Victoria will introduce a “world-first” financial mechanism to help residential building owners pay for urgent rectification works caused by the installation of non-conforming and non-compliant flammable cladding on high-rise apartment buildings in the state.
Planning minister Richard Wynne on Thursday said changes to the Local Government Act would introduce “Cladding Rectification Agreements”, or CRAs, which would be similar to the Environmental Upgrade Agreement (EUA) model, which allows owners to upgrade buildings and pay off the costs via council rates.
Under the model, owners or owners corporations would enter into an arrangement with lenders and a local council, accessing a long-term low-interest loan to pay for the building works, which would then be paid off by an increase in council rates over a minimum period of 10 years.
Costs would be transferred to new owners if the property were sold.
“This scheme is the first of its kind anywhere in the world and offers owners the cheapest and most efficient way of removing dangerous cladding from their buildings,” Mr Wynne said.
He said as well as ensuring properties became compliant with building laws, the agreements would allow cladding to be removed quickly without affecting property prices.
However, according to Strata Communication Association Victoria general manager Rob Beck, while the agreements would provide a level of “certainty and transparency”, they would not stop prices from being affected, as disclosures would need to be made indicating the agreements and the higher council rates needing to be paid.
And while the proposal was a world first and “a step in the right direction”, it did not address the fundamental issue of who should ultimately be responsible for paying for rectification works.
“Fundamentally, to get a fair outcome out of this, the cost shouldn’t rest solely with the owners,” he told The Fifth Estate.
“We’re thankful to see some action happening, [but] we don’t see this as being an end game.”
The change to the Act to allow CRAs was one of the key recommendations of the Victorian Cladding Taskforce, which was established last year. It comes as the Victorian Building Authority finalises its investigations into 1369 planning and building permits, which has already seen 100 building orders issued demanding rectification work.
The Fifth Estate recently reported that strata apartment owners were facing serious financial hardship from replacement costs.
Flammable cladding first emerged as a serious issue in 2014 when a fire in the Lacrosse apartment building in Docklands rapidly spread up the facade of the building.
See our articles:
- Cladding scandal – no incentive and no enforcement. Nationally
- Cladding scandal: $1 trillion of assets at risk and no action from government
- Cladding scandal: Action on dodgy materials
- The Lacrosse fire – now for where it really hurts: the hip pocket
- News from the front desk: Issue No 280 – On why it’s time to get a move on
Following the Grenfell fire in London in 2017, which killed 72 people, Australian state governments promised to act on the issue.