claims), and the level of liability that the Court might ascribe to the Council.
Final observations
The proposed legislative change still comes with plenty of unanswered questions. How is the Court to deal with cases brought by an innocent property owner who cannot afford to complete remedial work, where the warranties do not apply, and the other responsible parties do not have insurance and have gone out of business, leaving only the Council?
While it is well intentioned and offers some welcome relief for Councils, will the insurance market cover the gap? Or will homeowners be left even more exposed? The jury is out.
Will it make building cheaper and quicker? We consider this to be unlikely. Insurance comes at a cost. Council charges at consenting stage relate directly to the work they undertake as part of that process.
Either way, this is the biggest change in the building liability landscape for many years and represents a huge shift in exposure and risk for all parties involved – watch this space!
If you’d like to know more, reach out to Charlotta or our Civil team.
