Non-compliant cladding update

In this article: Cladding Taskforce audit findings released and new Cladding Rectification Agreements enable property owners and owners corporations to access low-cost finance for cladding rectification

The potential dangers of non-compliant cladding were highlighted by the Lacrosse Tower fire at Docklands in November 2014 and the tragic Grenfell Tower fire in London in June 2017.  The Victorian Cladding Taskforce was established in July 2017 to assess the extent of non-compliant external cladding in Victoria and advise on rectification and regulatory mechanisms.

The Taskforce released an interim report on 1 December 2017 which found that dangerous materials are widely used on buildings throughout Victoria.  An update was issued on 13 January 2018, and a  further update was released on 15 October 2018.

In its October update the Taskforce reports that it has conducted an initial assessment of 1369 building and planning permits where cladding was specified as a construction material.  The Taskforce made a number of findings including:

  • the majority of higher risk buildings involving the use of expanded polystyrene (EPS) are two or three storeys high with a single exit and inadequate fire safety measures;
  • visually identifying aluminium composite panels with a polyethylene core and EPS is difficult even for highly qualified and experienced building practitioners. Destructive testing is often necessary.;
  • building owners face increased insurance premiums and reduced property values while combustible cladding remains on a building.

Further information is available on the Victorian Cladding Taskforce website. and the Victorian Building Authority website.

Practical steps have also been taken to assist property owners, including owners corporations, to rectify non-compliant cladding.  In September 2018 new legislation was passed to make amendments to the Local Government Act 1989 to create a system of “Cladding Rectification Agreements”.  These agreements will enable property owners, including owners corporations, to access low-cost finance to replace non-compliant cladding.

The agreements will be executed between the owner or owners corporation, Council and a lender (which can also be Council).  Council will then levy a “cladding rectification charge” against the property which can be paid off as part of Council rates over a minimum of 10 years.

A special resolution of the owners corporation is required before it can enter into a Cladding Rectification Agreement.  The charge will not apply to the common property, but instead will be applied to individual lots.  Individual lot owners will be responsible for paying their portion of the overall charge, not the owners corporation.  If the lot owner sells their land, responsibility for payment will pass to the new owner.  If the property is a commercial lot, the landlord can pass the charge on to the occupier in certain circumstances.

The Explanatory Memorandum and further details of the amendment are available here.