by Nadia Herlambang

New Zealand’s commercial property sector is set for asignificant reset. The Government has proposed a major reform of the Earthquake-Prone Building (EPB) system through the Building (Earthquake-ProneBuilding System Reform) Amendment Bill.

This legislative shift would replace the long-criticised 'New Building Standard(% NBS)' model with a risk-based classification framework — a move intended to balance safety obligations with commercial practicality.

A More Proportionate System

Under the current % NBS model, buildings are assessedagainst how they would perform compared to a new building on the same site.Owners of buildings rated below 67 % NBS often face significant remediationcosts, even when their structures present minimal real-world risk.

The proposed risk-based system takes a more nuanced approach. It introducesfour mitigation levels tailored to building type, construction method, andseismic zone:

-  Remaining on the public EPB register

-  Façade securing

-  Targeted retrofit

-   Full retrofit

This new model focuses on actual life-safety risk, not aone-size-fits-all percentage threshold. It is expected to provide clarity andcost efficiency, particularly for owners of older or mixed-use buildings thathave been caught by over-broad rules.

Regional Realignment of Seismic Zones

A key feature of the reform is the regional recalibration ofseismic risk:

-   Auckland, Northland, and the Chatham Islandswould be exempt from earthquake-strengthening obligations due to their low-riskstatus.

-   Coastal Otago, including Dunedin, would shiftfrom high to medium risk, reducing compliance pressure.

Only buildings that pose a genuine risk to human life inmedium- and high-risk zones will fall within the new system. This adjustmentalone could remove roughly half of the properties currently classified asearthquake-prone.

What the Changes Mean for Property Owners

The new framework offers tangible relief for owners:

- Extended remediation deadlines: Councils maygrant up to 15-year extensions, allowing more time to finance and stagestrengthening work.

-  Removal of concurrent upgrade obligations:Owners will no longer need to complete fire-safety or accessibility upgrades atthe same time as seismic work.

-  Significant cost savings: The Ministry ofBusiness, Innovation and Employment (MBIE) estimates potential national savingsexceeding $8.2 billion in avoided remediation and demolition.

These reforms could reopen the market for buildingspreviously deemed uneconomic, allowing owners to realise value from assets thathad become stranded.

Legal and Commercial Implications

Many sale and purchase agreements and lease assignmentsinclude references to NBS ratings or EPB classification. Once the new frameworkis enacted, those clauses may no longer reflect current legal standards. NZLegal recommends updating template agreements to align with the revisedterminology and risk categories.

Buyers should confirm whether a building remains earthquake-prone under the newscheme. Key steps include checking for existing or pending Council EPB notices,identifying applications for deadline extensions, and reviewing insurance andvaluation implications tied to reclassification.

With a narrower definition of 'earthquake-prone,' many properties may regainlending eligibility and market liquidity. Lenders will likely revise theirinternal thresholds once the new classifications are in force.

Alignment with Health and Safety Law

Under current practice, some landlords have sought tomaintain at least 67 % NBS to mitigate liability under the Health and Safety atWork Act 2015. The Government intends to align that framework with the BuildingAct 2004, clarifying that compliance obligations should correspond directly toa building’s assessed seismic risk. This alignment should substantially reduceliability exposure and create consistency between workplace safety andbuilding-compliance requirements.

Impact on Buyers and Sellers

For purchasers, the reforms may unlock value in buildingspreviously excluded from investment consideration. For vendors, reducedremediation requirements could increase achievable sale prices or shortenmarketing periods. Councils and insurers are also expected to recalibrate theirpolicies, meaning now is the time to review your portfolio and identify whichassets stand to benefit.

Practical Next Steps

Property owners and investors should:
1. Confirm your building’s seismic zone and classification under the proposedframework.
2. Review any current EPB notices.
3. Assess contractual clauses tied to NBS percentages.
4. Seek legal advice before entering or renewing sale, lease, or financingarrangements.

NZ Legal’s Perspective

“The proposed reforms represent a welcome recalibration ofrisk and cost. They strike a fairer balance between safety and economicsustainability,” — Adam Siddall, Director NZ Legal.

NZ Legal’s property specialists are advising clients nationwide on how tofuture-proof agreements and compliance documentation ahead of the reforms. We canhelp determine whether your building still qualifies as earthquake-prone,advise on removal of unnecessary obligations, and update your contracts toreflect the new legal framework.

Key Takeaway

The refocused EPB system aims to deliver a more balanced, cost-effective,and practical approach to managing seismic risk. However, the reforms alsocreate transitional complexity. Legal review now will ensure you’re positionedto take advantage of opportunities once the new law takes effect.

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