Drive through any major New Zealand city and you will likely encounter them: half-built developments standing idle behind fencing, or the earthquake-damaged shell of a commercial building boarded up for years and often covered in graffiti. Stalled developments and damaged buildings create really legal and financial risk: for owners, contractors, and neighbours alike. This article explains what obligations apply, what powers councils have to enforce them, and where the law may need to go further.

Risks for clients

Buildings in the course of construction - Abandonment

Work on site may stop for a variety of reasons; the owner may suspend the works, a party may abandon the project, or a contract may be terminated for frustration, default, or the insolvency of a party. Under NZS 3910, abandonment of the construction contract by a party is a specific default event that entitles the other party to terminate the contract or, in the case of the owner, to resume possession of the site and complete the works. Abandonment as a default event protects the innocent party from being tied to a contract where the other party has walked away from the project and, in the case of a breach by the contractor, helps keep the project moving. A party should seek legal advice before terminating a contract, as there can be costly consequences for wrongful termination.

Site safety

Work on site may grind to a halt, but the parties' obligations do not. If there is a real likelihood of a development stalling, the parties must consider the physical state of the site when work ceases. An unsafe site creates significant risks for any person, vehicle, or property in proximity. The obligation to maintain site safety is ongoing, requiring regular inspections to ensure risks are mitigated and no new hazards have emerged.

The Epsom Central Apartments development, left unfinished for six years, illustrates the consequences of failing to meet this obligation. Loose metal bars fell from height and pierced vehicles; a concrete wall collapsed, forcing a neighbouring business to close for three months. The landowner was taken to the Disputes Tribunal and ordered to pay $30,000 in damages. The Seascape development has similarly drawn public concern, with questions raised about hoarding integrity, site security, and the management of the partially completed structure during the extended period of inactivity.

Damaged buildings

Stalled construction is not the only way a site can become a problem for the surrounding neighbourhood. Earthquakes, fires, flooding or simple neglect can leave an existing building damaged, unsightly or derelict, sometimes for years. New Zealand has seen this on a significant scale, most notably in Christchurch and Wellington, following earthquake events, where thousands of damaged buildings sat unrepaired or undemolished for extended periods.

Powers of Council

Building Act 2004

Councils have powers in specific circumstances where a building becomes dangerous, affected (by being adjacent to, adjoining, or nearby a dangerous building), or insanitary under the Building Act. A building is only considered dangerous, and Council powers triggered, where, in normal circumstances (excluding earthquakes), or in the event of a fire, it is likely to cause injury, death, or damage to people or property. A building will be insanitary when it is offensive or likely to be injurious to health because of one of the reasons listed in the Building Act (including disrepair, dampness, lack of water supply or sanitation).

Where a building meets one of these classifications, the Council may issue a written notice requiring the owner to carry out remedial work within a specified period of at least 10 days. If the owner fails to comply, the Council may apply to the District Court to carry out the work itself, with costs recoverable from the owner (registrable as a charge on the land).

Beyond this general power, Councils may also:

• restrict entry to or use of the building or neighbouring land;
• take urgent action without notice to the owner, including closing roads, demolishing structures, or making the building safe, where immediate danger exists; and
• seek District Court orders requiring remedial work or demolition.

An owner who fails to comply with a dangerous and insanitary building notice commits an offence and may be fined up to $300,000 (individual) or $1,500,000 (body corporate).

Resource Management Act 1991

While the Building Act is the most likely pathway, Councils also have enforcement powers under the RMA, particularly if:

• there has been a breach of the conditions of the resource consent, or
• the state of the building is noxious, dangerous, offensive, or objectionable to such an extent that it has or is likely to have an adverse effect on the environment.

These powers include issuing an abatement notice or applying to the Environment Court for an enforcement order. Either mechanism could require the developer or contractor to ensure compliance with the consent, or to avoid, remedy, or mitigate any actual or likely adverse effect on the environment caused by the abandoned building such as discharges of dust, harbouring of vermin, falling debris, or risks to neighbouring properties.

In some circumstances the Council could take action to remedy those environmental effects itself and seek to recoup the costs from the contractor or the developer. Failure to comply with either an abatement notice or an enforcement order is a strict liability offence. The maximum penalty for a person is imprisonment not exceeding 18 months or a fine of up to $1,000,000; for a company, a fine of up to $10,000,000.

As well as the Council, it is worth noting that members of the public (including dissatisfied neighbours) are also able to apply to the Environment Court for an enforcement order against the contractor or the developer if they are concerned about the adverse environmental effects being caused by the abandonment.

Local Government (Rating) Act 2002

Rates must continue to be paid regardless of a development's status or a building's condition. If rates fall into arrears, the Council may seek judgment against the landowner. If that judgment remains unpaid for three months, the Chief Executive may apply to the Registrar of the High Court to sell or lease the property; a process that gives interested parties six months to satisfy the debt before the Registrar proceeds to public auction or tender. This is a real risk for owners of stalled developments such as Seascape, where holding costs, including rates, continue to accumulate throughout any period of inactivity. Some councils have offered rates remission or postponement schemes for properties affected by natural disasters (for example, Christchurch City Council implemented specific remission policies following the Canterbury earthquakes) but this is a matter of individual council policy, not a general statutory exemption.

Impact on neighbouring properties

A damaged or derelict building rarely affects only the property it sits on. The effects manifest in three principal ways:

1. Property Value: proximity to a derelict or damaged building can materially suppress the value of neighbouring properties. Such buildings also degrade the amenity of the surrounding area, affecting visual quality and neighbourhood character, and tend over time to attract graffiti, vandalism, illegal dumping, transient occupation, and vermin. Affected neighbours have limited direct legal recourse for diminished value or loss of amenity alone, which underscores the importance of the Council enforcement powers and legislative obligations discussed above.
2. Safety: a structurally compromised building poses obvious physical risks: falling masonry, unstable parapets, exposed reinforcing steel, unsecured facades and scaffolding can injure passers-by and neighbouring occupiers and properties. These risks may be acute and immediate, as in the aftermath of an earthquake, or may develop gradually through neglect. A building that is merely unsound today may become genuinely dangerous tomorrow.

Time for change?

Should the law be changed to give authorities stronger tools to deal with abandoned or derelict properties and to protect the safety and character of surrounding neighbourhoods?

Overseas jurisdictions offer useful examples:

1. Singapore: developers must be licensed, provide bank guarantees for each unit sold, meet construction milestones before receiving stage payments, and pay fixed penalties if they deliver late. A system of this kind, requiring completion bonds and staged payments, is designed to prevent exactly the type of situation seen with Auckland's Seascape development.
2. England and Wales: the Levelling-Up and Regeneration Act 2023 introduced Compulsory Sale Orders (CSOs), which let local authorities force the sale at public auction of properties that have been derelict or vacant for a long time, without the authority having to buy the property itself. In New Zealand, councils can currently only take enforcement action but have no power to force a sale. A similar power here would give councils a simpler, lower-cost way to act before conditions deteriorate further.
3. Ontario, Canada: a fast-track process lets creditors force the sale of a property within 35 days, without needing to go to court. By comparison, in New Zealand, if a rates debt goes unpaid for three months after judgment, the Council's Chief Executive can ask the High Court Registrar to sell or lease the property, but there is then a further six-month window for the debt to be paid before any sale goes ahead. Ontario's approach cuts the courts out of the process entirely.
4. Victoria, Australia: a government body called Development Victoria has the power to step in, buy, and redevelop stalled or derelict sites on a large scale. New Zealand could consider setting up a similar agency with its own legal powers to intervene where properties are abandoned or falling into disrepair.

Conclusion

Stalled developments and derelict or damaged buildings can create serious legal, financial and safety risks for owners, contractors and neighbouring occupiers. While existing obligations and Council enforcement powers can help, recent examples show the framework does not always drive timely resolution.

If you are dealing with a stalled project or a damaged building, take early advice on your obligations, contractual options and engagement with Council, and consider what practical steps can be taken to reduce risk and move matters forward.

Get in touch

Contact us to discuss your situation and the next steps to protect your position.

Special thanks to Samantha Johnston for her assistance in writing this article.