The government has announced a major overhaul of the earthquake-prone building regime, following a sweeping review by MBIE. It follows a series of initiatives to assist the building sector such as the return of self-certification and the pending shift to proportionate liability. Under the proposed reform, about 2,900 buildings will be removed from the earthquake-prone building register and a further 1,440 will face lower remediation costs.
The status quo on earthquake-prone buildings
The existing regime was introduced in 2017, following the Canterbury Earthquakes Royal Commission in response to the 2011 Canterbury earthquakes. At the time, it reflected an understandably cautious view towards managing future earthquake risk.
Presently, territorial authorities are required to identify potential earthquake-prone buildings (EPBs) and issue notices to building owners. On receipt of such a notice, an owner is required to get an independent engineering assessment, which confirms the building’s status as an EPB or confirms that the building is not an EPB. The engineer will rate that building on a percentage scale by comparison to the new building standard (NBS).
A building is currently classed as earthquake-prone if it achieves an overall NBS rating of less than 34%. Engineers reach this figure by giving separate NBS scores to individual building components. The overall NBS is determined by the building’s ‘lowest individual score which causes a significant life safety risk’. Owners of EPBs are required to remediate or demolish within set timeframes. In the meantime, EPBs are recorded on MBIE’s public register.
Why the overhaul?
The government’s review of the EPB regime was announced in August 2024. This announcement was not unexpected as a 10-yearly review of the regime had always been intended – although it was a few years early.
Significant issues with the existing system
- Unintended economic impacts: Many building owners have been unable to remediate within the statutory timeframes but equally cannot afford to demolish. The result has been a slew of vacant buildings that cannot be legally occupied but also have no remedial work in progress.
- Lack of consistency: The existing system depends heavily on the judgement of individual engineers assessing individual buildings. These assessments are nuanced as they are based on a cumulative analysis of individual building components. Perhaps unsurprisingly, results can differ wildly from engineer to engineer, leading to some inconsistency across the broader system.
- Public misunderstanding of NBS: Tenants have exhibited a conservative tendency towards NBS ratings and are often hesitant to lease buildings with anything less than 70–80% NBS, even though the required standard is only 34%. This means that, even following a successful remediation, building owners may still be disadvantaged by the regime.
NBS ratings scrapped in favour of a targeted approach
MBIE research found that New Zealand is currently the only country that assesses every building type and gives everything a seismic rating. This ‘one size fits all’ approach does not account for different variables of risk such as the degree of seismic risk in a particular locality, the type of vulnerabilities exhibited by a particular building type and the severity of consequences associated with particular vulnerabilities.
To better align with international practice, the government’s new risk-based approach will allow for different rules in different regions and targeted remediation requirements to lower the costs of compliance.
Significant features of the proposed regime
- No regulation of EPBs in low-risk regions: Buildings will automatically be excluded from the EPB regime if they are in regions where the earthquake risk is low – for example, Auckland, Northland and the Chatham Islands.
- Targeted remedial requirements: Assessments of concrete buildings with three storeys or more will now be focused strictly on ‘critical vulnerabilities that can lead to collapse’. If a building consent application relates only to seismic remediation work, there will no longer be a requirement to meet the Building Code provisions relating to fire and disability access.
- Fewer priority buildings: Buildings classed as priority under the regime must be remediated twice as quickly. However, following the government’s changes, a building will only be considered priority if it could block emergency services routes or it is an unreinforced masonry building with parts that could fall on high-use footpaths or roads. Hospitals, fire stations and schools are no longer automatically designated with priority status.
- A new measure to replace NBS: The NBS will be scrapped and replaced. The government has not said what new standard will replace it, but the Minister for Building and Construction Chris Penk has previously indicated he would prefer a simple binary rating. It is unclear what that would look like in practice.
- New extension options: Owners of EPBs will now be able to apply to territorial authorities for extensions on remediation or demolition deadlines, up to a cumulative total of 15 years.
Balancing risks – will the new approach strike the right balance
There are self-evident benefits to the proposed reforms. Many building owners will find that remediation is now achievable where it was previously too complex and far too costly. This may have a net positive impact economically, freeing up property that was formerly classed as unusable and creating new work for the construction sector.
At the same time, the overhaul also presents new risks. For example, a binary approach to classifying buildings as earthquake-prone may leave less room for nuance in an area that is notoriously complex. Likewise, a targeted approach to remediation will need to be accompanied by precise guidance on what is necessary for owners to meet the standard if it is to avoid further frustration and inconsistency.
There is also potential here for confusion and yet more unintended consequences if the reform fails to establish a clear and practical translation from %NBS to its successor. Existing contractual clauses – particularly in commercial leases – dealing with seismic strength could become unworkable, leading to a flood of contract disputes and, most likely, to unsatisfactory outcomes for tenants.
Similarly, there is a risk that the overhaul creates gaps between what was formerly required for a contractor to certify %NBS and what is now required to certify under the replacement standard.
Essentially, the overhaul appears to be a move in the right direction – but it will still need to be careful and considered if it is to be a stable successor to the NBS status quo.