By Brendan Cash (partner) and Janette Zhong (law graduate) – Dentons Kensington Swan
In March, the Environment Select Committee returned their recommendations on the Building (Building Products and Methods, Modular Components, and Other Matters) Amendment Bill. They recommended that the Bill be passed subject to some amendments. While the enactment of this Bill may now not be far away, it has not received a lot of attention, even though its objectives are important ones.
In particular, the Bill aims to encourage the use of modern construction methods and products by making amendments to the Building Act 2004 (‘Act’). Two ways it does this is by the introduction of a specialist framework for modular components or buildings and changes to strengthen the product certification scheme.
Modular components specialist framework
Modular components or buildings refer to the design and production of components or even entire buildings in manufacturing facilities. However, such manufacturing processes do not easily fit within the traditional consenting framework. Currently, each building consent authority has to decide how to manage the compliance issues for a manufactured product in the context of processes intended for traditional construction methods. This undermines the efficiency of working with standard designs and manufacturing processes, with manufacturers having to meet differing consent authority requirements.
The Bill sets up a framework for an accreditation body that would approve and audit certifying bodies. Those certifying bodies would in turn certify and audit modular component manufacturers to produce modular building components within a defined scope. Those components would then be deemed to comply with the Building Code for consenting and code compliance purposes.
The certification of modular manufacturers should greatly ease the consenting and compliance process. For example, while the building consent authority will check the design for the whole building and proposed site works, it will not be required to review the modular components beyond how they interact with other elements. Another example is where the building as a whole is manufactured. In such cases, if the manufacturer is certified, the time limit for processing the consent will be reduced to 10 days.
However, the framework will generally mean that the building consent authority will not be liable for the performance of the modular components. That change is understandable given Councils’ limited role where they rely on a certificate to establish compliance but significant, as Council liability for building defects has been an important safety net for owners. The Bill is then silent as to the potential liability of the accreditation and certifying bodies for issues with modular components and imposes no requirements that they carry suitable insurance cover. In the event of any systematic issues arising with particular manufacturers, issues could therefore arise about the liability of such bodies (eg, for failing to identify issues when certifying or auditing manufacturers).
The overall scheme in the Bill for modular components was not materially changed during the select committee process. If enacted, it should hopefully increase the use of modular components or buildings that are manufactured locally. However, a question is whether any large foreign manufacturers of modular components, who can materially reduce the cost of components given their scale, will be willing to go through the certification process in such a small market as NZ.
Product certification scheme
CodeMark is the existing product certification scheme. It is designed to provide assurance that products comply with the Building Code. However, issues over several years, such as the issues with ACP cladding following the Grenfell fire and similar, have eroded confidence in the current scheme.
Currently, the Ministry of Business, Innovation, and Employment (‘MBIE’) does not have any power under the Act to enforce product certification rules or intervene if certain rules are not being upheld. With the Bill, MBIE will have the power to set compliance rules, audit and suspend or revoke a product certification body’s ability to certify products if they do not comply with the rules or suspend or revoke certificates for products and administer registers of product certification bodies and product certificates. In addition, MBIE will have the ability to investigate complaints about a product certification body and can take active steps to manage poor performing product certification bodies.
The scheme is intended to help build confidence in the products being used in the industry, with any product having to have a registered product certificate before the certificate can be relied as establishing compliance with the Building Code. It is supported by amendments that provide for minimum information requirements for products that must be provided and a requirement on manufacturers and suppliers that the products supplied must comply with that information.
However, it also means that particular products and building methods may be specified in the consent, with the result that substituting a product or method will require an amendment to the consent. In short, the current practice of substituting products during the course of construction should be much harder, as unless the consent is varied the works will not comply with the consent.
Effect of the Bill on the building industry
The use of these new methods and approaches do have the potential to transform the industry. An example, is Kāinga Ora’s trial of modular builds, such as its initiative in Hobsonville Point. In that case, the house was weathertight in just four days and six weeks later after the exterior and interior finishing was complete the house was signed off by the Auckland Council. In contrast, a conventional build takes approximately 22 weeks.
The Bill, if passed, should encourage innovation to meet the demands of the New Zealand housing crisis. Hopefully, the framework will also ensure buildings are still built to comply with the Building Code but if problems do arise interesting questions will then have to be answered as to who is liable for that.
Disclaimer: This article is not a substitute for specific professional advice on any matter. No warranty or guarantee whatsoever is given as to the accuracy of any information contained in the article, nor is any liability accepted for any actions taken based on this information.