Building Amendment Bill (No 4)

I move, That the Building Amendment Bill (No 4) be now read a second time. The Building Amendment Bill (No 4) has now been considered by the Local Government and Environment Committee, chaired by the very, very good member Nicky Wagner, and I thank the committee for its careful consideration of the bill. I also want to acknowledge the work of all of the members—all of the members—of that committee, who, I believe, have brought back to the House some well-thought-out amendments, which I think will both refine and improve the original bill that was introduced. The committee received 47 written submissions and heard 23 oral submissions. Overall, there was very much support for the fundamental policies in the bill—support that demonstrates the importance of these changes, which reflect the efforts the Government has made during its extensive consultation on the review of the Building Act to listen to the voices of all those participating in the building and construction sector.

May I take this moment to pre-empt Raymond Huo, because he will get up and tell everybody that everybody out there in the building sector is opposed. All I ask Mr Huo to do is to name one—name one. Is it the Registered Master Builders Federation? No, that body is in favour. Is it the Certified Builders Association? No. Is it the Building Industry Advisory Council? No, the council supports it. So when Mr Huo speaks I hope everyone listening to him speaking will temper his statement that everyone is opposed by saying: “Name one. Name one who is opposed.” However, I divert from the written speech, so I shall go back to it.

The select committee listened closely to concerns raised about whether the drafting of the bill would achieve the outcomes that the Government seeks to achieve. Particular areas of concern raised in submissions were the clarity of the proposed new consumer protection provisions and the changes to the Dam Safety Scheme. As a result of submissions, the select committee has recommended a number of improvements and clarifications to the drafting, to better achieve the Government’s policy intent and address the concerns that actually were raised at the committee. I have to say that I fully support the recommendations that the select committee brought back to the House. I would like to thank all the people who took time to make submissions and express their views on the bill. I also want to thank my officials, who have worked diligently and effectively on the drafting of the bill and in giving advice to the select committee. I am proud to commend this bill and the select committee amendments to the House.

This bill is a key part of a package of reforms designed to achieve a significant cultural and behavioural shift in the building and construction sector. Together with changes already made in the Building Amendment Act 2012, the enactment of this bill will enable the Government to lead the sector to a stable platform from which we can build the skills of practitioners, have confidence that buildings will be built right the first time, and be sure that designers and builders will stand behind the quality of their work. Achieving these objectives is important to help with the rebuilding of Christchurch, of course, but also it is important for increasing the productivity of the entire building sector. The building sector is a significant part of our economy. It employs about 8 percent of our workforce, and contributes about 4 percent of our gross domestic product. Increased productivity in this sector will contribute significantly to this Government’s Business Growth Agenda.

I would like to outline some of the key changes that have been made to the bill by the select committee. The major reform in the bill is in the new provisions for consumer protection. The establishment of improved consumer rights is an important precondition for introducing risk-based consenting. If we are going to allow builders to take more responsibility for their work, and reduce the involvement of councils to cut bureaucratic costs, we need to ensure that consumers have the necessary tools to hold builders to account. The consumer protection provisions in the bill as introduced were not completely clear about who can use the provisions and what types of building work are covered. Although the policy intent of the consumer protection provisions was supported by the people who made submissions, some issues were raised in relation to the clarity and the detail of the new provisions. For example, builders were not sure whether their subcontractors could use the provisions against them, and designers were not sure whether their work would be subject to the new provisions. Some submissions also asked for more detail to be included in the bill about information to be given to the client by building contractors and about the content of the mandatory written contracts.

The select committee has recommended changes to clarify the following issues. The consumer protection provisions do not apply to the relationship between head contractors and subcontractors. The provisions are intended for the benefit of the client—that is, the homeowner. The commercial trade arrangements between a head contractor and their subcontractors are not regulated under the Building Act. Design work is not subject to the consumer protection provisions. The bill does not limit the application of other consumer protection legislation that relates to the provision of design services. The purposes of the checklist and disclosure information required to be given to the client have now been clarified. This includes listing in the bill some of the topics that could be included in those documents, though the topics will be set out in detail in regulations later. The checklist and disclosure information are required to be given only if the building work is over a certain value, but if the work is less than that value, the client can still request, and the building contractor must provide, the checklist and the disclosure information. The matters that should be covered by the mandatory written contracts, further clarifying when a contract does not contain a matter required by the regulations, will be deemed to include any clauses stipulated in the regulations. This allows parties the freedom to contract as they please, but ensures crucial topics, such as disputes resolutions, are always covered by the contract.

The other key change in the bill is to dam safety provisions. These provisions are intended to improve the efficiency and effectiveness of the Dam Safety Scheme and reduce compliance costs for the owners of low-risk dams. The submissions received expressed support for the Dam Safety Scheme as a risk management scheme for large dams, but it raised issues relating to technical detail and requested further clarity about the application of the Dam Safety Scheme. The select committee has recommended changes that will provide consistency in the terminology used in the Dam Safety Scheme, provide a specific approach for classifying and managing the safety of canals under the Dam Safety Scheme, enable regional authorities to address critical issues in dam safety by reinstating references to earthquake-prone dams and flood-prone dams, allow regional authorities to refer dams for inclusion in the Dam Safety Scheme if they pose a risk to public safety because they are in a designated area, and, in the context of reporting dangerous dams, clarify that a recognised engineer is not required to act outside of what would normally be expected of their role. Collectively, these changes will further improve the targeting of higher-risk dams that should be subject to the requirements of the Dam Safety Scheme, and improve its administration.

The select committee also recommended other clarifications, such as refinements to schedule 1 to ensure potentially high-risk work is not exempt, and a new section 14G outlining the responsibilities of product manufacturers and suppliers under the principal Act, which is consistent with other responsibility provisions that are enacted in the Building Amendment Act 2012. The changes recommended by the select committee make clear the decisions made by the Cabinet on the Building Act review and resolves the issues raised in the submission. And, lastly, some sections have been amended by both this bill and also the Building Amendment Act 2012, because the Building Amendment Act 2012 is not yet fully in force. The select committee has recommended that the amendments be replicated in this bill. This will ensure the affected sections will read the same once both bills are in force. I support all the recommendations being made by the select committee and I would like to again thank the members of that select committee for their hard work in ensuring that we get this vital piece of legislation right for our building and construction sector.

So, in summary, I am pleased to see the support and the public interest the bill has received. Indeed, the view of most in the sector whom I have talked to in recent weeks is that a cultural and behavioural shift is needed to move this industry forward, and this bill provides that with the consumer protection elements in it. I understand the quality of submissions received from all participants in the sector was incredibly high, again reflecting the significance and the importance of delivering these reforms to the overall building sector. Finally, the effort that was put into helping the Government fine-tune the bill was well received by all of the members of that select committee, and certainly by me as Minister. I move that the Building Amendment Bill (No 4) be now read a second time.

I would like to start by thanking the officials and submitters for their contributions, and in reply to the Minister for Building and Construction’s questions, I would like to name not one, not two, not three, but 47 submitters. Particularly, I would like to urge the Minister to read again the submissions from Hawkins Construction, the Home Owners and Buyers Association, the Auckland Council, the Wellington City Council, the Christchurch City Council, and Local Government New Zealand.

I should reiterate that we support some good initiatives under this bill, the Building Amendment Bill (No 4). In particular, we have no problem in supporting provisions in relation to dams. Being a member of the Local Government and Environment Committee I have learnt a lot about issues in relation to classifiable and referable dams. Indeed, if this bill focused specifically on dams, making it the “Building Amendment (Dams) Bill”, we would support it all the way through. In that regard I would like to thank submitters such as Genesis Energy, the Greater Wellington Regional Council, Meridian Energy, the New Zealand Society on Large Dams, etc., for their thorough submissions.

We did support the Building Amendment Bill (No 4) to go to the select committee. However, listening to submitters and reflecting on the bill and, more important, the piecemeal approach this National-ACT Government has taken have led us to the view that this bill should not proceed. Labour supports the building law review process but cannot support the piecemeal and isolated approach, and therefore the passage of this particular bill.

The bill is the second of two bills to implement the building law review policy decisions. The review found weaknesses in consumer protection and a need to better allocate responsibility and accountability among building consent authorities, building professionals, and consumers. Since the introduction of the No. 3 bill, now the Building Amendment Act 2012, we, together with a large number of submitters, have urged the Government repeatedly that “In the absence of a more genuine reallocation of accountability, for example, through mandatory home warranties, the introduction of proportionate liability, and mandatory insurance, all parties (consumers, building professionals, and building consent authorities) will continue to be financially exposed, even for defects not of their making.”

To be fair to the Minister, Maurice Williamson, he might have good reasons for ignoring those issues. One of them is that he had referred almost all important matters to the Law Commission for review, such as the liability models and issues regarding mandatory home warranties or insurance-backed surety—fair enough, and I supported and would continue to support the Minister in doing so. But the problem is that the partial instalment will cause uncertainty and create false hopes for parties in the building and construction sector. This indicates that the Government is not ready to introduce a comprehensive reform package needed to genuinely achieve its stated goal.

For the second term and in its fifth year all we got was nothing but publicity gimmicks. Let me quote something to reinforce my position: “It is important to ensure the proposals are developed as an integrated package with a number of equally important and interdependent processes … To borrow the analogy of the discussion document—the building control engine will fail if all the cogs are not aligned and working effectively. A weakness in any of the processes will impact on others and result in an inefficient regime that is unbalanced and ineffective … [It] is disappointed that the Bill has been put forward in relation to a relatively narrow range of matters, although it recognises that the Bill is one component of a wider reform programme that Cabinet has approved. In [its] view, it would be preferable to delay legislative amendments until a broad range of changes to the Act (identified as part of the current reform package) can be promoted and consulted in an integrated way.” Where are the quotes from? From the Wellington City Council in its submission on the No. 3 bill. It is still valid because the Government is still taking the isolated and piecemeal approach. It is dangerous because if all these cogs are not aligned and working effectively, the building control engine will fail, and we cannot afford to have a repeat of the leaky building saga.

There are other issues I wish to touch upon at the bill’s second reading. Firstly, the purpose of this bill is to introduce “enhanced and more comprehensive consumer protection measures”. However, we note the frustration of some of the submitters and agree with them that the measures included under this bill provide no effective new protection for consumers. Rather, the protection the relevant parties now have is further reduced. I agree with those submitters, particularly structural engineer Mr John Scarry, that the explanatory note of this bill is misleading.

Secondly, regarding company failings, concerns were expressed about companies that are formed for the sole purpose of a single building project and then liquidated as soon as the work is completed, leaving no legal entity that can be directly held to account for defective work that is later discovered. The bill fails to offer consumers any effective remedies when left in the lurch by a $1 shell company, despite the fact that the building sector failure rate is higher than the rate for all businesses before 2003 and after 2008. Even legitimate contracting and subcontracting firms have often ceased to exist by the time defects have come to light.

Thirdly, regarding products warranty, we welcome an introduction of a responsibility provision for product manufacturers or suppliers. It is widely accepted that the leaky building saga was primarily caused by the use of inappropriate building products or systems, or incompetence in, or lack of adequate oversight of, their application. However, given the complexity of the issue, particularly where prescribed compliance with the building code is often difficult to establish, the provision in its current form fails to address the problem adequately. It is unclear what the implication is for competition between local and foreign product manufacturers.

Last but not least are drafting issues. There are drafting issues in terms of how provisions in this bill will be implemented. Many provisions in this bill are yet to be “prescribed” or “determined” by regulation. Without proper definition it is difficult to put the clauses into context, which hinders their interpretation and the implementation of the Act. It is unfortunate that in this time of a building sector crisis, New Zealanders are seeing an experienced Minister simply batting away critics rather than showing real leadership. Thank you.

Is the member calling?

💬 Nicky Wagner: Yes, I have called.

The ASSISTANT SPEAKER (H V Ross Robertson): I call the honourable member Nicky Wagner, and I will have no cheek from the member on my left.

I rise to support this Building Amendment Bill (No 4) at its second reading.

As we have heard from the Minister for Building and Construction and the previous speaker, Raymond Huo, this is the second of two bills to implement the Building Act review. It is the companion to the Building Amendment Act 2012, which came into force on 13 March 2012. What this bill does is it attempts to reduce compliance costs, to reduce complexity, and to reduce delays in the building process. It is also about protecting consumers.

Debate interrupted.

The House adjourned at 10 p.m.