Apartment owners face huge bills to replace flammable cladding

By Leith van Onselen

Last year it was revealed that apartment owners in Sydney, rather than developers or builders, are likely to pick up the tab for remediation after the NSW Government reduced the warranty claim window to just two years from seven:

Many owners of the 1000 NSW buildings identified with possible non-compliant cladding won’t be able to claim against their developer or builder because the two-year window to make such claims will have passed, a property lawyer says.

A change in law two years ago cut the window to make such claims from seven years, in part to reduce the risks for the statutory warranty insurance the state government underwrote.

This meant owners of buildings built under a contract agreed after 1 February, 2012 – which includes many built in the current housing boom – would not be able to claw back the costs of rectifying any non-compliant cladding. This is the view of David Bannerman, the principal of North Sydney-based Bannermans Lawyers.

Today, The AFR reports that owners in one Pyrmont apartment complex in Inner Sydney are facing a $7 million bill to have dangerous flammable cladding replaced:

Colin Knowles thought he was buying his dream home in Pyrmont in 2000…

Eighteen years on and Mr Knowles and his neighbours face a $7 million bill to have it replaced because of mounting pressure first by insurers and now legislated by the state government to remove it.
“The owners are greatly concerned at how much money they have to pay out,” Mr Knowles, chairman of his strata committee, said. “They believe they bought into a building which was all signed off on by inspectors, government certificates, the fire brigade and everybody else, only to find that now they’re left with a huge debt and we’ve got no recourse”…

Mr Knowles said only 85 apartments — or 19 storeys — in the complex were affected, yet all 200 owners have to pay a special levy to fix the problem.

If they proceed, each owner faces a $10,000 levy per quarter instead of the current $3000 for at least five years – something they worry will deter future buyers…

It’s now an offence to use the building product and corporations could be fined up to $1.1 million and individuals up to $220,000 for its installation.

But the ban also applies retrospectively, leaving potentially hundreds of NSW strata owners out of pocket because they are left to carry out remediation work themselves…

The NSW Cladding Taskforce found more than 400 buildings, half of them residential, had dangerous cladding that increased fire risks. It is unknown how many were built before 2012…

What we have here is a classic case of neo-liberalism gone mad.

In the rush to slash evil ‘red tape’ (i.e. health and safety rules), the government effectively watered-down the construction standards and handed over compliance to the developers themselves.

This has been a recipe for disaster, facilitating the creation of a shonky industry whereby greedy developers and builders have make out like bandits selling thousands of dodgy apartments and other structures to feed the population ponzi, all with the blessing of lax building regulators and policy makers.

Now, apartment owners are facing hefty remediation bills to bring their properties up to code, or worse risk being torched to death as they sleep.

It’s market and regulatory failure of epic proportions that’s more akin to a dodgy developing country.

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Comments

  1. I have a feeling we will see Government likely lending money real cheaply, to make this issue NOT CRASH HOUSING.

    • No taxpayer bail outs! If no statuatory safeguard then actions in tort for negligence for building a living place more akin to Christmas tree firecracker. No TP funds FFS! How many owners are overseas money launderers getting bailed out by our money?

      • Couldn’t agree more, however, if the Govt (local or Federal) is deemed to be negligent in their drafting of the rules ‘n regs surrounding the construction of buildings then surely these Govts are vulnerable to a class action, which, if lost could lead to the lowly taxpayer ‘making whole’.

        Life’s grand if you work for Govt — no matter how corrupt or incompetent you are, you are very rarely held to account and certainly NEVER financially inconvenienced.

    • someone like lend lease will bid for the government contract to do all the rectification, how can NSW liberals resist signing them up.

    • Did you actually read the post?

      It says NSW Government changed the law. They changed the law so that they were no longer liable. Developers are no longer liable. Owners are. They have washed their hands.

      Buildings in NSW now have a two year warranty period, shorter than a TV, shorter than what the ACCC says is reasonable for something of that cost.

      • It would be an interesting test case to see if Federal consumer law applies
        https://www.accc.gov.au/consumers/consumer-rights-guarantees/consumer-guarantees
        and does a unit count as an item :-
        •over $40 000 that are normally bought for personal or household use.

        If so there is a statutory warranty that states:-
        Since 1 January 2011, the following consumer guarantees on products and services apply.

        Products must be of acceptable quality, that is:
        •safe, lasting, with no faults
        •look acceptable
        •do all the things someone would normally expect them to do.

        Acceptable quality takes into account what would normally be expected for the type of product and cost.

  2. Last year it was revealed that apartment owners in Sydney, rather than developers or builders, are likely to pick up the tab for remediation

    I think we all know who will be picking up the tab.

    haroldus.

  3. I know building surveyors who millionaires many times over because they turn a blind eye to this. If your a strict surveyor you get no business if your slack you get heaps and you name your price. Aust has some of the best building standards in the world what has happened here is against building law. It has become a whitewash. The problem has come about from deregulation of enforcement and slack building authority. And developers/ builders who strive to max profits. Needs to be tested by class action.

    • I think it may be time for a Royal Commission into the whole economy. Every sector has a scandal as big as the financial services industry .

    • Even StevenMEMBER

      I presume an insurer won’t pick up the tab for ‘criminal’ negligence. I expect that’s a gaol term.

  4. How much of this cladding has been used in China? Is Beijing a tinder box (not Reusa’s type of Tinder Box)

  5. The rectification of this is going to be huge and will keep construction workers employed for a considerable period of time. The NSW government will be patting itself on the back with the GDP prints. So rather than being innovative,we make money by selling dodgy apartments and then charging to fix it.

      • Shows what a great measure GDP is then, doesn’t it.
        All economic activity is good, whether it produces a benefit or not.

    • Australian authorities have known about this cladding risk for years. Possibly as early as 2009 when the first building went up in flames in China, definitely by 2014 when the Lacrosse building went up in flame in Melbourne.

      IMO what has happened in the last few years has all been staged. The money grab, the denial of risk, the stitchup of warranty periods to put the costs onto consumers, and the enforcement of repairs to coincide with a housing downturn.

  6. If you bought after 2012 you’re covered by warranty insurance. If you bought before 2012 you’re sitting on a massive capital gain, so you should cough up the dough and pay to fix your building. Or sell.

    • $35k per apartment in the original article. Not pocket change, but 3.5% of the value is pretty small.

      • My working says its $140K:

        (($10,000/quarter -$3,000/quarter) *4) * 5 years

        Imagine paying $10K/quarter just on strata fees? That’s $800/pw you could spend on rent.

    • >If you bought after 2012 you’re covered by warranty insurance

      NO. Did you actually read the post?
      It says NSW Government changed the law. They changed the law so that they were no longer liable. Developers/donators are no longer liable. Owners are.

      Buildings in NSW now have a two year warranty period, shorter than a TV, shorter than what the ACCC says is reasonable for something of that cost.

  7. Remove the cladding reveal the concrete cancer, yep, apartment and unit owners are going to get the rough end of the pineapple on this one.

    • Yr close there. much of that cladding was secured by fasteners drilled into the concrete
      if the fastener was near the reinforcing, the reo now has an effective lack of concrete cover to keep out the water,
      thus form locations of initiation for concrete cancer.
      I have kept those notes on building surveyors for later use.

  8. This is the problem with regulation: it lulls a dopey citizenry into believing the Govt has their back when, in fact, most of the regulations they implement aren’t fit for purpose. It also means that when certain regulations are conveniently removed, no one is any the wiser.

    It seems that ‘personal responsibility’ is truly extinct. Another deleterious effect of the State’s role in people’s lives.

  9. The Penske FileMEMBER

    A Melbourne based valuer has told me that there are 1600 buildings across Victoria affected. I’m not sure how anyone will really find out or if there’s too many looking for the real number.

    • I would love to know how sworn valuers are dealing with this problem, they must have provided valuations in the period between this issue becoming common knowledge and now.

  10. “If there’s a hint of taxpayer bailouts I will personally set all of these buildings on fire,” said some bloke on the train. Couldn’t see his face. Couldn’t identify him in a lineup.