New law for low-rate “cladding rectification” loan to be considered by Victorian Parliament

This is a repost. Original article posted on March 12, 2020

Owners Corporations could soon have access to low-interest loans for the removal of flammable cladding on their buildings.

New laws were introduced to the state parliament on Thursday by Legislation Planning Minister Richard Wynne, which will allow for the creation of Cladding Rectification Agreements between building owners, local councils and lenders.

The laws would allow lenders to offer low-rate loans to Owners Corporations for the removal and replacement of flammable cladding on their buildings, which can be paid back over a minimum of 10 years.

The scheme would only be available for residential buildings.

“This scheme is the first of its kind anywhere in the world and offers owners the cheapest and most efficient way of fixing their buildings,” Mr Wynne said.

“As well as making properties safe and compliant with building laws, these financing agreements allow cladding to be removed quickly, without affecting property prices.”


Since the LaCrosse fire in Melbourne of 2013 and the tragic Grenfell fire in London in 2017, there has been concern about the widespread use of the same flammable cladding which played such a pivotal role in the spread of those fires.

The Aluminium Composite Panel (ACP) cladding used on those building contributed significantly to the rapid spread of those fires.

Tragically, in London, over 70 people were killed.

In light of those fires, the Victorian Building Authority and state government have formed a Cladding Taskforce, which has been working with local councils to identify building with suspect cladding.

Building notices have been issued to over 100 buildings across Victoria already, with the notices asking Owners Corporations to investigate the cladding on the building, install additional fire safety measures or – at worse – evacuate the building and arrange for the removal and replacement of the cladding.

The removal and reinstatement of cladding is an extremely costly exercise for an Owners Corporation, costing $100,000s of dollars and as the current owners of the building, the Owners Corporation will have little choice but to find a way to pay for the rectification required.

Owners also have to disclose the discovery of any flammable cladding on their buildings which can lead to increased strata insurance premiums or worse difficulty finding an insurer willing to take on the risk.

As the owners of the property who form the current Owners Corporation may not have had any say in the building materials used on the building, they may look at legal options and try to chase the builder for costs.


However, the Owners Corporation is required under the act to rectify any issues with the building once it has been alerted, meaning when it comes to cladding rectification it could be a case of pay now, sue later.



The scheme proposed to the Victorian parliament was in line with one of the recommendations made by the Cladding Taskforce.


“It means that people can see clearly how much they’re going to be required to pay and to have a way forward for decladding,” John Thwaites, co-chairman of the Victorian Cladding Taskforce told the Australian Financial Review.


Not everyone is convinced, though.


Sahil Bhasin is the general manager of Roscon, a company which specialises in identifying building defects, said apartment owners should never have been placed in this position.


“The Andrews Government is protecting the building industry by passing the cost of rectification onto owners when they should be helping prosecute the builders,” Mr Bhasin told Fairfax Media.


Mr. Bhasin also refuted Mr. Wynne’s claim that property prices wouldn’t be affected.


As any loan taken out under the Cladding Rectification Agreements scheme would need to be disclosed on an Owners Corporation certificate, “[They] would devalue the properties affected,” he said.


Strata Plan will continue to monitor this story and update customers as news comes through.

For more cladding news, check out our archive HERE


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