Mandatory home warranties and PI at the centre
The New Zealand government has announced a package of consumer protections to support its overhaul of the building consent system, with two key measures aimed at improving quality, confidence and accountability across the residential construction sector.
Building and Construction Minister Chris Penk says the reforms will make the system more productive while safeguarding homeowners.
“Earlier this year, I announced a major change to the building consent system to tackle risk-averse behaviour that slows productivity and delays the delivery of new homes, public buildings, and commercial developments,” Penk said in a media release.
The reforms come as new building momentum begins to re-emerge, with Stats NZ reporting 3,747 new homes consented in September 2025 – the highest monthly total in more than two years. Multi-unit consents led the growth, signalling early signs of recovery after several years of declining residential construction.
Mandatory home warranties to protect new builds and major renovations
At the centre of the new protections is a mandatory home warranty scheme covering:
- All new residential buildings three storeys and under
- Renovations worth $100,000 or more
- A one-year defects period
- A 10-year structural warranty
Penk believes these warranties will give homeowners meaningful protection at modest cost.
“The benefits of a home warranty scheme for those planning to build a house or carry out major renovations are significant," he said. "For around half a percent of the total build cost, homeowners are protected against defects after the build is finished.”
The market is ready to scale, said Penk. “Home warranty schemes are already widely available across New Zealand, and the sector has assured me it can scale to meet new demand, allowing consumers to shop around to find coverage best suited to their build."
Design professionals must hold professional indemnity insurance
The second major change requires key design practitioners – such as architects, engineers, and others involved in building design – to carry professional indemnity insurance.
“Requiring professional indemnity insurance for building designers ensures these professionals are financially able to stand by their work, giving building owners confidence. This requirement does not extend to other building trades,” Penk said.
This requirement ensures design professionals have financial backing if their work contributes to defects.
Proportionate liability to replace joint-and-several model
The consumer protections accompany the government’s move to proportionate liability, replacing the existing joint-and-several liability model.
Penk said the current system unfairly exposes councils to large payouts even when their contribution is minimal.
“Right now, councils can be hesitant to sign off on the building projects New Zealand needs because they risk being held fully liable for defects they did not cause, to the tune of millions of dollars.
“Councils have the deepest pockets and cannot walk away by filing for insolvency, meaning that ratepayers often end up paying for mistakes made by others, even when the local council’s involvement was limited to signing off the work.”
Under the new system, each party will be liable only for its share of responsibility.
“Under proportionate liability, each party will only be accountable for the work they undertook," Penk said. "This will speed up consenting and ease the burden on ratepayers unfairly footing the bill for damages.”
Tougher penalties to target 'cowboy' operators
Licensed Building Practitioners (LBPs) will face stronger disciplinary action, including:
- Maximum fines increasing from $10,000 to $20,000
- Maximum suspension periods extended from 12 months to 24 months
Penk said raising standards is long overdue.
“I’ve heard from tradies that the poor work of a few cowboys can unfairly damage the industry’s reputation. Disciplinary penalties were long overdue for an update and strengthening them supports skilled professionals by holding to account those who cut corners.”
Implementation timeline
According to the government:
- Home warranty and professional indemnity requirements will be included in the Building Amendment Bill in early 2026.
- A one-year implementation period will begin once legislation passes.
- LBP penalty increases will progress through a separate Bill and take effect in 2026.
- Mandatory warranties apply only to Restricted Building Work requiring consent.
- Warranty providers must be registered with MBIE and meet regulatory standards.
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