Six Laws Are Currently Rewriting Who Pays When Construction Goes Wrong. Does Your Contract Know That Yet?
I want to start this week with two questions I've been asking almost everyone I talk to lately, clients, contractors, homeowners renovating their own place.
Question 1: Have you actually read your insurance policy, the whole thing, conditions and exclusions included?
Question 2: Do you know what's actually changed, or is about to change, in building and construction regulation over the next two years?
Almost nobody says yes to both. Most people say no to both. And I don't think that's a knowledge gap anyone should feel bad about, the system has genuinely moved fast this year, across more fronts than just building consenting. But it does mean a lot of people are about to be more exposed than they realise, right at the moment they can least afford to be.
This week's EM Fridays isn't about arguing whether any single reform is good or bad policy. It's about putting the pieces next to each other so you can see the actual shape of what's changing, and then talking honestly about what you can do about it, because the answer isn't simply "get insurance" and stop there.
A quick regulatory overview from 2026 to 2028
Here's what's actually moved, or is moving, at the same time, across four separate pieces of legislation:
Self-certification for plumbers and drainlayers
Letting endorsed tradespeople sign off certain work without a routine council inspection.
Granny flats up to 70m²
No need for a building consent since early this year, provided licensed trades carry out the work and it meets the Building Code.
A second private Building Consent Authority was approved early this year, adding capacity outside council-run consenting.
The Building Amendment Bill had its first reading and it's currently working through Parliament. It's a bigger package than proportionate liability alone. It also introduces a fast-track 10-working-day consent pathway for homes with solar and sustainable features, cuts PIM processing from 20 to 10 working days.
Proportionate liability, and other Act in the making, once the Bill passes, carries a further one-year implementation period before it takes effect, meaning realistically 2027 at the earliest.
The Health and Safety at Work Amendment Act 2026 will comes into force 1 April 2027. This is separate from the Building Act changes, but it matters just as much as the WorkSafe's main function shifts from regulatory to advisory, and the Act narrows its focus to "critical risks" only. On a construction site, that's a direct reduction in the regulator actively checking in on how risk is being managed, on top of everything changing in the consenting system.
The Planning Bill and Natural Environment Bill, intended to replace the Resource Management Act, had their first reading in December 2025 and a select committee recommended passage in July 2026. They haven't passed yet, and the original "mid-2026" target has already slipped. This is resource consent, not building consent, so it's a different track, but it's the same direction of travel: less consenting friction, earlier in a project's life, before a building consent is ever applied for.
Individually, every one of these is a defensible, explainable policy change. Together, over roughly an 18-month to 24-month window, spanning building consenting, liability, workplace safety regulation, and resource consenting, they add up to the largest reset of who is responsible for what, and who is actively checking it, in New Zealand construction in more than a decade.
What that actually means for your risk profile
If you take nothing else from this week's post, just take this: more of the responsibility in a construction project is being pushed onto individual parties in the chain, at the same time as there's less routine, independent checking happening, both during the build and around it.
Less council inspection under self-certification. A regulator moving from checking compliance to advising on it under the health and safety changes. And the traditional financial backstop, joint and several liability, being removed at the same time.
That's true whether you're the client commissioning the work, the main contractor coordinating it, or the subcontractor carrying out one piece of it. Everyone's individual risk exposure is going up, even though on paper the system is being sold as fairer and faster. It can be both of those things and still mean you personally need to pay closer attention than you did two years ago.
The churn sitting underneath all of this
Here's a number that's been sitting with me and I have been sharing in my past articles.
Construction remains the single largest contributor to company liquidations in New Zealand, 768 firms in the year to March 2026, around 30 percent of every liquidation appointment nationally, in a year that already produced an 11-year liquidation high.
What worries me more is the other half of that picture. Despite that scale of failure, the total number of construction enterprises hasn't shrunk, it's kept climbing, from 67,677 in 2020 to over 81,000 by early 2025. Companies are exiting the market at the fastest rate in over a decade, and new ones are entering fast enough that the sector keeps growing anyway.
Most of that churn is completely ordinary, tight margins, a bad debtor, a genuine downturn. But liquidators working these cases have also flagged a less comfortable pattern alongside it: directors who kept trading and spending well past the point the warning signs were obvious. Whether a company's exit is entirely involuntary or something closer to a choice made too late, the result for the person who hired them is identical. The business isn't there anymore.
A scenario worth thinking
Now, I would like to put all the information above into a scenario to help you better understand what does that means to you.
Say you hire a builder to construct your new home. They do a genuinely good job, the finish is clean, the sign-off goes smoothly, and you move in without complaint. Three years later, you notice a faint smell in one bedroom. You pull back a piece of skirting and find mould.
It might be nothing. It might also be early moisture damage, the same underlying failure that defined the leaky homes era, made harder to catch early because building standards are set against historical weather data, not the more intense rainfall and humidity conditions a home will actually face over its 50-year lifespan. You go back to the company that built the house. It no longer exists. Wound up, deregistered, gone.
Under the old settings, you'd still have somewhere to go, most likely the council. Under proportionate liability, that avenue narrows to whatever share of fault the council genuinely had, which on a self-certified job may be close to nothing.
Why insurance alone won't fully solve this
In the scenario above, this is exactly where mandatory home warranty and PI insurance is meant to step in, and it's a reasonable policy response. But I'd encourage some healthy scepticism about treating it as the whole answer.
We all know that the insurance policies are drafted by very capable legal teams whose entire job is to define, as precisely as possible, where the insurer's obligation stops. That's not a criticism, it's simply what a well-run insurer does. It means exclusions, notification deadlines, and the exact definition of what counts as a covered "defect" versus excluded "wear and tear" or "gradual damage" are all doing real work, often work that only becomes visible once you're the one trying to make a claim.
So if you're building or contracting right now, on either side of the table, I'd genuinely encourage you to sit down and actually read your current insurance conditions properly, not skim the certificate, read the policy wording, and think specifically about what it means for the project you're on right now. If there's a clause you don't fully understand, ask. Ask your broker, ask your insurer, ask someone independent. That question is far cheaper to ask now than it is to ask after something's gone wrong.
What else can you actually do?
However, my above suggestion do not mean that insurance is your one and only solution.
If insurance defines the floor, and that floor is still being finalised in regulation you can't influence, the natural next question is: what can you do right now, on the project in front of you?
The honest answer is your contract.
And I think this is the part most people, understandably, have never given much attention.
Most people read a contract for the price, the programme, and the signature page. The clauses in between, indemnities, defects liability periods, retentions, insurance requirements, notice provisions, get treated as boilerplate. But those are exactly the clauses that determine how the risks we've just talked about actually land if something goes wrong.
Once you understand your own risk profile under the current regulatory settings and your project, the contract becomes the tool you use to manage it, not a formality you get through to start the work.
A contract can require a specific level of insurance cover, not just "adequate insurance." It can set out exactly how long a defects liability period runs, and what happens if it runs out before an issue like a slow moisture leak becomes visible. It can allocate responsibility clearly enough that if something does go wrong years later, there's a documented answer to who was responsible for what, which matters enormously under proportionate liability. None of this requires a longer contract. It requires a clearer one.
If you're building, renovating, or adding a granny flat right now
Read your insurance policy wording, not just the certificate, and ask about anything you don't understand. Do this before work starts, not after a claim.
Check how long the company has been trading, not just what its portfolio looks like. Ask directly, and check the Companies Office register yourself.
Ask whether each piece of work is self-certified or independently inspected.
Have your contract reviewed before you sign, with your actual risk profile in mind, not a generic template check.
Keep records of every trade involved, including licensing details, from day one.
If you're a builder or tradesperson working under the new settings
Read your own PI and liability policy wording now, and confirm it actually matches the work you're taking on this year.
Get ahead of tighter PI and mandatory warranty requirements before the Bill is fully in force, rather than reacting once it is.
Use your contract to document scope and sign-off clearly, particularly on self-certified work, so responsibility is traceable later.
The bigger picture
None of this means the reforms are wrong, or that a crisis is inevitable. A genuine housing supply problem needed a genuine response. But it does mean the risk is moving toward individuals, on both sides of a construction contract, across consenting, liability, workplace safety oversight, and resource consenting all at once, faster than most people's understanding of their own insurance and contract terms is keeping up.
Insurance will define part of your protection, once the detail is finalised. It was never going to define all of it. The contract in front of you right now is the one document you actually have full control over today, and it's worth treating it that way.
If reading through this has you wanting a second set of eyes on your current insurance conditions or contract, whether you're a homeowner, a builder, or a subcontractor, I offer contract review and risk assessment services to help you understand exactly where you stand before you need to rely on it.
Have a great weekend.
Emmolina
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Emmolina May is a Registered Quantity Surveyor, contract specialist, educator and dispute resolution practitioner based in New Zealand. She helps contractors, subcontractors, developers and homeowners understand contractual risks, negotiate clearer terms, improve procurement and commercial strategies, and resolve disputes when they arise.
