Kevin Longman – who was made an NZIBS Life Member in 2012 and helped found the Society of Construction Law New Zealand in 2005 – is worried a similar path of systemic failures is on the horizon if the potential shifts in the country’s building certification processes come to fruition. He’s already had some experience in this; in the early 2000s, following the confirmation New Zealand was facing an extensive and expensive leaky building crisis, insurance companies began withdrawing from the construction market.

Building certifiers, created by the Building Act reforms of the early 1990s to compete with council inspections, needed insurance cover for 10 years to stay in business. If insurers refused to cover them, certifiers could not choose to carry on their business, as other professionals could because they were closed down by the then-independent regulator the Building Industry Authority (BIA). In 2002, ACE Insurance announced it planned to exclude leaky building cover across the whole building industry. Kevin was president of the Institute at the time and told the NZ Herald – as more insurance companies pulled coverage and building certifier companies began losing business – “We’re just at the mercy of the insurance industry.” Looking back at the scheme now, its downfall was wrought because of its dependence on insurance.

Insurance companies would, and still do, insure what they perceive as reasonable risk. “It is the perfect warning sign for any decision-makers looking to implement a similar scheme dependent on insurance companies; if insurance companies see a situation where it’s high risk, they don’t want to be there.” Kevin advocates for an independent regulator, as it provides necessary oversight, highlighting risks insurers might otherwise deem too high to cover. He believes that self-certification fails to address the industry’s fragmented nature, where multiple subcontractors—handling elements like roofing, cladding, and foundations—operate under disparate standards. “You need someone who isn’t invested in the project’s profits to ensure each component meets a durable standard,” he argues.

Without this, New Zealand risks seeing issues similar to those faced by the roading industry, where self-certified work often requires constant repair due to initial quality shortcomings. Any framework aiming to expedite building processes should prioritise consumer protection and be underpinned by insurance backing to cover a period of the structure’s lifespan, Kevin says. “There’s no means of holding those people to account unless you have insurance, and insurance has to be very clearly tied up with long-term liability once you’ve completed the project. But that’s the difficulty the industry faces when you try to implement something like this. Builders might liquidate after completing a project, leaving new homeowners without recourse for issues that arise later,” he says.

Only an insurance-backed, independently overseen system, he suggests, can ensure long-term accountability and quality assurance in residential construction. “The best construction in our industry is when we have an independent overview of the construction process. You can only speed up the construction process by having more qualifications and a more streamlined processing system by the regulator, but you still have to have the regulator.” Any regulatory adjustments must balance the urgent need for housing with enduring quality and risk management standards. Kevin recommends that the Government, rather than relaxing oversight, focus on resourcing regulatory bodies to streamline compliance without sacrificing thoroughness. By fostering a robust, insured oversight framework, New Zealand can address its housing needs without jeopardising future generations’ security.

More continuous professional development and greatly improved education in the construction sector are required before a self-certification scheme can be trusted to solve our country’s homebuilding woes. So says NZIBS President David Clifton, who is wary of the Government’s proposed changes to allowing trusted building professionals and accredited businesses to carry out low-risk building work. He told Newstalk ZB’s Mike Hosking that self-certification is something that can be worked towards, but the sector’s education processes need to be up to scratch first.

“There is huge value in refining the consenting process to address time and cost concerns. In fact, there are examples where the time and costs of the consent processing outweigh the cost of the actual work. But these are at the fringes of the process, and so these proposed changes must strike the right balance between oversimplifying the process and protecting homeowners, businesses, and councils.”

The sector already wrestles with an alarmingly high rate of failed inspections, so removing a Building Consent Authority’s process of consenting could risk further failures. David says the priority should be improving the professional development and education of builders and consultants before culminating in self-certification. “We believe that Licensed Building Practitioners need further training to be adequately prepared for any proposed change for self-certification. The market must have confidence the sector can deliver with minimal defects from design, to build and completion. This can only be achieved with the process of further education for the sector, and confirmation of this working via independent inspections.”

The Minister sees three key safeguards as critical for the design of a potential self-certification scheme:

1. Strengthening the competency of building professionals;
2. Consumers have a remedy for non-compliant work; and
3. Careless or incompetent self-certifiers are identified and subject to disciplinary action.

As an underwriting agent who has represented several insurers providing Building Defects Insurance in New Zealand over the past decade, Stamford has a first-hand understanding of the risks associated with the residential building industry and the financial consequences of the failure to meet acceptable standards. For several years, contracts to remediate leaky buildings built in the 1990s were an important part of our business! Our insurers have always valued the oversight provided by councils through their consenting and inspection regime as a way of reducing risk.

Auckland Council estimates that between 25% and 35% of all inspections fail, so they are an important part of the quality assurance process. Where no such regime exists in other territories, insurers generally insist on appointing their own professional building surveyors to ensure that the building will be built to an acceptable standard. This means that some self-certified work may not be insurable. There is also doubt that insurance would be available and affordable to self-certifiers. The changes imply that they would be expected to buy professional indemnity insurance, but the market for such insurance is limited and expensive.

The Government’s stated aim is to reduce red tape, speed up the consenting process, and enable councils to limit inspections based on a risk analysis of the project. This is intended to increase the supply and reduce the cost of housing. However, the past few years have shown that housing supply and prices are driven primarily by market forces. Many developers have deferred projects due to recent market conditions.

The example being quoted is that of plumbers and electricians who self-certify their own work, suggesting that this could be the way forward. However,

plumbing and electrical work rarely causes structural or weather-tightness failure. These performance failures are a serious financial risk to homeowners and where they need the most protection, both in terms of legislation and insurance.

Whilst the law can make self-certifiers liable for their own work, it is not a simple matter for a homeowner to hold a builder or other professional accoun

table for defective work. This generally involves engaging their own professional advisers – surveyors, lawyers, and others – to establish the cause of the defect and the person responsible. As the Ministry of Business, Innovation and Employment has confirmed, seeking redress when things go wrong is difficult, complex, and costly for consumers.

The reliability of a robust building consent process and a professional inspection regime, backed up by holding their own first-response insurance policy, is the best protection for homeowners.

*This article was originally published by the New Zealand Institute of Building Surveyors – NZIBS The Journal Issue 15 page 18 – 20 Read it HERE