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New Combustible Cladding Laws require action by Building Owners and Bodies Corporate

Monday, 12 November 2018

New combustible cladding laws passed on 1 October 2018 could leave building owners, property sellers/purchasers and bodies corporate in hot water.

As a response to devastating fires at the Grenfell Building in London and Lacrosse Building in Melbourne’s Docklands area, the Queensland Government has introduced new legislation for buildings with combustible cladding - the Building and Other Legislation (cladding) Amendment Regulation 2018, which amended the Building Regulation 2006 (QLD).

According to Hickey Lawyers partner, Joe Welch, while the new legislation does not force anyone to remove their cladding or change their building, there are a number of potential impacts and legal ramifications.

“The legislation requires building owners and bodies corporate that have a development approval for their building after 1 January 1994 to report it to the QLD Building & Construction Commission (QBCC).  QBCC will keep a register of those buildings that have reported and ultimately keep a register of the buildings that have combustible cladding. While it is not the intention of the QBCC or the legislation to force bodies corporate or owners to remove and replace cladding, if dangerous combustible cladding is found the property may not be safe or lawful to live in.” Mr Welch said.

Speaking at the Smart Strata Community Education Seminar, Mr. Welch joined the CEO of Solutions and Engineering, Ross Daley, in addressing concerns of owners and committee members of Gold Coast bodies corporate about combustible cladding on their buildings and the introduction of these new laws.

As identified at the seminar, owners and bodies corporate have a number of obligations under the new legislation, including the legal requirement to complete combustible cladding checklists. Part 1 of that checklist is to be completed online by 29 March 2019; Part 2 will be required to be completed if there may be combustible cladding in the building and that must be completed through a building industry professional before 29 May 2019.  If there is combustible cladding, then a combustible checklist Part 3A needs to be completed by 27 August 2019 by a fire engineer.   Depending on whether the combustible cladding will be a problem for the building then a further checklist may be required to be completed 3 May 2021.

“There are a number of big issues for people to address,” Mr. Welch said. 

“If you own a building with combustible cladding, you may be required to tell your insurer or it may void your insurance. If you do tell your insurer that you have cladding, then your insurance premium may increase dramatically,” he said.

“It won’t take long for financiers to realise how important this issue has become because it can significantly reduce the value of a building. So, be prepared to make disclosure to your financier as well,” cautioned Mr Welch.

“It is not clear whether using combustible cladding for a building is a defect by the builder, so your rights may be limited against your builder depending on when they built and whether or not they knew the cladding was combustible,” he said.

“If you are buying a building or a unit that is in a building that has combustible cladding, then your body corporate levies may increase dramatically because of the insurance premium may increase dramatically. If the body corporate has to pay for the replacement of the cladding, then the body corporate levies may increase dramatically. This could reduce the value of your apartment,” he said. 

“If you are a seller and you know your building has combustible cladding and you will have to pay a significant amount of money to have it replaced, then under the standard form of REIQ contract and the Body Corporate and Community Management Act, you may have an obligation to disclose that to a buyer,” he said. 

Fortunately, Mr Welch assures that the QBCC believe only a small number of residential strata title buildings will have combustible cladding problems, leaving the issue more prevalent for commercial and government buildings. Additionally, owners of houses, townhouses and most buildings under 3 stories are not impacted by this legislation.

“Aluminium cladding wasn’t used a lot by residential builders as it was a more expensive material. It was favoured by commercial and government buildings, such as office blocks, because while it was more expensive to install, it saved a significant amount of money in the long term as it didn’t require repainting as often, with minimal maintenance costs. It also contributed to the aesthetic appeal of commercial office buildings,” Mr Welch said.

“Problems with cladding will be a significant issue for commercial building owners, who should initially contact a licensed builder or a fire engineer to address concerns with cladding, then follow up with legal advice” he said.

“Anyone considering buying a unit in a high rise that may have cladding, we recommend that you search the body corporate records and take advice from a lawyer to give you protection under your purchase contract. If you are buying a whole building, then we recommend that you have the building investigated for combustible cladding,” Mr Welch advises.

As a specialist property development and community title lawyer, Mr Welch warns of many potential legal headaches for people impacted by the combustible cladding laws but says good legal advice can help.

“At Hickey Lawyers, we can provide legal advice for people to make their way through reporting requirements to the QBCC. We can assist people with selling units or buildings to make sure that they make the right disclosure and provide the right documents. For buyers, we can help with their due diligence and identify obligations for the future if there is cladding to be replaced” he said.

“Furthermore, some parties may have a claim against builders who used combustible cladding and we can provide legal assistance to proceed with this,” Mr Welch said.

To access the full legislation, visit the Queensland Government website and to discuss potential legal issues and impacts, contact Joe Welch at welchj@hickeylawyers.com.au

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