NSW
From 15 August 2018, the use of aluminium composite panels (ACPs) with a core comprised of more than 30% polyethylene in any external cladding, external wall, external installation, façade or rendered finish in certain buildings, has effectively been banned.
This essentially is
residential apartment buildings, hotels, office buildings, shopping centres,
carparks and warehouses, factories and hospitals and other public
buildings. The ban does not apply to all buildings in those classes but
only to those buildings with a number of storeys and of a certain construction
type.
The ban operates
retrospectively and thus applies to buildings constructed before the ban came
into force, as well as those currently being built and any future
buildings. The ban applies even if the use of the ACPs was in accordance
with the National Construction Code (NCC).
There are two
exceptions:
(a)
where the ACPs have successfully passed the Australian Standard test (AS1530.1)
for combustibility prescribed by the NCC and an accredited testing laboratory
has produced the test results on or after 1 July 2017;
(b)
the ACP and the proposed wall assembly has successfully passed the Australian
Standard test (AS5113) and the person or entity intending to use the ACP has
declared by statutory declaration that the ACP will be installed in a manner
identical to the tested prototype and an accredited testing laboratory has
produced the test results on or after 1 July 2017.
It seems to be
recognised in the industry that it is not easy to comply with either test.
Victoria
There have been
various amendments to the Building Act 1993 (Vic) to strengthen laws in
respect of inspection, testing and notice requirements of building works.
Victoria has been at
the forefront of responding to the risks associated with the use of combustible
ACP cladding. It experienced the Lacrosse apartment fire in 2014 and
proceedings by the apartment owners against the builder are currently before
the Victorian Civil and Administrative Tribunal.
Victorian Cladding Taskforce
The Victoria Cladding
Taskforce has issued its October update which notes that the Victorian Building
Authority (VBA) has completed its initial assessment of 1,369 building and
planning permits where ACP cladding is a construction material. Following
the audit:
·
Emergency orders have
been issued to owners of 12 buildings for urgent short-term
remediation. The remediation may include further fire safety measures and
removing ignition sources.
·
The Taskforce has
reported that only a very small percentage of low rise buildings in suburban
Melbourne and regional cities have combustible ACP cladding, the high risk
buildings are 2 or 3 storeys high with a single exit and inadequate fire safety
measures.
·
The Taskforce has
noted it is difficult to identify ACPs with a polyethylene core – even for
highly qualified and experienced building practitioners. It is often
necessary to undertake destructive testing.
In the audit, the VBA
was able to deal with non-compliant cladding on buildings currently in the
planning stage and under construction as well as existing buildings.
Building notices which
are essentially show cause notices to owners corporations have been
issued. The notice requires the owners corporation to show why
combustible cladding should not be removed. These were issued to about
150 buildings.
The process allows
owners corporations the opportunity to provide evidence that the building is
safe without the removal of the cladding. However, the VBA has the right
to disagree with that evidence.
The VBA has found
43 buildings in a higher risk category and the VBA has been appointed as
the municipal building surveyor for those buildings plus another one for which
it is also municipal building surveyor. In relation to these 44
buildings, there is a longer term rectification issue which may involve removal
of some or all of the cladding.
The Taskforce has also
recommended that the Victorian government undertake an audit of all government
owned and leased buildings.
The Building
Amendment (Registration of Trades and Other Matters) Act 2018 (the Act)
provided for Cladding Rectification Agreements (CRAs). That part
of the Act comes into operation on 30 October 2018.
The CRA scheme is a
voluntary scheme entered into by owners corporations, councils and lenders to
raise the funds necessary to rectify cladding and allows loan repayments to be
made through an individual owner's council rates. On settlement of a sale
of a unit, the CRA transfers to the purchaser.
The CRA scheme
identifies that it is individual unit owners who will bear the costs of
rectifying combustible cladding.
Queensland
The approach in
Queensland to private buildings with potentially combustible ACPs is to put the
onus on the building's owners to undertake the necessary investigation and
rectification measures. The report of the Non-Conforming Building
Products Audit Taskforce released in May 2018 recommended a strong regulatory
role be taken by the Queensland Government to ensure private building owners
adequately address the safety issues posed by combustible cladding.
The Building and
Other Legislation (Cladding) Amendment Regulation 2018 (Qld) came into
effect on 1 October 2018. The Regulation requires private building owners
of in-scope buildings to register through a Safer Buildings website and to
complete an online checklist. Buildings which are in-scope are those
buildings for which a development approval was given after 1 January 1994 to
construct or alter the building and the building is a Class 2 to 9 building of
Type A or B construction.
The buildings which
are in-scope are most high rise residential and commercial buildings. The
owner of a building subject to a community title scheme is the body corporate.
The Regulation
requires building owners to:
·
Register on the
Queensland Building and Construction Commission's online assessment system and
provide a completed combustible cladding checklist by 29 March 2019.
·
If the building might
be affected by combustible cladding, a fire safety engineer must be engaged to
complete a fire safety risk assessment by 27 August 2019. The assessment
must be submitted by 3 May 2021.
If in the process it
is ascertained the building is affected by combustible cladding, a notice that
the building is affected by combustible cladding is to be displayed and the
notice and the fire safety risk assessment are to be given to each owner and
tenant within 60 days of receiving the fire safety risk assessment.
Clearly the costs of
complying with the Regulation will be borne by the owners of the
buildings. A building notice would affect the value of the units in the
building and also impact on the rental returns.
Western Australia
Cladding Audit
The Western Australian
Building Commission is conducting a state-wide cladding audit of all high-rise
buildings with ACP cladding attached. The scope of the audit is of
privately owned buildings three storeys or higher and built or refurbished
between 1 January 2001 to 30 June 2017 with ACP cladding on the building's
exterior. The buildings prioritised are residential, hospital, aged care
and assembly buildings.
The status update of
11 October 2018 identified a total of 1,734 privately owned buildings with ACP
cladding attached. Of these 238 required a detailed risk assessment with
120 completed. No further action is required for 118 buildings while two
buildings have been referred to the permit authority for further action.
On 6 October 2018, theBuilding Amendment Regulations (No. 2) 2018 came into effect in
Western Australia. The Regulations now prescribe applicable building
standards for non-combustible external walls. Rather than banning particular
products as in some of the other States, the Regulations seek to control the
performance of an external wall in a fire event by requiring external walls of
certain buildings comply with the deemed to satisfy requirements of the
Building Code of Australia. Any performance solution proposed is required
to satisfy full scale fire testing.
The Regulations are
not retrospective.
Owner pays
Currently in
Australia, the responsibility for rectifying cladding is borne by the
owner. In high rise buildings this is usually the owners
corporation. In NSW, the inclusion of combustible cladding as a major
defect gives owners a remedy against the builder or developer under the
statutory warranty provisions of the Home Building Act 1989.
In our previous update
for insurers dated 30 November 2017, we discussed the current issues for
property, public liability and professional indemnity insurers. Almost a
year down the track, the extent of the problem of combustible cladding on
existing buildings is becoming clearer. From the audits conducted in each
of the four larger states, it is clear that a reasonable number of buildings
will require rectification although perhaps not in the numbers first
anticipated.
It remains the case
for construction professionals and their professional indemnity insurers that
owners will seek to recover the costs of rectification from builders under the
statutory warranty regimes in each state. Claims in negligence by owners
corporations against building and construction professionals for pure economic
loss (rectification costs) are limited because a duty of care in negligence
does not usually extend to subsequent owners.
In our experience,
high rise commercial and residential building work is usually undertaken by
contractors under design and construct contracts. The consultants such as
the certifier and fire engineer are usually retained by the contractor, and
often if the developer has retained the architect that contract is novated to
the contractor. The contractor ought to have professional indemnity
insurance for a design and construct contract. The contractor is likely
to seek to recover any rectification costs from its consultants.
There remains the
potential for significant litigation arising from the use of combustible
cladding mostly as an attachment on high rise buildings in Australia. The
judgment in the litigation regarding the rectification of the Lacrosse
apartments in Melbourne likely to be delivered by the end of the year may
provide some guidance. However, each case will have to be considered on
its own facts which means there is no one answer that fits all to the question
of who pays.
Footnotes
1
Building Products (Safety) Act 2017 (NSW).
2
Home Building Amendment (Cladding) Regulation 2018.
The content of this
article is intended to provide a general guide to the subject matter.
Specialist advice should be sought about your specific circumstances.
Source: http://www.mondaq.com/australia/x/751572/Building+Construction/Around+the+grounds+The+current+status+of+combustible+cladding+in+Australia+owner+pays
Jason Gwerder
Wednesday, 1 May 2019
