Short-term salvation with an end-goal of more certainty and less red-tape – those are the promised results of the recent changes to the earthquake-prone building (EQP Building) regime. But as always, the devil will be in the detail.
In keeping with its aim of being all about action, the Government has accelerated – and widened – a planned review into the EQP Building statutory regime originally slated for 2027.
At the same time, the Government has granted a reprieve to owners of earthquake-prone buildings (EQP Buildings) facing looming deadlines to upgrade their buildings. Affected building owners now have another four years (with a possible extension of another two years) to undertake their statutorily required upgrades.
Why has the Government made these changes?
The purpose of the extension, the Government states, is to alleviate immediate pressure within the property sector. With statutory deadlines for nearly 500 EQP Buildings set to expire over the next four years (over 200 of them in Wellington alone), many owners of EQP Buildings face immediate challenges in rationalising the (often significant) capital expenditure required to comply with the upgrade regime.
For many building owners, particularly those in rural locations, this dynamic is unlikely to change in four years’ time.
The unstated, and wider, purpose, however, may be to give EQP Building owners – of which the Crown is one –breathing space pending the outcome of the accelerated review of the EQP Building regime.
While Cabinet is not due to set the terms of reference for the accelerated review until next month, the Ministry of Business, Innovation and Employment (MBIE) has confirmed the review will:
- focus on how well the current system is managing seismic risk in existing buildings;
- look to identify barriers to remediation of earthquake-prone buildings; and
- examine the approach taken by other overseas jurisdictions in regions of high seismic risk.
A potential outcome of the review, says MBIE, is to ensure “a regulatory approach that appropriately balances reducing life safety risk in an earthquake and the impact on building owners.”
The Government has stated that the review will be “extensive” – perhaps signalling that the Government is listening to the vocal calls to overhaul a regime that is currently challenging for all stakeholders.
What are the implications?
The developments will have some challenging consequences. The extension to the upgrade timeframes will not provide any relief to (former) EQP Building owners who have already complied with their obligations. This may pose a particularly fraught decision for those owners currently part-way through their strengthening projects – and could be seen as rewarding those who haven’t been as proactive.
The extension will also not extend to buildings where the upgrade deadline has already lapsed, posing challenges to building owners that have completed some but not all upgrade works before their deadline. Our understanding is that they will still be required to complete them.
And we would have thought the accelerated review is likely to see a halt to any planned upgrades by EQP Building owners. While Building and Construction Minister Hon Chris Penk has encouraged building owners to undertake required upgrades notwithstanding the new extension, it is difficult to see why building owners would do so if the outcome of the review could remove, reduce or further extend their statutory obligations.
All of which leaves owners and occupants of EQP Buildings in an uncomfortable but familiar place of uncertainty – and one that will remain until the outcome of the review. The Government seems conscious of this: the release of the new Seismic Risk Resource For Commercial Building Tenants (which builds on MBIE’s release under Labour of its Seismic Risk Guidance for Buildings in 2022) shows a commitment to educate and support stakeholders in managing the complex regime. Other technical changes in the offing – including revisions to the controversial Yellow Chapter – may bring more certainty as well.
Where to from here?
We understand the review timeframes will be announced with the terms of reference next month. The extension will be legislated in late 2024, with retrospective effect from 2 April 2024.
We will keep you updated with developments, including any opportunities for submissions – and if you need any assistance in this area, please contact one of our experts.
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