What Do Building Act Changes Mean for Landscapers?

The Building Amendment Bill currently before Parliament proposes some of the biggest changes to construction liability in years. In this article, Builtin construction and risk expert Ben Rickard explores how it will impact landscapers

For landscapers, there are three changes worth understanding: proportionate liability, mandatory home warranties, and mandatory professional indemnity (PI) insurance for design professionals. But before assuming another layer of compliance is coming your way, there is an important distinction: most standalone landscaping work may not actually be caught by the proposed mandatory home warranty regime.

What’s Changing with Liability?

Currently, New Zealand operates under “joint and several liability” for defective building work. In simple terms, if several parties contribute to a defect, a homeowner can potentially recover the full loss from one liable party, even where that party was only partly responsible. That usually happens when the other parties have disappeared or gone insolvent.

That can leave the last solvent business standing carrying substantially more than its share.

The Bill proposes replacing this with proportionate liability for defective building work. A court or adjudicator would determine each party’s responsibility for the loss and each defendant would only be liable for that proportion.

For example, imagine defective drainage behind a retaining wall causes $100,000 of damage to a new home. The landscaper’s work is found to have contributed 20% to the loss, while deficiencies in the drainage design and the developer and builder’s work contributed the remaining 80%.

Under proportionate liability, the landscaper would only be responsible for their assessed share, $20,000, rather than potentially being pursued for the entire $100,000 simply because the developer, designer and builder had done a runner.

Most commonly in the past, it has been the local council that has been the “last man standing” and has had to pick up the tab for the whole mess.

The new approach is potentially a significant improvement for contractors who are still trading when an issue arises. However, a proportionate liability regime doesn’t remove liability. If your work or advice contributes to a defect, you will still be responsible for your share of the resulting loss.

Why Are Mandatory Warranties Being Introduced?

Proportionate liability creates another problem. If the landscaper responsible for 60% of a defect has disappeared or become insolvent, the homeowner may no longer be able to recover that 60% from another responsible party. That leaves a big financial hole for them.

The proposed mandatory home warranty scheme is partly intended to address this consumer protection gap. The bill’s intent is structured towards larger, residential builds and is unlikely to effect landscapers’ much. However, it is still useful to understand it.

The Bill proposes minimum warranty protection of one year for defective building work and ten years for structural defects. This is on top of the implied warranties in the Building Act, as the mandatory home warranty must be supplied by an approved third-party warranty provider or insurer. It’s designed to be the failsafe in case the builder is no longer in business.

However, this does not mean every landscaper will need to provide a third-party warranty on every job. The proposed requirement is focused on residential building projects involving restricted building work and requiring a building consent.

It is intended to capture new houses and small-to-medium apartment buildings, together with qualifying residential alterations valued at $100,000 or more.

A standalone contract for planting, lawns, paving, fencing or general landscape construction is quite likely to fall outside the mandatory warranty regime.

The detail will also depend on regulations, so landscapers shouldn’t assume at this stage that they are either definitely included or definitely excluded.

What If You’re Subcontracting to a Builder?

If your landscaping forms part of a new home or major residential alteration, the overall project may require the mandatory warranty. Responsibility for ensuring that the project has a warranty will generally sit at project level rather than requiring every subcontractor to purchase and supply their own separate warranty.

That doesn’t mean landscapers can get away with defective work. If your work contributes to a defect covered by the warranty, the warranty provider, builder or another party may ultimately seek recovery from you.

Designers Have Another Issue

Landscape designers should pay particular attention to the Bill’s proposal to require mandatory professional indemnity (PI) insurance.

PI is intended to cover liability arising from professional services such as design, advice and specification. It is separate from public liability, which primarily deals with liability for accidental property damage.

The Bill requires PI for prescribed “design consultants” providing design or other services on building project work valued at $100,000 or more. The final definition of who qualifies as a design consultant and which services are captured will be prescribed by regulation.

So, we can’t yet say that landscape designers will automatically be required to carry PI.

However, if you’re designing or specifying elements that contribute to building work or Building Code compliance, this is an area to watch closely.

More importantly, professional liability exposure already exists, regardless of whether insurance becomes mandatory, so it’s still a very good idea to have professional indemnity insurance if you are designing anything!

Consider these examples: Drainage design: Incorrect levels, falls or stormwater design direct water towards the house, resulting in significant moisture damage.

Retaining structures: A landscaper designs or specifies an inadequate retaining solution and movement subsequently damages the house, driveway or neighbouring property.

Incorrect specifications: The wrong paving system, drainage product, waterproofing interface or structural product is specified, requiring extensive removal and replacement.

Finished ground levels: Landscaping is designed too high against the building, compromising clearances or moisture management and contributing to water ingress.

Planting specification: Large trees or unsuitable species are specified too close to structures or drainage systems, causing subsequent damage.

These are all issues arising from the design or specification, rather than the workmanship or installation.

Builtin can also provide professional indemnity insurance that covers both the design and technical services as well as allegations of errors in construction-specific activities such as project management and construction management.

What Does This Mean for Landscapers?

For many landscapers, the mandatory home warranty requirement may have relatively little direct impact. But the wider liability reforms could still be significant.

Proportionate liability should reduce the risk of a landscaper being left carrying other people’s share of a problem. At the same time, it puts greater focus on identifying exactly who caused what, making contracts, scopes of work, drawings, specifications, site records, documenting variations and having insurance even more important.

And if your landscaping business provides design and specification as well as construction, don’t overlook PI regardless of whether it is mandatory or not.

A useful rule of thumb is: the more responsibility you take for deciding how something should be designed, detailed or specified, the greater your professional liability exposure becomes.