The construction market is governed by two sources of law: legislation and common law. English cases and cases from the wider commonwealth (primarily Australia and Canada) are influential, but non-binding, in New Zealand.
Key legislation applicable to the New Zealand construction industry includes the following.
The Building Act 2004
The Building Act 2004 (Building Act) sets out the rules for the construction, alteration, demolition and maintenance of new and existing buildings in New Zealand. Its purpose is to provide for the regulation of building work and set performance standards to ensure that buildings are safe, durable and healthy for people to use.
The Building Act is aimed at improving regulatory control over, and encouraging better practices within, the building design and construction industry. The Building Act attempts to assure building owners that their buildings will be safe, durable and weathertight without creating undue barriers to construction.
The Building Code
The Building Code (the “Code”) is contained in regulations under the Building Act 2004. The Code is a set of performance-based standards that buildings must meet. It is not prescriptive in how work is done, but sets out performance criteria that buildings must meet, such as structural stability, fire safety, access, moisture control, durability, services and facilities, and energy efficiency.
Under the Building Act, all building work must comply with the Code, even if it does not require a building consent.
The Construction Contracts Act 2002
The Construction Contracts Act 2002 (CCA) was introduced to reform the law relating to construction contracts. The stated purpose of the CCA is to:
As is the case with similar legislation in other commonwealth jurisdictions, the CCA mandates a “pay now, argue later” scheme to encourage prompt payment of funds, with disputes to be resolved later. The “pay now, argue later” regime in the CCA is intended to prevent cash flow issues throughout a project, reduce project delays and encourage swift dispute resolution. The CCA also includes strict rules on the retention of money provisions. These rules are designed to protect subcontractors and other parties lower in the contractual chain, by ensuring that retention money (money withheld by a principal or head contractor as security for the performance of a subcontractor’s obligations) is held safely and can be recovered if needed.
The CCA has undergone several changes since its inception. These include:
Arbitration Act 1996
The Arbitration Act 1996 governs the process of arbitration in New Zealand and provides a framework for resolving disputes through arbitration, a form of alternative dispute resolution. The Arbitration Act applies a structured and enforceable approach to resolving disputes outside the traditional court system, with a particular focus on commercial and contractual matters, including construction contracts. See 10.2 Alternative Dispute Resolution.
The Resource Management Act 1991
The Resource Management Act 1991 (RMA) encourages sustainable use of the environment by the construction industry, through the use of natural resources and regulation of land use and infrastructure where this use could otherwise result in harm to the environment. The RMA governs the process by which a resource consent is granted for a construction project, if the construction project will use natural resources or carry out environmentally impactful activities.
The Health and Safety at Work Act 2015
The Health and Safety at Work Act 2015 (HSWA) applies to all workplaces and is aimed at improving health and safety outcomes. It does not specifically target the construction industry but is particularly relevant as construction is a highest-risk sector with respect to workplace injuries, illnesses and fatalities.
The HSWA aims to ensure safer working conditions, prevent harm and clarify responsibilities on complex and hazardous sites. The HSWA also controls how the health and safety standards are measured and how breaches of the HSWA are enforced.
New Zealand has several standard industry contracts. Use of standard contracts is not mandatory.
New Zealand Standards
New Zealand Standard (NZS) construction contracts are the most common standard contracts and are provided by Standards New Zealand. Parties often include special and specific conditions that amend and clarify the general conditions, to tailor the contracts to their specific needs.
Other Standard Contracts
Other standard contracts include the following.
International Standard Contracts
Some projects may use internationally recognised standard contracts. These are useful as they have a proven track record internationally and may be utilised in New Zealand where overseas parties are involved. They may also be required by financers or where cross-border financing or supply chains are involved. Examples include the following.
The employer, often referred to as the “principal”, may be one of a number of different types of entity. The most common employers in New Zealand for large projects are limited liability companies, limited partnerships and the Crown (central government). Other examples include territorial authorities, educational institutions, charitable organisations, incorporated societies, family trusts and individual person/s.
The primary responsibilities of an employer are:
The primary rights of the employer are as follows:
The employer will have a contractual relationship with the contractor. Most contracts allow the contractor to subcontract some of its works, and the contractor and subcontractor will be parties to a subcontract agreement. Contractors are not relieved from their responsibilities to the employer if they subcontract works to third parties.
Contractors in New Zealand can vary in size. There are large, listed companies (national and international) operating in New Zealand, along with much smaller private companies and individual builders.
The primary responsibilities of the contractor are to complete the works:
The primary rights of the contractor are as follows:
As set out in the foregoing, contractors are not relieved from their responsibilities to the employer if they subcontract some of their works. There is normally a clause to this effect in the contract. Further, in Body Corporate 189855 v North Shore City Council (Bianco Apartments) [2014] NZHC 612, the court held that, where a contractor agrees to be responsible for acts or omissions of its subcontractors and has sufficient control over and capacity to influence the quality of the construction, the contractor will owe a non-delegable duty of care to ensure that the building work complies with the Code and is free from defects.
Subcontractors, like contractors, can vary in size. Subcontractors typically specialise in a specific trade.
The primary responsibilities of subcontractors are similar to the obligations of the contractor – ie, it must complete the works:
The primary rights of the subcontractor are to:
Subcontractors generally have no contractual relationship with the employer; however, depending on the trade, subcontractors are sometimes required to provide a warranty to the employer for their works or for materials used.
Subcontractors are generally engaged via a subcontract agreement through the contractor. While the contractor is not relieved from their obligations to the employer if they subcontract, the contractor will often try to pass risk on to the subcontractor for its relevant works.
It is rare for funders and subcontractors to have any direct contractual relationship. See 2.4 The Financiers.
Typical financiers in New Zealand may be national or international banks, private equity firms, private individual funders or central and local government. Financiers may accept a share in the land on which the project is based, or in any building work done thus far, as a guarantee of any loans made for the project.
The rights and obligations of a financier will be set out in the finance and security documents. Generally, the primary obligation of the financier is to provide the funding to the employer. The financier may have a right to take security over the land and/or building. They may also receive the benefit of a guarantee for repayment of financing provided by a parent and guaranteeing company.
While the funder will not be party to the construction contract, tripartite deeds are relatively common. A tripartite deed will be between the employer, contractor and financier. It aims to protect a funder’s security by creating a contractual relationship between the lender and contractor. It may include provisions for resolving disputes and ensuring completion of the project.
It is rare for funders and subcontractors to have any direct contractual relationship. See 2.3 The Subcontractors.
Architects, architectural draftspersons and engineers are commonly professional designers in New Zealand – they may be operating as incorporated companies, partnerships or individuals. They are responsible for preparing the design (via plans and specifications) for the building work.
A designer has a primary responsibility under the Building Act to ensure that their design will result in works that are compliant with the Code. Generally, their contract will include a clause requiring the designer to prepare a design using reasonable care and skill. A designer also owes a duty of care to undertake its design work with the reasonable care, skill and diligence expected of its profession.
The relationship between the designer, the employer and the contractor will depend on the contract. Using 3910, the designer would be party to a consultancy contract with the employer (eg, using the CCCS agreement discussed in 1.2 Standard Contracts) and not party to any contract with the contractor.
Under 3916, the designer will have a direct relationship with the contractor. Either the contractor has an in-house design capability, or it will subcontract the design to someone else. In these scenarios, the employer and designer do not have a direct contractual relationship. However, the designers still owe a duty of care to owners and subsequent purchasers.
In construction contracts, the scope of works outlines the building work to be completed. This will vary depending on whether the contract is build-only or design and build. The scope of works is more detailed for build-only contracts, generally including detailed drawings, plans and specifications for materials, and sometimes bills of quantities.
In accurately determining the scope of works, parties should be conscious of any order of precedence clauses setting out which documents supersede others. This is helpful in scenarios where there is an inconsistency between documents that set out the scope of work.
A variation is a change to the scope of works and could be an addition, a substitution or omission or a change to the quality and type of materials used.
Most contracts will include specific processes for instructing and valuing variations.
Normally, variations will be at the discretion of the principal, and the contract often requires all variations to be ordered by the principal in writing. This is helpful to avoid disputes about what is and is not a variation. Most contracts will include specified events or circumstances that are deemed to give rise to a variation (even within an order in writing). The most common example is unforeseen ground conditions.
Parties should be wary of clauses that limit a contractor’s ability to claim variations, such as time limits or other conditions that are “conditions precedent” to the contractor’s right to a variation.
The process for valuing variations will depend on the contract. Valuation will normally be by agreement, by referring to a schedule of prices or by assessing the net cost (ie, the amount actually paid by the contractor). Often, there will be an allowance for overheads and profit.
The allocation for design responsibility is determined by the contract.
As discussed in the foregoing, 3910 is the most used build-only contract, which means that the employer is responsible for any errors in the design (not the contractor). There are often some exceptions where the contractor will have some design responsibility, but this is normally limited to temporary works – eg, the design of scaffolding or propping. Even where a contractor is not responsible for design, it usually assumes the buildability risk in relation thereto.
The most used design and construct contract is 3916, under which the contractor is responsible for the design and construction, and design risk lies with the contractor.
The employer’s role during construction is limited to making payment of scheduled amounts on time, providing unimpeded access to the site and providing further information to the contractor upon request.
As is the case with other commonwealth jurisdictions, responsibility for completing construction lies with the contractor and subcontractors who are responsible for procuring materials, deciding how to undertake the works and then performing the works.
The principal is generally responsible for the site conditions, although the contractor will owe obligations to the employer to take care of the works and the site during their possession. This will depend on what has been agreed by the parties in the contract.
For geotechnical risks, the employer will generally have the risk of unforeseen ground conditions, but this can vary significantly depending on the contract. This is similar for pollution/contamination and archaeological finds. Rules regarding pollution and contamination are governed by the RMA and the local authority’s district plan. Rules regarding archaeological finds are governed by the Heritage New Zealand Pouhere Taonga Act 2014.
All building work in New Zealand is required to comply with the Code. Most building work also requires a building consent that confirms that the work proposed complies with the Code, although some “low-risk” work is exempt from requiring a building consent. Obtaining a building consent is usually the employer or designer’s responsibility, but the contractor may need to obtain its own consent for temporary works.
Other common permits are:
The party responsible for obtaining the CPU and/or CCC will vary based on the terms of the contract.
An employer is generally responsible for maintenance after the works are complete. The employer may either maintain a building themselves or enter into maintenance contracts with third parties.
Various functions, such as operation, finance and transfer, can be directed by the employer to the contractor or third parties, depending on the specific contractual agreements and the nature of the project – see 2.4 The Financiers and 3.7 Maintenance.
Materials and or equipment may need to be tested as part of the commissioning and completion process to ensure that they function and meet requirements. Depending on the contract, testing will normally be the contractor’s responsibility, although the employer and/or the employer’s representative will be able to attend.
Under 3910, the engineer to the contract can require that any materials or work forming part of the contract works be tested or inspected. The engineer may exercise this power at any time until the end of the defect notification period.
Testing is often undertaken throughout the works and on completion. Where works are required to be inspected and tested, the contractor will need to ensure that these are not covered up or out of view.
Most contracts will include provision for determining when a project is complete. A common completion process will have two stages:
These stages are normally accompanied by the issuing of a certificate.
The defects liability period, also referred to as the “defects notification period”, will be specified in the contract. During this period, a contractor is required to remedy any defects (at its expense) that are notified to it by the employer (or employer’s representative). The period generally starts running from practical completion.
Defects liability periods commonly range from three months to one year. During this period, the contractor also has the first right of remedy, meaning the employer cannot do the works themselves and then ask the contractor to pay for them (unless the contractor has failed to do the work within a reasonable period).
Contractors are often incentivised by the application of a retentions regime, where the employer holds back some of the contract price until the defect notification period expires.
Beyond the contractual defect liability period, there are also statutory periods that cannot be contracted out of. The Building Act has a “longstop period”, whereby building work is covered by a ten-year warranty that the work is carried out with reasonable care and skill. During this time, the employer cannot compel the contractor to return to the site to remedy defects, but it is able to bring proceedings against a contractor where the contractor has not carried out work with the requisite skill and care.
The Supreme Court in Beca v Wellington City Council [2024] NZSC 117 has now confirmed that the Building Act’s ten-year longstop does not apply to third-party contribution claims. This means that:
The method of establishing the contract price will vary on a contract-to-contract basis, but the two most common structures are as follows.
Payment structures are based either on progress or milestones. Progress payments are based on the amount of completed work (including claims for variations) whereas milestone payments are made at specified stages of a project. Milestone payment structures are common in residential build or simple projects where there are discrete phases (eg, consent approved, foundation works complete, framing, exterior works, interior works, practical completion and final completion).
Indexation is the process by which the pricing of assets is adjusted based on a financial index. In construction contracts, indexation typically refers to adjusting the prices of goods and/or services in line with inflation, reflecting the changing purchasing power of the New Zealand dollar.
NZS contracts all include a “Cost Fluctuation Adjustment by Indexation” appendix. The default indexation structure makes an adjustment of 40% against the Labour Cost Index, and 60% against the Producers Price Index. These indexes are published by Statistics New Zealand on a quarterly basis.
This provision in NZS contracts is stated to apply “unless otherwise specifically provided in the Special Conditions”, allowing parties to opt out of the cost fluctuation provisions (and which is common).
Cost fluctuation provisions may be more common during periods of high-cost volatility and where the price of material may vary significantly due to national or international factors. If the contract does not expressly allow claims for cost fluctuation under the contract, then the contractor cannot recover the costs it incurs where there are increases in costs (unless there is a variation).
The contract will likely include provisions regarding late or non-payment, including whether interest is payable and any rights and obligations of the contractor in the event of non-payment.
The CCA includes a default regime for payment claims that are not disputed via a payment schedule, or where a payment schedule is late/unpaid. This allows the contractor to suspend works after giving notice to the employer or to issue a statutory demand for the unpaid amount.
Advance payments may be used to provide cash flow support to a contractor before work starts. They are commonly used to cover high initial costs or where there is a long lead time to the project, but the employer wants to lock in the costs of materials. Delayed payments might be used where the employer needs more time due to financial constraints or disputes.
Interim payments or progress payments are more common and are made throughout the project based on the amount of work completed, often at regular intervals (eg, monthly or bimonthly).
Typical means of invoicing in construction projects include issuing normal invoices/tax invoices or issuing payment claims under the CCA.
A tax invoice will generally include a date, a description of the work (goods and/or services) and a date for payment.
To be a valid payment claim under the CCA, a claim needs to:
The responsibility for planning and programming usually rests with the contractor. A programme is often prepared by the contractor at the outset of the project, and some contracts include requirements for the contractor to update and report on the programme at regular intervals throughout the works.
A construction programme will set out the intended start and finish dates, a proposed sequence of works (with start and end dates for each part of the work) and the critical path.
Contracts will generally specify a process for where/if delay occurs. Generally, the contractor will need to notify the employer, and the employer will assess the cause and the extent of delay and determine whether an extension of time is appropriate.
Common grounds for a valid extension of time include:
If the contractor has caused delay, then contracts commonly provide for damages to be paid for the period of delay, with contracts often specifying the liquidated damages per calendar day or working day of delay.
Conversely, where the employer is responsible for delay, the contract will normally include provision for the contractor to have more time to complete the works and also to receive payment for costs (if the cause of the delay gives rise to time-related costs). See 5.4 Extension of Time.
As set out in 5.2 Delays, contracts normally include provision for circumstances that will qualify the contractor for an extension of time, such as:
It is common for contracts to require contractors to issue notices for extensions of time, setting out the contractual basis for the extension of time claim.
Measuring an extension of time is normally done with consideration of the impact the delaying event has on the critical path. There are a number of different methodologies, and contracts do not normally specify what methodology should be used. The Society of Construction Law – Delay and Disruption Protocol provides helpful guidance for delay analysis experts, but ultimately an extension of time claim will rely on evidence such as the programme, site reports, progress reports and other evidence of delay (eg, instructions, correspondence, photos or timesheets).
A force majeure event is an unforeseen, extraordinary event that is beyond anyone’s control. They are unpredictable, unavoidable and normally outside the parties’ control. Common examples are natural disasters, war, terrorism, trade restrictions and pandemics.
It is possible to contractually limit or exclude certain circumstances from being qualified as force majeure. In NZS contracts, force majeure clauses are not commonplace but there is relief for events that would be considered force majeure events (eg, weather, strikes and natural disasters are all grounds for an extension of time in 3910 and 3916).
The typical legal consequences of a force majeure will depend on the contract but may include the suspension of obligations, award of extensions of time and possible financial compensation, depending on the provisions.
In extreme cases, and if there are no applicable clauses in the contract, the law of frustration of contract may apply. See 5.6 Unforeseen Circumstances.
Whether relief for unforeseen circumstances is available will be determined by the contract.
A contract may be frustrated if performance of the contractual obligations becomes impossible or radically different from what was contemplated, provided neither party is at fault. Frustration will only apply where the main purpose of the contract can no longer be achieved. This is a high threshold. It will not apply if performance of the contractual obligations merely becomes more difficult or expensive. If a contract is frustrated, it will terminate immediately. The Contract and Commercial Law Act 2017 sets out certain consequences if a contract has become impossible to perform or has been otherwise frustrated, including matters relating to payment.
In a construction context, disruption refers to a disturbance or interruption to the planned sequence or progress of work, resulting in delays or inefficiencies in the execution of the project. Unlike force majeure, which typically involves external events beyond the control of the parties, disruption often involves interference or changes that are caused by the contractor, employer or other project stakeholders (designers or subcontractors, for example).
Disruption is different to delay; see 5.2 Delays. Because of the difficulty in assessing potential productivity and efficiency, entitlements for contractors under disruption claims can be hard to quantify.
It is generally not a contractual ground for an extension of time, and disruption claims will commonly be excluded in construction contracts.
Proving and measuring disruption requires establishing a clear link between the disruption and the delay or cost increases. Contractors need to show that the disruption caused a deterioration in productivity and that it led to either a delay in project completion or additional costs.
Contractors cannot contract out of the implied warranties in the Building Act for residential building work (whether there is a contract on foot or not). Parties also cannot contract out of obligations owed under the Consumer Guarantees Act 1993, Fair Trading Act 1986 and HSWA. These non-excludable liabilities are typically related to public policy, consumer protection and fairness in trade.
Wilful misconduct and gross negligence are not terms unique to the construction industry in New Zealand. Negligence is a foundational tort in New Zealand, and the phrases “gross negligence” and “wilful misconduct” are used to describe increasingly bad behaviour. “Wilful misconduct” is used to describe instances where a wrongdoer acts with full awareness of their actions and, often disregarding consequences, behaves with full awareness of their actions.
Where contracts include clauses seeking to limit a party’s liability, the clause will generally specify that it cannot apply to misconduct or gross negligence.
It is possible for parties to contractually limit their liability. This was not a common feature of construction contracts until recently – ie, with the introduction of the new form of 3910 in 2023, which introduces a new provision enabling contractors to limit liability. This is a welcome development in the construction industry in New Zealand.
Consultancy agreements often include contractual terms limiting a consultant’s liability. A common example is a clause that limits a party’s liability to “[…] five times the fee, with a minimum amount of $500,000 and maximum liability of $2,000,000 […]”. For design consultants and their insurers, limitation of liability clauses are a crucial component of risk allocation and are often relied on in defending claims.
The High Court Tauranga City Council v Harrison Grierson Holdings Ltd & Constructure Auckland Ltd [2024] NZHC 714 determined that the limitation of liability clauses in the CCCS agreement and the Association of Consulting and Engineering New Zealand/Institution of Professional Engineers New Zealand (ACENZ/IPENZ) Short Form Agreement operated to limit an engineer’s liability arising under the Building Act 2004 and the Fair Trading Act 1986 (FTA), and for negligent misstatement.
The Consumer Guarantees Act 1993 also provides limits on limitation of liability clauses, and a contractor cannot limit its liability for completing works with reasonable skill and care. This only applies to “consumers”, not commercial parties.
Indemnities are common in New Zealand and are used to manage and limit risk between the parties. Parties are free to negotiate indemnities as they see fit.
Typical subjects for indemnities are:
However, there are public policy reasons preventing indemnities for fines or court imposed penalties. For example, the HSWA prevents a person from paying to another person, or receiving from another person, an indemnity for a fine or an infringement fee under the HSWA.
Like indemnities, guarantees are a common tool in construction contracts in New Zealand, allowing parties to allocate risk as they see fit. They are not mandatory.
Common guarantees are performance guarantees, like a bank guarantee or a parent company guarantee. The guarantee ensures that if a party fails to meet its performance obligations, the guarantor will compensate the other party.
The insurances typically taken out are:
When a party to a construction contract becomes insolvent, the other party is typically entitled to terminate the contract or suspend work.
If a contractor becomes insolvent, the employer generally has the right to take over the project or hire another contractor to complete the work. The employer may also be entitled to claim on performance bonds to mitigate any losses incurred.
If the employer becomes insolvent, the contractor may be entitled to claim for unpaid amounts. Provisions for employer insolvency in contracts usually allow the contractor to suspend work or terminate the contract if payments are not made. Additionally, the contractor may have rights against the funder under a tripartite deed.
Payment clauses in construction contracts may also address non-payment in the event of insolvency, often permitting the suspension or withholding of payments to the insolvent party.
Through guarantees and indemnities, parties can redistribute risk under construction contracts as they see fit. As discussed, these guarantees and indemnities are subject to certain statutory limits. Since the publishing of the Abrahamson principles in 1973, risk in the New Zealand construction industry has been shared on the principle that “risk should be allocated to the party best placed to bear it”. In many cases, this meant that principals attempted to shift risk to contractors, as principals argued that the risks were within the contractor’s control, and that it was more efficient to place this risk with the contractor, as they would be responsible for remediating any issues.
In more recent years, the construction industry has attempted to take a broader approach than that encouraged by the Abrahamson principles, and to allocate risk in an accurate, realistic and transparent way. Contractors are also entitled to charge premiums in their fees for any risks allocated to them that are above the statutory minimums.
It is common for construction contracts to include key personnel clauses whereby a party agrees to retain key personnel and obtain consent from the other party to change any of the defined key personnel. These clauses are included to ensure consistency across a project. Breach of any key personnel clause may result in damages
Under NZS contracts, contractors are prohibited from entering into subcontracts that “wholly or substantially” outsource all of the works to a subcontractor without written consent from the principal. Subcontracting generally requires the employer’s consent.
As set out in the foregoing, subcontracting any of the contract works does not relieve the contractor from their liabilities and obligations under the contract.
See 2.2 The Contractor and 2.3 The Subcontractors.
Typically, each party will retain their intellectual property rights.
3910 includes indemnities from the employer to the contractor against any claims arising from a breach of intellectual property law by the principal or engineer.
Similarly, 3910 includes indemnities from the contractor to the principal and the engineer to the contract against any breach of intellectual property law.
General damages are available for breach of contract in New Zealand.
Common remedies for the employer include:
Common remedies for the contractor include:
Common remedies for the designer include:
Specific performance may also be sought where a contract includes clear obligations and compensation by way of damages is insufficient. This requires the party in breach to perform their obligations under the contract as originally agreed.
As discussed in the foregoing, there are statutory time limits on bringing legal proceedings in New Zealand, and it is common for parties to introduce caps on damages that a party will pay in the event of a breach. See 6.1 Exclusion of Liability and 6.3 Limitation of Liability.
Parties may also seek to include time limits for liability in contracts. For example, the CCCS includes a general condition limiting liability for loss or damage after a period specified by the parties in special conditions.
Sole remedy clauses specify that, in the event of a breach or dispute, one party’s only recourse or remedy is limited to a specific action or form of relief, rather than allowing for a broad range of remedies.
The most common sole remedy clauses in New Zealand construction contracts are:
Forms of damage that are commonly excluded are as follows:
Retentions are common in construction contracts, and the requirements for retentions are governed by the CCA. The CCA’s retention provisions have been amended in recent years to give greater protections to subcontractors, and to introduce mandatory requirements and regular reporting. See 1.1 Governing Law.
Under the CCA, the contractor has a right to suspend works for non-payment.
A party’s ability to terminate a construction contract will vary based on the contractual terms. Most contracts will set out a process for terminating a contract, including notification to the defaulting party and providing an opportunity to remedy the default before proceeding with termination.
Termination is generally permitted for frustration and default. See 5.6 Unforeseen Circumstances.
Other examples of default giving rise to a right to terminate are:
If a party wrongfully terminates a contract (either without cause or without following the contractual process), it may be liable to pay damages.
In the event that the employer terminates the contract, as is the case in other commonwealth jurisdictions, damages payable to the contractor are often quantified by reference to the contractor’s loss of profit on the unperformed portion of the remaining works.
In the event that the contractor terminates the contract, damages payable to the employer are often quantified by reference to the cost to the employer of having an alternative contractor complete the remaining works.
Construction contract disputes can be resolved at all court levels in New Zealand. The district court has jurisdiction to determine disputes quantified at up to NZD350,000, the High Court determines disputes exceeding NZD350,000 and the court of appeal and Supreme Court are appellant courts.
However, construction contracts commonly include dispute resolution provisions, which in turn include mediation followed by private arbitration as the agreed form of dispute resolution.
The CCA outlines a statutory adjudication process that is available to all parties to construction contracts in New Zealand. It has no monetary limits for claims, and it is a private and confidential dispute resolution process. The CCA is prescriptive, and failure to comply with the mandatory requirements can be fatal to a claim or defence. Decisions by adjudicators are binding, and the CCA sets out the requirements and timeframes for payment. Parties may ultimately proceed to litigation or arbitration for final determination of the dispute but there is still an obligation to pay an adjudication award.
There are several alternative dispute resolution options in New Zealand. Construction contracts commonly include dispute resolution clauses that dictate a process to be followed in the event of a dispute, including the steps that must be taken and the order in which they should be taken.
Even when construction contracts do not require arbitration to be used for dispute resolution, it may be favoured by parties due to the advantages it offers in terms of speed, cost-effectiveness, privacy, the expertise of the arbitrator (and the ability to agree an arbitrator) and flexibility. Further, arbitration typically provides a final and binding decision, which means that the arbitral award is legally enforceable with limited grounds for appeal.
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Introduction
New Zealand’s construction sector is undergoing a period of significant legal and regulatory change, reshaping how infrastructure is planned, financed and delivered. Climate resilience, housing affordability and economic productivity are now central themes in a wave of government initiatives aimed at modernising the country’s construction laws.
The response to recent disasters, including Cyclone Gabrielle and the 2023 Auckland floods, has accelerated the push for robust infrastructure that can withstand future shocks. At the same time, pressure to meet renewable energy targets and address housing shortages is driving reforms across environmental regulation, planning law and public investment strategies.
New legislation such as the Fast-track Approvals Act and the upcoming Climate Adaptation Act signals a shift towards faster, more co-ordinated project delivery. Meanwhile, long-standing frameworks like the Resource Management Act and the Public Works Act are being reworked to better support large-scale development. Changes to infrastructure funding mechanisms, including increased borrowing limits for local councils and a streamlined Overseas Investment Act, aim to unlock capital for critical projects.
Taken together, these developments mark a turning point in construction law, one defined by urgency, ambition and a growing recognition of the sector’s central role in New Zealand’s future resilience and prosperity.
National Infrastructure Plan
The development of New Zealand’s National Infrastructure Plan is progressing with significant steps being taken by the Infrastructure Commission. The plan, which aims to guide infrastructure development over the next 30 years, includes four main components: an Infrastructure Needs Assessment, a strengthened National Infrastructure Pipeline, the Infrastructure Priorities Programme (IPP), and priority reforms to improve infrastructure selection, investment, delivery and maintenance.
The plan is designed to provide greater stability and foresight in infrastructure planning, funding and delivery. It seeks bipartisan support and involves consultation with various stakeholders, including government bodies, Māori/iwi organisations, the private sector and the public.
Feedback on the initial discussion document, Testing our thinking, highlighted several systemic challenges such as the need for strategic planning beyond short-term political cycles, resilience to climate change, workforce capability, stable funding mechanisms, and improved asset management. The consultation process, which ran from November to December 2024, received over 100 responses from a diverse range of stakeholders.
Resilience and natural hazard adaptation
New Zealand’s construction and infrastructure policy has seen a marked shift towards integrating resilience and climate adaptation into planning and investment decisions. Following the significant damage from Cyclone Gabrielle and the Auckland floods in 2023, the government has placed greater emphasis on future-proofing infrastructure.
Key initiatives include updates to the National Adaptation Plan and flood management standards, along with the development of new legislation setting out a climate change adaptation framework. This legislation, which is currently under consultation, would introduce mechanisms for managed retreat, new insurance frameworks for high-risk zones and expanded local government funding options.
Central and local governments are also moving toward a more co-ordinated approach to resilience planning, with government departments and agencies beginning to incorporate stress-testing and future climate scenarios into their planning processes.
Despite increased funding commitments, the sector continues to face challenges, including insurance accessibility in hazard-prone areas and the need for consistent application of risk-based planning across regions. Overall, resilience is becoming a central consideration in the design and regulation of infrastructure projects throughout New Zealand.
Renewable energy
New Zealand is making significant strides in renewable energy development, as evidenced by recent legislative and policy initiatives. The government has unveiled plans to shape the future of the country’s electricity sector, focusing on creating a more competitive and fuel-agnostic market that works in the long-term interests of consumers. This includes updating the wholesale electricity market to accommodate an increasing proportion of electricity from intermittent renewable sources and ensuring efficient investment in transmission and distribution networks.
In a move to bolster renewable energy capacity, the government has allocated up to NZD60 million from the Regional Infrastructure Fund to explore supercritical geothermal technology (SCGT). This initiative, led by GNS Science and the Ministry of Business, Innovation and Employment (MBIE), involves the design and cost analysis for drilling exploratory deep wells in the Taupō Volcanic Zone. SCGT has the potential to produce significantly more energy than current methods, which could enhance New Zealand’s renewable energy capacity and reduce emissions.
Drawing lessons from the UK’s success in offshore wind development, New Zealand is considering similar strategies to accelerate its renewable energy projects. The UK’s approach involved strong government policy, clear targets and electricity market reform, which provided revenue certainty for low-carbon energy generation. These measures have made offshore wind projects more financially viable and could serve as a model for New Zealand’s renewable energy sector.
Additionally, the Offshore Renewable Energy Bill has been introduced to establish a regulatory regime for the sector. This Bill aims to provide clarity around permit regimes and decommissioning obligations, which are critical for the successful establishment of offshore renewable energy projects. The Bill also emphasises the importance of engaging with iwi and the potential for partnerships, recognising New Zealand’s competitive position in the global renewable energy market.
Resource Management Act reforms
The New Zealand government is undertaking a significant overhaul of its resource management system, with reforms aimed at streamlining processes and enhancing economic growth. This reform is being executed in three distinct phases, each targeting specific aspects of the Resource Management Act (RMA) and its associated legislation.
Phase one: repeal of existing acts
The first phase of the reform involved the repeal of the Natural and Built Environment Act and the Spatial Planning Act, which was completed in December 2023. This step was crucial in clearing the path for more targeted amendments and the eventual introduction of new legislation to replace the RMA.
Phase two: targeted amendments
Phase two focuses on implementing targeted changes to address pressing issues within the current resource management system. This includes the introduction of the Fast-track Approvals Act. Additionally, two bills have been introduced to amend the RMA, aiming to simplify and expedite processes for infrastructure and housing development, as well as to reduce regulatory burdens on the primary sector.
The first of these amendments, the Resource Management (Freshwater and Other Matters) Amendment Bill, was passed in October 2024. It removed certain obligations from resource consenting and repealed contentious regulations to reduce costs for farmers.
Phase three: comprehensive replacement
The final phase will see the complete replacement of the RMA with new legislation. This new system will be guided by the principle of property rights enjoyment, allowing more freedom for property owners while ensuring environmental protection. The government plans to introduce the Planning Act and the Natural Environment Act to replace the RMA by the end of 2025, with the aim of passing them into law by mid-2026. With the next general election due by December 2026, it remains to be seen whether other political parties’ campaigns will introduce uncertainty around the government’s reform agenda.
An Expert Advisory Group has been established to develop a blueprint for this new system, drawing on expertise in resource management law, planning and te ao Māori. Their recommendations will form the basis of the new legislative framework.
These reforms represent a significant shift in New Zealand’s approach to resource management, with implications for construction law and practice. By streamlining processes and reducing regulatory burdens, the government aims to foster economic growth and development while maintaining environmental standards.
Housing/residential construction
The Residential Development Underwrite (RDU) programme, launched in October 2024, is designed to stabilise the construction industry by committing to purchase a specified number of properties in a development if they are not sold, providing certainty of finance for developers without the need for pre-sales, which may be difficult to obtain in periods of high interest rates. The object of this initiative, which can be suspended and re-engaged by the government as required, is to ensure the continuation of housing projects in high-demand areas like Auckland, Hamilton and Wellington, and smooth the impact of economic fluctuations on housing supply.
In parallel, the government is considering reforms to the building consent system to enhance efficiency and consistency. Proposed changes include consolidating councils for building control functions and establishing regional Building Consent Authorities (BCAs). These reforms aim to streamline the process, reduce costs, and improve the overall efficiency of housing development.
Kāinga Ora – Homes and Communities, New Zealand’s public housing agency, is refocusing on its core mission to provide quality social housing. The agency plans to add new homes and renew existing ones, emphasising sustainable management and improved tenancy practices. This refocus is expected to enhance the quality and availability of social housing, contributing to long-term financial sustainability.
Transport
The government has approved a NZD226.2 million investment package for road improvement projects, focusing on enhancing the resilience of state highways and local roads against severe weather events. This initiative is part of a broader effort to ensure that critical transport routes remain operational and meet the needs of communities and industries across the country.
In Wellington, the New Zealand Transport Agency Waka Kotahi (NZTA) has confirmed the construction of a second Mt Victoria Tunnel and upgrades to State Highway 1 (SH1) as preferred options for the next steps in the Wellington Improvements project. These upgrades aim to reduce congestion and enhance economic growth by improving travel times and the reliability of bus services.
To accelerate transport investment, the government has introduced new tolling policies, which include corridor tolling, automatic toll adjustments linked to inflation, and improved toll collection systems. The aim is to share construction costs with road users, enabling faster and more efficient development of major road projects.
Additionally, the government has announced the advancement of two significant regional roading projects. Originally scheduled to begin in 2027, upgrades to SH76 Brougham Street in Christchurch and the realignment of SH2 through the Waikare Gorge have been brought forward. These projects are expected to enhance connectivity and address infrastructure vulnerabilities.
In the rail sector, the completion of the Papakura to Pukekohe rail electrification project marks a significant milestone. This development allows for direct, quieter and eco-friendly journeys on modern electric trains, improving commuter travel in Auckland’s southern regions.
The government is also investing NZD200 million to remove level crossings in Auckland’s Takanini and Glen Innes, replacing them with grade-separated crossings. This initiative aims to maximise the City Rail Link’s ability to speed up journey times and reduce traffic interruptions.
Finally, the government has launched a global search for new ferries to replace the Interislander fleet by 2029. This initiative includes engaging international shipyards and welcoming alternative proposals for ferry services, ensuring that New Zealand’s maritime transport infrastructure remains robust and efficient.
Infrastructure funding and financing
The government has announced plans to streamline the Overseas Investment Act, making it more permissive to foreign investment. This reform is expected to boost New Zealand’s infrastructure development by attracting much-needed foreign capital, particularly in sectors like renewable energy and housing.
Local governments are also gaining greater access to borrowing, with the Local Government Funding Agency (LGFA) increasing the leverage available to councils with projected population growth of at least 1% annually over the next decade. This move is designed to support greater infrastructure investment by allowing councils to borrow up to 350% of their total revenue.
Additionally, Local Government New Zealand (LGNZ) has released a funding and financing toolkit for councils, which includes a range of tools to help diversify revenue streams and alleviate pressure on ratepayers. This toolkit is intended to support critical infrastructure and services across the country.
The New Zealand Treasury has revised its approach to discount rates used in Cost Benefit Analyses (CBA) for public investments. This change aims to improve the long-term benefits of non-commercial public good projects by applying lower discount rates, thereby making long-term investments more attractive. The Treasury has also updated its guidelines on market-led proposals, which it claims:
Fast-track approvals
The Fast-track Approvals Act 2024 introduced legislation aiming to expedite the consenting process for infrastructure projects, addressing long-standing challenges associated with the Resource Management Act (RMA). The Bill introduces a one-stop-shop approach for approvals, covering RMA consenting and other legislative requirements, thereby reducing delays and costs associated with infrastructure development.
The Fast-track Approvals Bill (as it then was) emerged from the Environment Select Committee with several key recommendations, including the delegation of final decision-making authority to an expert panel rather than ministers. This change enhanced the transparency and efficiency of the approval process. The resulting Act also emphasises the importance of environmental considerations, ensuring that expedited processes do not compromise environmental standards. Nevertheless, there have been certain trade-offs, including limitations on appeals and barriers to public consultation.
The need for such reforms was highlighted by the significant barriers posed by the RMA, which has historically been a major obstacle to timely infrastructure development. The RMA’s complexity and outdated provisions have led to increased costs and delays, preventing communities from addressing critical challenges like climate resilience and housing supply. The Fast-track Approvals Act is seen as an interim measure, paving the way for the government’s planned RMA overhaul.
Public Works Act review
The government has completed a review of the Public Works Act 1981 and is proposing changes to improve the efficiency of land acquisition for public infrastructure projects.
A Public Works Act Amendment Bill is expected to be introduced to parliament in mid-2025. Public feedback will be invited through the select committee process. The proposed amendments will include the following.
Incentive payments
Updated compensation payments
Land acquisition process reforms
Emergency provisions
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