The Government is introducing a major shift to the Building Act through the Building Amendment Bill, expected in early 2026: from 2027, all new residential builds up to three storeys, plus major renovations over $100,000 involving restricted building work, will require a compulsory 10-year building warranty. This reform is intended to enhance consumer protection, boost accountability, and support the shift from joint and several liability to proportionate liability.

Stamford Insurance cautiously welcomes this change. As New Zealand’s only insurance-backed building warranty provider—supported by Lloyd’s of London with an A+ credit rating—we’re ready to deliver robust, reliable cover for projects of any scale and value, reinforcing confidence across the sector.

Why the Change Matters

Under the current joint and several liability model, all parties in a build share accountability for defects. If one cannot pay, the burden often falls on others—including councils. Whilst this has resulted in significant improvement in performance across the industry, driven by a combination of rigorous Council inspections, training and product development, the move to proportionate liability means each party will be responsible only for their share.

For homeowners to pursue claims under a proportionate liability regime would be almost impossible – the complexities of investigating the cause of the defect, apportioning blame, and then pursuing several legal claims simultaneously against the various parties would be simply beyond the resources and capability of the average homeowner. Mandatory warranties are critical here. They give homeowners a clear pathway to remedy defects and ensure funds are available, even if a builder or professional cannot meet their obligations.

Benefits Across the Sector

Compulsory warranties offer multiple advantages:

• Enhanced homeowner protection– Every eligible build gains a defined process for defect resolution.
• Boosted buyer confidence– Developers can offer stronger assurances, aiding presales and reducing uncertainty.
• Sector-wide consistency– Currently only 46% of builds are covered by a warranty or guarantee, a universal approach delivers clarity.
• Supports proportionate liability– Warranties provide a financial backstop, potentially enabling the new framework to work effectively.

1. Financial Strength is Critical
   For compulsory warranties, strong financial backing is crucial. Stamford’s A+ rating through Lloyd’s of London guarantees claims can be met, even for complex or high-value projects. Reliable warranties protect homeowners if any party falters.
2. Multi-Unit and Apartment Buildings
   Buildings over three storeys may fall outside the mandatory scheme, potentially exposing some apartment owners. Stamford insures projects of any size, underscoring the need for proactive planning, comprehensive insurance, and solid governance in larger developments.
3. Council Oversight Remains Vital
   Reduced council liability will not in principle lessen their regulatory role. Councils will continue to enforce Building Code compliance via the consenting and inspection process, sustaining standards and minimising long-term risks.
4. Professional Indemnity Insurance Pressures
   Architects, engineers, and others must hold professional indemnity (PI) insurance—most already do, but formalisation could strain the market. Robust PI ensures funds for claims where professional errors play a part.

Risks to Consider

While compulsory warranties may signal progress, challenges and risks persist:

• Will Councils relax their consenting and inspection regime over time as they will in future bear less of the risk?

• Still no compulsory cover for multi-unit buildings above three storeys.

• PI limitations, where larger claims may outstrip available cover.

These highlight the value of diligent risk management. Stamford’s operational expertise and financial strength mitigate them, instilling confidence for developers and homeowners alike.

Next Steps

Warranty providers must register with MBIE, proving financial strength, operational capability, and 10-year claims-paying ability. Independent audits will ensure compliance. With a one-year transition post-legislation, Stamford is geared up to meet rising demand and support seamless rollout.

Stamford’s Position

We cautiously back the Government’s reforms. Compulsory warranties, paired with proportionate liability and bolstered PI requirements, advance homeowner protection and industry accountability. Stamford remains committed to insurance-backed warranties with ironclad financial security, empowering homeowners, developers, and builders to thrive in this evolving regulatory landscape.

Sources

• Ministry of Business, Innovation and Employment (MBIE). (November 2025). Building System Reforms: Proportionate Liability and Home Warranties. Retrieved from building.govt.nz.
• Beehive.govt.nz. (November 2025). Building Reforms Deliver Consumer Protections.
• Building Performance. (2025). Proportionate Liability – Changes Coming to Accountability for Defective Work.