VIC: Q&A Combustible Cladding and Cladding Safety Victoria (CSV)

These questions are about combustible cladding on Victorian owners corporation buildings.

Table of Contents:

• QUESTION: My apartment block requires cladding work and rendering replacement to the entire building. Who is responsible for paying for this work?
• QUESTION: Is there any progress, or do you have anything to report with the fireproofing and combustible cladding issues in Victoria?
• ARTICLE: CLADDING UPDATE – Cladding Status.. What’s The Real Story!
• ARTICLE: Cladding Status.. What’s The Real Story!
• QUESTION: Even though we have a letter from a qualified expert claiming that the facade presents no risk, our strata insurance renewal quotes still reflect a combustible cladding excess.
• QUESTION: Are there circumstances where non-fire rated Aluminium Composite Panels comply with the National Construction Code? If not, who is responsible to replace?
• QUESTION: Our Strata Corporation has sent us a letter and they are investigating all buildings under their control; however, they stated that only buildings with 30% or more combustible cladding are to be forwarded to insurance companies for review. Is this correct?

Question: My apartment block requires cladding work and rendering replacement to the entire building. Who is responsible for paying for this work?

My apartment block built in 2012 requires cladding work and rendering replacement to the entire building at a cost of $400,000. The owners corporation has contacted all apartment owners to organise division of the cost to pay for the work to be done.

Who is responsible for paying for this work?

Answer: Assuming cladding and rendering is not covered by any warranty, VBA scheme or other plan then the Owners Corporation is responsible and they will be required to either take the funds from previously saved funds, raise a special levy or borrow to fund the work.

Remedial repairs of this nature can be confronting and as identified within the question expensive to implement, however there are certain responsibilities that fall with an owners corporation when it comes the management of remedial repairs and these are laid out within the Owners Corporations Act 2006 (the Act) in Division 1, Section 4 as outlined below:

Functions of owners corporation

An owners corporation has the following functions—

1. to manage and administer the common property;
2. to repair and maintain—
   
   1. the common property;
   2. the chattels, fixtures, fittings and services related to the common property or its enjoyment;

Common property means land shown as common property on a plan of subdivision or a plan of strata or cluster subdivision.

If the external walls of each lot are not part of the plan of strata then the likelihood is that the walls will be chattels – (property other than land), however if the building is a multi storey one then the external wall will be on the plan of strata.

Additionally – Division 5 Asset Management, section 46 of the Act:

46 Owners corporation to repair and maintain common property

An owners corporation must repair and maintain—

1. the common property; and
2. the chattels, fixtures, fittings and services related to the common property or its enjoyment.

There are also multiple sections that go into detail about the repair and maintenance, the funding, the raising of levies etc.

The bottom line is that assuming that cladding and rendering is not covered by any warranty, VBA scheme or other plan then the Owners Corporation is responsible and they will be required to either take the funds from previously saved funds, raise a special levy or borrow to fund the work.

There is no reference within the question to combustible cladding, however in such instances the owners corporation should refer to the CSV website for guidance.

When facing remedial repairs, is it highly recommended to gain advice from experts to assist in providing a detailed scope of works, management of the tender process and project management to ensure that works are all inclusive, are of the highest standard are completed in line with Australian Standards and to assist with cost management throughout the life of the project.

Scott Driscoll
Sedgwick
E: [email protected]
P: 0402 342 034

This post appears in the December 2021 edition of The VIC Strata Magazine.

Question: Is there any progress, or do you have anything to report with the fireproofing and combustible cladding issues in Victoria?

Answer: My understanding is that money is going to dry up pretty quickly and they’ll be a lot of Owners Corporations that will be left to their own devices to rectify the cladding.

Cladding Safety Victoria (CSV) is an organisation set up by the government to deal with the combustible cladding installed on buildings. My understanding was that they had $600 million of funding originally and they were actually associated with Victorian Building Authority (VBA). Recently, my understanding is that those two organisations have separated. CSV now has to stand on their own two feet, so to speak, and I heard a comment the other day that a lot of the funding is going towards the administration of making sure that organisation can work.

So going back to the Owners Corporations that are affected, yes, there have been a number that have received funding from CSV to rectify the noncompliance, aluminium composite panels, or the Expanded Polystyrene (EPS). Although I haven’t heard much recently in regards to how much money there is still available for Owners Corporations, my understanding is that money is going to dry up pretty quickly and they’ll be a lot of Owners Corporations that will be left to their own devices to rectify the cladding.

One of the biggest issues that we’ve found (and we do manage a number of properties affected) is that the cladding is removed and or there’s destructive testing to identify that the cladding is non compliant. But also, during that testing, that identified what’s behind the cladding is also defective in terms of the building. The CSV will only fund the replacement, the cladding, not the rectification of the other non compliant building, whether it’s the construction of the facade. So the Owners Corporation will need to put their hand in their own pocket to fund those works.

I was actually speaking with a company last week at an SCA conference and that chap is in the business of lending monies to Owners Corporations. Their business is pretty busy at the moment because a lot of Owners Corporations are putting their hand out to fix these other issues, aside from just the rectification of the cladding.

Further to that point, if you are experiencing a situation where you believe you’ve got cladding, engage expert. That expert should be either a fire engineer or a building surveyor. Get a report from them to understand whether there is any combustible cladding or non compliant cladding installed. Then, if the builder is still around, there is recourse back to the builder. If the building is within 10 years, however, with that being said, I understand the government has extended the statutory warranty to 12 years (so 12 years from the date of occupancy of the building), the Owners Corporation has recourse back to the builder if they’re still around. If the builder has died, disappeared or become insolvent, then there’s no recourse.

If the Owners Corporation has builder’s warranty insurance, then they may be able to make a claim on that. Otherwise they’ll go to the CSV to try and get funding to remedy the defect.

Gregor Evans
The Knight
Email
P: 03 9509 3144

This post appears in the June 2021 edition of The VIC Strata Magazine.

Article: CLADDING UPDATE – Cladding Status.. What’s The Real Story!

In our last article I made some comments with respect to Cladding Safety Victoria – CSV. Titled ‘Cladding Status – The Real Story’ (below), I can now report some further information after being updated by Dan O’Brian Chief Executive CSV.

Roscon can confirm to date, CSV has reached practical completion on 17 privately owned residential buildings and 60 government buildings have also been rectified. Some further questions which need to be asked to CSV are the 60 Victorian owned buildings rectified via the $600 million allowance that should be set aside to fund innocent strata owners or have the funds been taken from the $600 million to fund Government Buildings and if so how much of the $600 million so far been spent of those Government buildings.

Furthermore, cladding removal is currently underway on 94 private buildings and 12 government
buildings. There are many more buildings that will shortly move into the design and then construct phase.

As of 30 April 2021, CSV has provided funding agreements for 232 privately owned residential buildings. CSV has confirmed the funding is in the form of a grant, not a loan, and does not have to be repaid. Collectively, these building projects and those that follow will account for most of the funding provided to CSV.

In respect to commercial buildings, Roscon has been advised by CSV that CSV is not and never has been responsible for assisting the owners of commercial buildings and neither is it responsible for taking action in relation to combustible cladding on them. CSV is not a regulator. In Victoria that falls with the Victorian Building Authority – VBA and local councils.

If you have received a cladding notice or emergency order Roscon can assist OC’s in dealing with these cladding notices issued by Municipal Building Surveyors quickly and efficiently.

Paul Cummaudo
Roscon Group
E: [email protected]
P: 1800 767 266

This post appears in Strata News #482.

Article: Cladding Status.. What’s The Real Story!

We are hearing lots of stories from numerous OC managers dealing with cladding notices or emergency orders issued by Municipal Building Surveyors to either remove the entire cladding from buildings or at least remove what is considered dangerous where cladding is present adjacent to exit ways and or near firefighting equipment so not to obstruct firefighting personnel in the event of a fire at the location. These notices sometimes only require minimal on site works to satisfy these notices. Roscon assist OC’s in dealing with these cladding notices or emergency orders issued by Municipal Building Surveyors quickly and efficiently.

The establishment of Cladding Safety Victoria by the Victorian Government was supposed to be a
world-leading initiative. The $600 million program which was aimed to make Victorians safer by reducing the risk associated with combustible cladding on residential apartment buildings and publicly owned buildings. Since its establishment Cladding Safety Victoria – CSV has been just busy trying to get its head around the cladding and had little time actually removing cladding as the whole cladding matter is kept a secret.

Cladding Safety Victoria recently asked the Government to introduce the Cladding Safety Victoria Bill 2020 (Vic) (CSV Bill) which has been passed.

The aim of this CSV Bill is to essentially do the following:

• Establish Cladding Safety Victoria (CSV) as a separate body corporate.
• Prescribe the process by which CSV will administer the cladding rectification program in Victoria;
• Introduce an extended limitation period of 12 years for cladding building actions; and transfer the existing cladding rectification work functions from the Victorian Building Authority (VBA) to CSV.
• Separates CSV from the Victorian Building Authority (VBA), where it is currently a business unit of the VBA
• Provides for the appointment of a CSV board, CSV chief executive officer and CSV staff in its own right
• Prescribe the process for cladding rectification work
• CSV is to determine if the buildings referred to it will be registered in its program and if it will grant financial assistance for the cladding rectification work.
• And much more.

Originally when the $600 million program was announced by the Victorian Government property owners were somewhat relived on the announcement, however from what I see the funds will be consumed in providing CSV staff salaries, board fees, office premises and paying professional indemnity insurance premiums and a host of other fees they incur over their lifespan.
From my understanding CSV is going to be granting financial assistance by way of loans which it intends to recover from OC and not pay for the total costs of removal and replacement of non-combustible cladding. Typically, another government department who will burn a lot of taxpayers money in setting up the infrastructure and little money going out where it’s needed urgently.

What about commercial premises, how will this be managed by CSV? There are thousands of commercial buildings with combustible cladding around Australia will these be left alone as they pose a lessor risk, there is no clear indication from CSV or other state governments how these buildings are to managed moving forward. In our opinion non-residential buildings should be left alone as the risk has always been there in the past and insurers should stop adding additional premiums to these buildings.

Roscon would like to hear from any OC where CSV has removed the cladding at no cost to the OC as we believe none have been completed since the establishment of CSV. We appreciate confidentiality and we don’t need the address details but looking for feedback from the OC industry.

Paul Cummaudo
Roscon Group
E: [email protected]
P: 1800 767 266

This post appears in the April 2021 edition of The VIC Strata Magazine.

Question: Even though we have a letter from a qualified expert claiming that the facade presents no risk, our strata insurance renewal quotes still reflect a combustible cladding excess.

An issue that I find rather interesting is that of strata insurance. It’s perhaps the largest expense for strata and yet we seem to lack competition in pricing from this sector. The brokers appear to have their favoured insurers I have noted over many years with one, in particular, coming out as preferred/recommended on 80% of occasions. Coincidence or what?

I’ve recently been involved in three strata insurance renewals. Two are quite straight forward (albeit hefty pricing increases of up to 20% have been applied this year) the third though saw our current insurer applying a combustible cladding excess of some $100,000 or 10% of the Building Sum insured (so $120,000 for us) in the event of a fire with “cladding” contributing to the outcome. Some insurers declined to even quote for the fact that our building has part wooden and part copper facades (no flammable PE cladding in sight).

And this is all despite the fact that a qualified expert provided a letter to the developer claiming that the facade presented no additional risk to normal. These days it would seem that most new buildings are more than simply brick and concrete so this “cladding” is not simply PE cladding but any covering applied to a building would add an unwanted cost to insure strata buildings than before the Docklands fire. So to say this whole debacle is not having an impact across the board would be completely false.

It would seem that insurers are taking the whole PE cladding issue way out of context and we are paying for the very unfortunate occurrence of a very small number of buildings.

I’m interested if others are experiencing similar issues in rising insurance pricing, non-competitive quotes, special exclusions leaving them exposed due to combustible cladding and whether they have ideas or insurers they have used to better manage these rising costs.

Answer: Simply obtaining a letter from to the developer claiming that the facade presented no additional risk to normal will not suffice these days.

Simply obtaining a letter from to the developer claiming that the facade presented no additional risk to normal will not suffice these days, where it used to in the past.

Based on our experience the insurer will put you in a high-risk category unless you can prove otherwise, as they want the following questions answered:

Risk Assessment Questions Strata Insurers are asking on Cladding/EPS:

• A copy of the plans identifying the areas that have cladding/EPS
• % of the building that has cladding/EPS
• How the cladding has been affixed to the building
• The type of cladding used e.g Alucobond Plus, Vitrabond FR, etc.
• For multiple products, you will need to provide the information above for all products.
• Is there monitored detection to common areas?
• Are there any commercial tenancies?
• Is the property sprinkler protected? If so, is there 100% coverage?

Roscon has developed a report titled a ‘Materials Assessment Report’ in conjunction with CHU, Whitbread, Chubb and other insurers and brokers, to assist Owners Corporation Managers accurately assess the above requirements so you don’t get placed in the high risk category.

In some cases we have seen insurance premiums quadrupling, we just completed one for an Owners Corporation who didn’t get this report in time, as the insurance went from $28K to $130K.

This week we have successfully lowered the insurance of two Owners Corporations by over $20K per year.

Materials Assessment Report is great value and will hopefully save the Owners Corporation the report costs in the insurance renewal.

Our Materials Assessment Flyer can be view and downloaded, plus take a look at this short 3min video detailing our Materials Assessment Report.

Sahil Bhasin
Roscon Group
E: [email protected]
P: 1800 767 266

This post appears in Strata News #253.

Impact to households who are living in apartments with flammable cladding
Are you an owner in a building affected by combustible cladding? RMIT would like to invite you to participate in the ‘‘At what cost? Cladding concerns for owners” research project.
They are interested in learning more about the scale of the problems owners of property affected by combustible cladding face day to day across Australia, particularly those living in apartments. Find out more via this document from RMIT.

Question: Are there circumstances where non-fire rated Aluminium Composite Panels comply with the National Construction Code? If not, who is responsible to replace?

Are there circumstances where non-fire rated Aluminium Composite Panels comply with the National Construction Code? If not, who is responsible to replace?

We are in a four storey apartment building with a Certificate of Occupancy issued in late 2013.

Answer: Regardless of the amount of cladding present, buildings should undergo a risk assessment to identify whether the cladding constitutes an undue risk of fire spread at the façade of the building.

Aluminium Composite Panels (ACP) is prominently marketed in three variations, 100% polyethylene Core (Combustible), 30% Polyethylene Core & 70% Mineral Core (Fire Retardant), 10% Polyethylene Core & 90% Mineral Core (Non-Combustible), however, all 3 fail AS 1530.1 (1994) as they are Combustible.

The words ‘Fire Retardant’ and ‘Non-Combustible’ are marketing terms used by the manufactures which don’t link to any Australian or International standards.

Some of the only items used for cladding which withstands AS 1530.1 (1994) are concrete tilt panels and bricks, as the testing regime requires items to withstand a furnace at 750 degrees for 30mins. See the ‘Non-Combustible’ 10% Polyethylene Core & 90% Mineral Core fail the Australian Standard test.

By the nature of the question, the following statements assume the Owners Corporation you reside in has received a Building Notice.

Prior to your Owners Corporation receiving a notice or order via the Municipal Building Surveyor, the Victorian Cladding Taskforce led by the Victorian Building Authority have verified that there is an unacceptable level of danger to life, based on the combustible external cladding that does not comply with the Building Code of Australia.

If you have received a Building Notice it will denote that the external walls of the building consist of combustible materials, which is contrary to specification C.1.1 of the Building Code which requires all external walls and attachments to be non-combustible.

As an Owners Corporation you are now required to ‘SHOW CAUSE’ in writing within 30, 60 or 90 days why Occupation of the building should not be prohibited or why you should not replace all combustible materials and or carry out other items denoted in the notice or order.

We understand this is a very frustrating and stressful time for all owners and occupants of the building, as the notice is an encumbrance on selling your asset, in turn reducing the asset value and increasing your insurance premium.

You are now required to undertake a Fire Engineering Review in line with the International Fire Engineering Guidelines to look at possible Performance Solutions or Deemed-to-Satisfy Provisions which only a Fire Engineer can submit. This process can save considerable funds on rectification works, rather than just replacing all the combustible materials which could cost millions of dollars. For this to occur a Fire Engineering Brief and Fire Engineering Report will need to be completed.

These two documents provide an approach to justify the performance solutions identified through qualitative and quantitative analysis statements. Statistical and or supportive evidence will also be used where assumptions for fire engineering analysis are made.

As you have mentioned the building was constructed and Occupancy Permit issued in 2013 the cladding would form part of a Building Defect claim as the Owners Corporation and hold the builder responsible under the Statutory Warranties: Section 8 of the Domestic Building Contracts Act 1995 for 10 years from the date of the Occupancy Permit or the Certificate of Final Inspection. This includes the National Construction Code, guides to standards and tolerances and Australia Standards.

The builder can be held responsible under the Statutory Warranties: Section 8 of the Domestic Building Contracts Act 1995, when building works do not comply with:

• The Contract
• The Planning Permit
• The Building Permit
• The National Construction Code (NCC) – Formerly BCA
• The Building Act or its Regulations
• Relevant Australian Standards

All domestic building work must be carried out:

• In a proper and workmanlike manner and in accordance with the plans and specifications
• In accordance with and comply with all laws and legal requirements
• With reasonable care and skill
• So that the home will be suitable for occupation on completion
• Materials supplied will be good and suitable for purpose

If Builder is in breach of a section 8 warranty:

• The works can be considered defective/non-compliant works
• Owners can seek damages
• Damages equate to the costs for the works to be rectified
• Subject to a test of necessity and reasonableness
• Necessary to produce conformity
• Rectification would not be unreasonable

As your Building is over 3 storeys the ‘Home Warranty Insurance’ doesn’t apply.

At the time of replying to your question, Roscon is one of two Fire Engineers in Victoria that has been granted access to the Risk Matrix the Victorian Building Authority used to direct the Municipal Building Surveyor to issue your Owners Corporation a Building Notice.

This allows Roscon to look at the initial rating of a building (Extreme, High, Moderate or Low) and subsequently design Fire Engineering solutions and run design simulation through the Victorian Building Authorities, ‘Risk Matrix’ to reduce the risk rating of a building, thus reverse engineering solutions and presenting a compelling argument to have the Building Notice revoked as quickly as possible, lifting the encumbrance on selling your asset and restoring the asset value.

As a registered domestic and commercial unlimited builder, Roscon can also assist in the Project Management of any Building or Emergency Orders which require rectification works, including advising the committee of funding options available rather than raising special levies.

As the industry leading Fire Engineers for cladding, our team look forward to assisting Victorians through this difficult period.

Sahil Bhasin
Roscon Group
E: [email protected]
P: 1800 767 266

This post appears in Strata News #210.

Question: Our Strata Corporation has sent us a letter and they are investigating all buildings under their control; however, they stated that only buildings with 30% or more combustible cladding are to be forwarded to insurance companies for review. Is this correct?

Our Strata Corporation has sent us a letter and they are investigating all buildings under their control; however, they stated that only building with 30% or more built with combustible cladding are to be forwarded to insurance companies for review. Is this correct? Or does it depend on whether the cladding conforms to the correct Australia standards?

Answer: Regardless of the amount of cladding present, buildings should undergo a risk assessment to identify whether the cladding constitutes an undue risk of fire spread at the façade of the building.

Some insurers are using the percentage of cladding coverage as an interim parameter to adjust insurance premiums on buildings with aluminium composite or expanded polystyrene cladding. This is because the issue is new and guidelines are still being developed on a State and Federal Government level.

Cladding on the external façade of a building is required to be non-combustible for any residential building 3 stories or greater under the National Construction Code. Any amount of combustible cladding can undermine the fire engineering design of the building, as this has been prepared under the assumption that the façade cannot be set alight. Regardless of the amount of cladding present, buildings should undergo a risk assessment to identify whether the cladding constitutes an undue risk of fire spread at the façade of the building.

A detailed cladding assessment would consider the location of the cladding and the manner with which it is installed as well as the existing essential safety measures (fire safety) systems which are present at the site, each of these is equally as important as the total cladding coverage. Examples, where the amount of combustible cladding coverage may be a very small percentage but would add significantly to the fire risk, include:

• Any situation where cladding has been installed near or above a required exit such as to make the exit unusable in the event of a fire – this is particularly relevant where there no alternative exit pathway.
• Where cladding has been installed as the walls of balconies, but the fire sprinklers do not extend to the balcony area.
• Where the cladding is a strip of narrow width but has been installed as a continuous element which spans upwards across more than 2 levels. If a fire occurred at the base of such a panel it would easily move upwards to floors above.
• When cladding is located near common ignition sources this can be near bin storage, balconies, electrical equipment etc.

Conversely there can be situations where there is a large percentage of cladding coverage which does not constitute an undue risk of fire spread at the façade because it may be a non-continuous architectural feature that is not considered to form part of the external wall of the building, with non-combustible elements separating panels and acting as a ‘firestop’.

All these factors need to be considered when assessing combustible cladding at a building.

Sahil Bhasin
Roscon Group
E: [email protected]
P: 1800 767 266

This post appears in Strata News #175.

Have a question about combustible cladding or something to add to the article? Leave a comment below.
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Read next:

• Managing the Cladding Crisis: aluminium composite panel (ACP)
• Strata Finance: The guide for Owners Corporations

This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

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