Proposed Reforms to Building Act and Regulations

There are major changes to the Building Act on the horizon that will impact the entire construction sector including manufacturers, builders, building consent authorities, consultants and many others sector wide.  Helen Macfarlane and Lydia Sharpe of our construction team have prepared bite-sized updates examining MBIE’s proposals to re-shape regulation of the building sector and the impacts this will have on the New Zealand construction industry. The first of these examines MBIE’s proposals to regulate building products and methods.

INTRODUCTION

1. In recent years, the New Zealand building sector has demonstrated a number of failings ranging from inefficient processes and practices to bad risk management and lack of quality control.  These failings have impacted the productivity of the sector, the health and safety of industry members and end users, and public confidence that structures and components meet requisite quality and compliance standards.
2. During 2018, MBIE began a comprehensive review of the sector aimed at overhauling the building regulatory system.  It met with representatives from nearly 50 organisations representing sector stakeholders, who raised concerns about (among other things):
   •  Quality of, and lack of information about, building products;
   • Ensuring those working in the sector have the requisite skills;
   • Ensuring those responsible for defective work are held accountable; and
   • Ensuring that risk of loss does not fall disproportionately on home owners and building consent authorities (BCAs).
3. In April 2019 MBIE issued a Discussion Paper for Building System Legislative Reform (Discussion Paper) setting out proposals for legislative and regulatory reform in relation to:
   • Building products and methods;
   • Occupational regulation;
   • Risk and liability;
   • Building levy; and
   • Offences, penalties and public information.

   The objective is to achieve reforms that will deliver “safe and durable buildings, a high-performing building sector and an efficient regulatory system.

4. Following further consultation, on 8 May 2020 MBIE introduced one of two proposed Bills to Parliament.  Under the Building (Building Products and Methods, Modular Components and Other Matters) Amendment (Bill), new public notification requirements would come into effect immediately.  New responsibilities relating to building products, strengthened CodeMark regulations, and a manufacturer certification scheme for modular construction are proposed to be phased in over time.  Regulations are to be finalised in 2021.  MBIE also hopes to present a second bill addressing occupational regulation and other initiatives.
5. Collectively, the above initiatives by MBIE will likely result in some of the most significant changes to the building and construction legislative and regulatory framework in the last 15 years.  This is the first of a series of articles on those initiatives, as follows:
   • Building products and methods (this article)
   • Strengthening the product certification scheme
   • Modular components and the modular component manufacturer scheme
   • Occupational regulation
   • Risk and liability
   • Building levy and penalties.

The Bill can be found at http://legislation.govt.nz/bill/government/2020/0234/latest/LMS264715.html

BUILDING PRODUCTS AND METHODS

6. The Bill contemplates greater regulation of building products and methods, including the extension of obligations / liability to product manufacturer and suppliers.
7. New section 9A defines a building product as a “product that could reasonably be expected to be used as a component of a building”.  New section 9B provides that a building method is “a method for using one or more products or things as part of building work or for carrying out building work”. 
8. With respect to products (but not methods) MBIE will be empowered to issue regulations specifying product information to be provided by manufacturers and suppliers.  This may include:
   • Description of products;
   • Details of manufacturer, importing supplier, retailing supplier;
   • A building product’s installation use, maintenance and disposal requirements;
   • Any warnings, bans or restrictions – e.g., under s 26 Building Act.

9. The information requirements may also include how the product information is to be verified before it is disclosed, the form and manner in which the information will be disclosed, requirements for updating and for maintaining copies and records of product information disclosed.
10. Failure to provide the minimum product information required will be an offence – with a maximum penalty of $10,000 for individuals and $60,000 for a corporation.  Provision of false or misleading information will also be an offence – with a maximum penalty of $200,000 for individuals and $600,000 for a corporation.
11. Section 14G of the Building Act will be amended to provide that a person who supplies a building product is responsible for ensuring that they comply with the building product information requirements.
12. The responsibilities of builders under section 14E will be modified to differentiate between where building work requires consent and where it does not. 
    • Where consent is not required, builders will be required to ensure that products and methods used in carrying out building work are used in a manner that complies with the building code.
    • Where consent is required, the builder has the obligation to ensure that building products and methods will be used in a manner that complies with the consent.
13. Finally, MBIE will be able to require a person to provide information and/or produce documents if:
    • MBIE has cause to consider issuing a warning/ban (section 26 of the BA).
    • MBIE is taking enforcement action (section 11(m) of the BA).
14. Failure to supply information will be an offence ($30k individual; $60k corporation).
15. MBIE may share information with other regulators with notice to the person to whom the information relates.  

COMMENTS

16. Currently while the Building Act requires that any product information provided must be accurate, it imposes no obligation to provide product information to begin with.  Since liability can lie under the Building Act or the Fair Trading Act in respect of the provision of inaccurate information, there is an incentive for manufacturers and suppliers to provide no information at all. 
17. As a practical matter this can lead to building consultants, contractors and BCAs searching the internet to find out relevant product information during the consent process and a significant amount of what they find is marketing material of dubious reliability.  The Bill if passed should materially assist in the provision of more reliable product information. 
18.  One issue to be clarified (presumably through regulations) is who is to provide what information along the supply chain – what information does a manufacturer who is supplying a product to a trade supplier provide?  What information does the trade supplier provide to the retailer, and what information does the retailer provide to the customer? 
19.  There is also a question as to how that information is to be provided.  While compliance may be improved if the process is not unduly burdensome (e.g., posting the material on the website of the relevant manufacturer / supplier), from the perspective of the person seeking out the information, it would be more useful to have this available in a set format in a recognised space (e.g. a register).  Of course, it may be that a one size fits all approach will not prove practical.
20. The proposed requirement for builders to ensure that building products and methods are used in a manner that complies with the building consent appears to be directed towards limiting product substitutions – if a product is sufficiently important to be specified in the consent, then a product substitution will require BCA notification.  This should protect against substitution of inferior products with respect to critical systems.
21. Finally, we note that the Bill does not include the manufacture of building products within the definition of “building work.”  However (as will be discussed in our article on MBIE’s reforms relating to modular components) “building work” does include “the design and manufacture of a modular component”.  This differential treatment of manufacturers seems anomalous.
22. As noted, MBIE anticipates preparing regulations in 2021.  For anyone interested in commenting on what the regulations might appropriately contain or wanting more information on the building law reform programme, MBIE can be contacted at building@mbie.govt.nz
23. You can stay updated on the progress of the Bill at:  https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_97710/building-building-products-and-methods-modular-components

If you have any questions about the article, please get in touch with our Construction team or your usual contact at Hesketh Henry.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.