On 18 August 2025, Building and Construction Minister Chris Penk announced sweeping changes to the building consent system. The headline reform is a move to proportionate liability. Instead of councils being forced to cover the full cost of defective building work when other parties cannot pay, each party will now be responsible only for its own share of fault.
This is a fundamental shift. For decades, councils acted as the last man standing in construction disputes, leaving ratepayers exposed to enormous liabilities. Under the new system, building owners will carry the shortfall if a contractor, developer, or designer cannot meet their obligations.
Sarina Gibbon, APIA GM, says: “This is a massive transfer of risk from councils to investors. Under proportionate liability, you will have to pursue each builder, tradesperson, or designer separately and prove where their duty failed. In a market where companies can fold overnight, that leaves owners carrying more of the burden. It means investors must take vetting, contracting, and documentation far more seriously than before.”
The Minister’s message is clear. Councils should no longer operate as insurers for private projects. Responsibility will sit with those actually involved in the work. With less risk on their shoulders, councils may also process consents faster.
For investors, the new framework changes the calculus of risk. Faster approvals are possible, but the price is greater personal exposure when other parties collapse. Projects will also be shaped by new insurance and warranty products designed to fill the gap left by councils.
What should APIA members do?
- Do deeper due diligence on contractors. Check solvency, insurance, and track record before you sign. A shaky builder now represents a direct risk to you.
- Strengthen contracts. Use retention clauses, performance bonds, and guarantees to reduce the risk of being left with unpaid repairs.
- Keep detailed records. Inspection logs, photos, and quality assurance reports are your best protection in disputes.
Sarina adds: “This reform is a reminder that property investment is not passive. The days of assuming council will carry the can are over. Investors who adapt will not just manage risk, they will outcompete those who don’t.”
The shift to proportionate liability is not just legal housekeeping. It changes how responsibility is distributed across the sector. Smaller players who cut corners will be exposed. Well-prepared operators who understand contracts, due diligence, and risk management will stand out in the market.
This is Part 1 of our three part blog series that help investors make sense of the upcoming reform. Part 2 looks at insurance and warranties as the new normal. Part 3 will cover how lenders will move the goalposts before the law even changes.
This article is general information only and not investment advice. Members should seek personalised advice before making decisions.
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