New Zealand’s earthquake-prone building rules are heading for a major overhaul, but commercial landlords and tenants may find that changing the legislation is only part of the story.
The Building (Earthquake-prone Buildings) Amendment Bill has passed its second reading and is currently before Parliament at the Committee of the Whole House stage. If enacted as presently proposed, most of the new regime will take effect from 1 July 2027.
MOVING AWAY FROM %NBS
A central change is that percentage of New Building Standard (%NBS) will no longer determine whether a building is earthquake-prone under the statutory system.
Instead, the proposed regime concentrates on particular higher risk buildings in medium and high seismic zones. These include certain unreinforced masonry buildings and concrete buildings of three storeys or more. Buildings in Auckland, Northland and the Chatham Islands are to be removed from the earthquake prone building regime because of their lower seismic risk.
Remediation will also become more targeted. Depending upon the building and its risk, requirements may range from remaining on the public register or securing a façade through to targeted or full seismic retrofit.
BUT WHAT IF YOUR LEASE STILL SAYS 67% NBS?
This is where matters become particularly interesting for commercial landlords and tenants.
Over many years, %NBS has found its way into leases, agreements to lease and seismic policies. A lease might record the landlord’s representation as to the building’s NBS rating, require strengthening to a specified percentage or provide rights where the rating falls below an agreed level.
Changing the Building Act regime does not automatically rewrite those contractual provisions.
The result could be that a building which is no longer classified as earthquake-prone under the legislation remains subject to an existing lease obligation expressed as, for example, 67% NBS.
Equally, clauses which refer simply to whether premises are legally “earthquake-prone” may operate differently once the new statutory regime applies.
NBS MAY NOT DISAPPEAR COMMERCIALLY
There is another important distinction. Removing %NBS as the statutory test does not necessarily mean seismic assessments will cease to matter commercially.
Prospective tenants, purchasers, banks and insurers may still want information about how a building is expected to perform in an earthquake. Building owners may therefore find that the market continues to demand seismic information even where legislation no longer requires a particular NBS threshold.
A GOOD TIME TO REVIEW THE LEASE
Landlords and tenants should therefore avoid assuming that the new legislation will resolve existing seismic issues automatically.
For current leases, it is worth checking exactly how any NBS or earthquake-prone building provisions are expressed. For new leases and renewals, care should be taken before continuing to use percentage-based seismic obligations simply because they have appeared in earlier documents.
The regulatory question and the contractual question may soon be quite different. Knowing what the legislation requires is important, but knowing what your lease says may be equally so.
