The combustible cladding crisis has become a point of contention in recent years. Building practitioners and industry insiders continue to face off against the State Government in a hotly contested debate over who should wear the burden. Apartment owners have been caught in the middle, where thousands of Victorians are currently living in potentially hazardous situations and are expected to come up with tens of thousands in owners corporation levies to rectify somebody else’s mistake.
The cost of rectification ordinarily rest squarely on the shoulders of lot owners. Building practitioners are next. This process proves rather problematic, as builders find themselves uninsured and without the means to pay for the rectification works. Desperate lot owners could agree upon extraordinary owners corporation levies, however with no means to pay them, plans to rectify often stagnate.
The State Government recently announced a new grant to help rectify some of the most at-risk properties. To the tune of $600 million, the cladding removal program will allow the owners corporations to seek funding directly from the State Government. The idea is that the amount of $300 million will come from the state coffers, and the State Premier is hopeful that a reluctant Commonwealth will cover the rest.
Others remain sceptical as the Builders Collective in conjunction with RMIT University recently estimated the total cost of rectification to be in the ballpark of $2.6 billion. Admittedly, it does appear as a relatively small gesture given the order of magnitude, but at least in the interim, the grant should act as a lifebuoy to those most severely affected. At present, we anticipate that the majority of rectification costs will continue to be sourced from lot owners or building practitioners.
A building will be assessed by the state-wide cladding audit and inspected for the presence of combustible cladding. If discovered, an expert panel will review these findings to determine potential risks. The matter will be referred to the local council's Municipal Building Surveyor (‘MBS’) and emergency works may be ordered to rectify immediate risks.
The matter will then be referred to Cladding Safety Victoria (‘CSV’). The relevant owners corporation will receive notice and lot owners will be invited to meet with CSV. Lot owners will appoint a project manager, who will start planning the rectification works. At this stage, CSV will assess the proposed costs and determine the amount of funding to be made available.
The funding scheme is currently prioritising high risk buildings. Medium to low level buildings are encouraged to sign a Voluntary Rectification Agreement (‘VRA’). VRAs may be put in place by owners corporations to relieve the immediate financial burden on lot owners. VRAs are agreements between lot owners or an owners corporation, local council and a third party lender where money is borrowed and gradually repaid through council rates.
As discussed above, the CSV will only be available to fund a high risk rectification works. If you know that your cladding is not compliant but not certain as to whether it is highly combustible or does not constitute high risk, contact us on 9555 7233 to discuss your options.