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Building regulation improvements Q&As

Questions and Answers

Q. Why are these changes needed?

The weathertightness issue showed that the current building control system is not meeting its objectives. The Hunn Committee report considered the weathertightness problem to be multi-faceted and systemic and that all parts of the building control system needed to be addressed to minimise the risk that there will be similar failures in the future. These changes are designed to work together, by supporting and enhancing one another, to minimise the risk of future failure.

Q. Do these changes go too far?

No, these changes are designed as an integrated package and are the minimum necessary to minimise the risk of future regulatory failure. We have achieved a balance, which allows for innovation, but within a quality assurance framework. The underlying logic is that the focus should be on designing and building it right first time. Due to the systemic nature of the problems, we cannot just focus on one part of the problem and expect it to be resolved. For example:

we could focus solely on improving design and standards, but the integrity of the system would remain dependent on the quality of inspection and/or building practitioners; inspection alone cannot hope to detect all failures by builders, and any attempt to do so (eg. through frequent and intensive inspections) would come at a very high cost; we could focus solely on improving the quality of builders, but it would be highly unlikely that they could compensate for poor designs or designs with a lack of detail. Quality Assurance needs to be the focus of designs and standards, building practitioners and inspection services. Submissions on the discussion paper, Better Regulation of the Building Industry, highlighted the importance of building practitioner regulation, the need to improve the capability of Territorial Authorities and building certifiers and the need for better information provision/disclosure.

Q. What time period are these changes going to be brought in over?

The BIA is already moving to become a more proactive regulator. Many of the changes will begin as soon as the Act is passed. However, due to the significance of some of the changes proposed and the need for the training and education sector to respond to the need to build the capacity of Territorial Authorities, building certifiers and building practitioners, some of the proposals will be phased in over time. While many of the individual proposals have their own specific transition periods, it is expected that all of the proposals will be in effect five years from the passing of the legislation.

Q. Will the proposals result in an increase in the costs of housing?

There will be an increase in the initial purchase price, however, with the focus on the whole-of-life costs of the building, the benefits outweigh the cost. What we have seen in recent years is how not getting it right the first time has quickly resulted in the need for extensive and costly repairs. This has led to deterioration in the quality of the housing stock, which has been reflected in high maintenance costs. Many of these become stored for future homeowners and result in social and economic costs. The weathertightness issue is an example of this. A key finding of the Hunn Committee was that there has been too much emphasis on minimising short-term compliance costs, rather than maximising long term benefits.

The social and economic impact analysis undertaken by PricewaterhouseCoopers estimates that this package of measures will increase the costs of dwelling construction by approximately 2.9 per cent. The study concludes that, compared with the risks associated with a ‘do nothing’ option, these measures will deliver net benefits.

Q. How do these changes fit with the recommendations from the Hunn Committee and Select Committee Inquiry reports?

These proposals have been subject to substantial consultation. In making its decisions the government took account of:

The findings of the Hunn Committee Report; The recommendations of the Parliamentary Select Committee Inquiry into the Weathertightness of Buildings; Over 300 submissions made in response to the discussion paper ‘Better Regulation of the Building Industry in New Zealand’; Feedback received in consultation meetings in Auckland, Hamilton, Tauranga, Wellington, Christchurch and Dunedin; The views of industry stakeholders and representatives including Local Government New Zealand and the Building Industry Taskforce.

The government also considered the findings of the previous Building Act review undertaken by the Department of Internal Affairs and has decided to:

Introduce a comprehensive regulatory regime to improve the safety of dams; Regulate for safety of private cable cars; Create a new statutory framework to apply to earthquake prone buildings.

Q. What is the government doing to address existing buildings suffering from weathertightness problems?

The Weathertight Homes Resolution Service (WHRS) was set up by the government in December 2002 to help owners of homes less than 10 years old that are leaking and causing damage. At the moment home assessments are being completed throughout the country.

Once the assessments are completed a report is prepared for the homeowner and Evaluation Panel. The Evaluation Panel determines if the claim is eligible; if the claim is eligible the homeowner can choose to use the WHRS’s voluntary mediation service, compulsory adjudication or decide to take no further action.

As of 22 May 2003, 3,297 calls were made to the service. A total of 758 applications covering 1,599 individual dwellings were received by the WHRS.

Q. Is the government doing anything else to help consumers when things go wrong in the building process?

In order to clarify responsibilities and expectations, and to improve contract documentation between building practitioners, developers and homeowners, regulations will be developed that specify some bottom line standard terms to be implied into all building design and construction contracts, whether written or otherwise, that can not be contracted out of. These terms will include a mandatory warranty.

Further work on the development of a disputes resolution procedure for all building disputes between homeowners and building practitioners based on the provisions of the Construction Contracts Act 2002 (likely to facilitate regular and timely payments between the parties and to provide for the speedy resolution of disputes; allow any party the right to refer a dispute to adjudication, allow for the consolidation of disputes and result in a binding but not final decision; the cost of adjudication is met by the parties) is also being undertaken and is expected to be completed by 30 July 2003.

However, due to the focus on getting the inputs into the building process right, the chances of things going wrong are likely to be much lower.

Q. Will there be compulsory Home Warranty Insurance?

The package of measures aims to prevent problems before they occur. Discussions with participants in the insurance market have indicated that compulsory home warranty insurance does not appear viable at this time. Currently global supply of professional indemnity insurance is constrained and insurers are unwilling to provide cover in this market. Improving the quality of building inputs will improve insurer confidence meaning that supply should improve in the future.

Q. What about developers?

The government recently announced its decision to legislate for additional measures to deal with phoenix companies under insolvency law, including:

That criminal penalties be available to the courts where directors are shown to have acted in bad faith to defeat creditors’ legitimate interests;

That legislative provisions based on UK legislation be enacted to restrict the re-use of the name of a company in insolvent liquidation by a director of that company to prevent abuse of phoenix companies.

By dealing with the inputs the chances of developers producing poor quality buildings should be significantly reduced. Officials are continuing to look at the issue of developers, where there is no direct contractual relationship between the purchaser of the dwelling and the building professionals involved.

Q. How are products and processes going to be more reliable? How will consumers know they can rely on building products and processes?

More guidance will be provided to Territorial Authorities on the level of information that they will need to make decisions on the code compliance of building products and systems. The regulator will also have new powers to warn against or ban the use of particular products. In addition a new product certification system will provide more and better information on building products and systems.

Q. What are you doing about building practitioners?

A new board will be established to license building practitioners, including designers and builders. Individuals registered under the Architects Act, which is also being modernised, and the Chartered Professional Engineers of New Zealand will be deemed to comply with the new regime. On-going competency testing will be required of licensed building practitioners.

Critical building work that requires a building consent and is over a specified dollar amount (indicatively $10,000) will need to be undertaken or supervised by a licensed building practitioner under the new Building Act. This dollar amount will be set to allow owner builders to undertake minor work without supervision.

Due to the significance of this change, a five-year period will be allowed for the implementation of the licensing regime.

Does this mean I won’t be able to build my own house?

No, but if you are not a licensed building practitioner, you will have to be supervised by a licensed building practitioner. Although you may be building your home for your own family, it may be sold one day, and the future homeowners are entitled to know that there was professional oversight.

Q. What are you doing about Territorial Authorities and building certifiers?

Territorial Authorities and building certifiers will be required to hold a current certificate of accreditation from an internationally recognised accreditation agency approved by the building regulator as a condition of carrying out their functions under the Building Act.

Territorial Authorities will be required to apply for accreditation within 18 months of the Building Bill being passed and to achieve accreditation within three years from that date. Territorial Authorities unable to meet the conditions of the proposed accreditation system be required to enter into alternative arrangements with other Territorial Authorities or certifiers for the provision of statutory inspection functions.

The roles and responsibilities of building certifiers will be clarified by requiring them to meet the same accreditation and audit requirements as Territorial Authorities, and allowing certifiers to issue building consents but on the basis that they must undertake all subsequent inspection functions related to that building consent.

Q. Why continue with building certifiers?

Building certifiers possess a range of skills that are currently in short supply in the building industry. Certifiers also provide an important check on the level of service provided by Territorial Authorities in relation to the provision of building services. We are building a regime to improve the quality of both certifiers and Territorial Authorities.

Will there be a time limit on when owners will be required to get a Code Compliance Certificate?

Owners will be required to request a Code compliance inspection as soon as practicable after completion of building works. The Building Act will be amended to deem practical completion for the purposes of a final Code compliance inspection, when it is not requested earlier by an owner, to be two years from the date on which the building consent is issued unless an alternative arrangement is agreed between the owner and Territorial Authority or building certifier.

How will consumers know what their rights and obligations are?

In addition to the regulations that will be developed that specify some bottom line standard terms to be implied into all building design and construction contracts (including a warranty), as part of the package of measures, more information and guidance will be provided to the industry, Territorial Authorities and consumers from a more proactive and responsive building regulator.

Q. What will be done to prevent the use of products/systems that fail?

The regulator will also be given a new power to warn against, ban and require the use of designs, practices and products in circumstances where there is evidence of actual or likely risks of failure to meet the performance standards of the Building Code.

Q. How will enforcement be improved?

To improve compliance and enforcement, the Building Act will also be amended to improve the functioning of the determination process, provide for a system of infringement fees for simple breaches of the Act and allow the regulator to pursue enforcement actions in order to clarify the law or to ensure that breaches of the Act are pursued.

What are you doing about the BIA?

The government has decided that BIA will become part of a government department to strengthen the accountability of the regulatory body to the responsible Minister. The change will be implemented through legislation, which is anticipated to be introduced to Parliament by the end of July 2003. Final decisions have yet to be made with respect to which department the BIA will be located in the future.

Q. What are you doing about the Building Levy?

A number of proposals in this package of measures may add to the costs of the regulator. These costs are to be met in part by the BIA running down its surplus, however, the building levy is also likely to increase. The current Building Industry Authority Levy is $0.65 for every $1,000 (or part thereof) of the estimated value of the building work concerned. Final decisions on the amount of increase have yet to be made. Q. What about BRANZ?

The regulator will be required to co-ordinate its activities to strengthen relationships between the regulator itself, Standards NZ and BRANZ. The broader question of where BRANZ should ultimately fit into the building control system should be answered in the course of work undertaken by the Ministry of Research Science and Technology.

Q. Where can I get a copy of the full set of Cabinet decisions?

A full set of papers outlining all Cabinet decisions on this package of measures is available on the Ministry of Economic Development website

What happens now?

Legislation to implement these changes is currently being drafted. It is planned that the legislation will be introduced to Parliament by the end of July 2003. People will have a chance to have their say on the proposals through the Select Committee process. In the meantime, the BIA is already planning and preparing for their more proactive role.

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