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Property: Cladding’s burning issues

Property: Cladding’s burning issues

By Megan Thorburn

Real Property 

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Progress has been slow in the rectification of privately owned buildings with combustible cladding in Victoria.

Snapshot
  • CSV was established in July 2019 and has prioritised funding 15 buildings for cladding rectification to test its processes.
  • The Building Act 1993 has been amended by the Building Amendment (Cladding Rectification) Act 2019, introducing a cladding rectification levy as well as the subrogation of rights of owners who have received financial assistance from CSV.
  • There has been glacial progress to date in the cladding rectification of privately owned buildings with combustible cladding in Victoria.

The Victorian Cladding Taskforce handed down its final report in July 2019, shortly after my article “Beds are Burning” was published (LIJ, July 2019). On 15 July 2019, the state government announced a $600 million package to fund the rectification of privately owned buildings with combustible cladding, establishing Cladding Safety Victoria (CSV). The state government will fund $300 million of the $600 million cladding rectification package, with $300 million to be raised by increasing building permit levies.

CSV provides advice to owners on reducing fire risk, assists them to find qualified building professionals and has prioritised 15 high-risk privately owned buildings to receive funding to “test their processes”. For an owners corporation to be eligible for funding, the building must be assessed during the statewide cladding audit, subject to a building notice or order, referred to CSV by either the Victorian Building Authority or the City of Melbourne, deemed to be high risk, as well as be prioritised for rectification by CSV. 

Funding can be provided for project management support, professional design services, building surveying, permits and approvals, building materials and rectification works. It is unclear how funds will be apportioned across any of those areas and $600 million will probably not be enough funding for cladding rectification in Victoria. Funding does not extend to cladding on medium or low risk buildings with cladding, or to other defects. The cladding rectification program is highly secretive and is expected to take five years to complete. Rectification is increasingly focused on buildings’ fire safety, with removal and replacement of cladding being one option in “reducing risks to an acceptable level”.

In the 2019 Victorian Budget, $160 million was committed to be spent over the next four years to rectify cladding on 95 publicly owned buildings. $5.2 million has already been spent in 2018/2019 rectifying 22 publicly owned buildings.

The cladding rectification levy was introduced by the Building Amendment (Cladding Rectification) Act 2019 (the new Act), amending s205A and s205G of the Building Act 1993, commencing 1 January 2020. The levy applies to Class 2 to 8 buildings, not located in regional Victoria, having a cost of works or cost of whole of building works of $800,000 or more and is payable in addition to current building levies.

Amendments to the Building Act 1993, introduced by the new Act, also include ss137F Subrogation and 137G Repayment of Financial Assistance. Section 137F allows for the subrogation of the rights of owners who have received financial assistance from CSV. These amendments will allow the Crown to take legal action to recover the costs of cladding rectification from builders and others responsible for the installation of combustible cladding and for “other building work that required the cladding rectification work to be undertaken”. Owners may have incurred losses relating to other building defects and an “Anshun” estoppel may arise if claims for all losses are not brought in one proceeding. If, when attempting to offset their liability, a defendant joins other defendants, then the Crown will bear the risk, as well as bearing the risk of non-recovery. Multi-party litigation can prove expensive, lengthy and difficult, especially if the products were compliant at the time of installation.

CSV funding currently only covers the rectification of aluminium composite panels or expanded polystyrene cladding. An unknown number of buildings may also require products such as timber and high-pressure laminate to be rectified.

There has been glacial progress to date in the cladding rectification of privately owned buildings with combustible cladding in Victoria. Work in the UK to remove combustible cladding has been halted, at the time of writing, due to the lockdown associated with the COVID-19 outbreak. ■


Megan Thorburn is an LIV accredited specialist in property law, has her own practice specialising in property law and is also an adjunct lecturer with the College of Law. She is a member of the LIV Property Law Committee and the LIV Building and Construction Working Group.


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