Cladding – remove now, pay later?

Apartment buildings across Melbourne are finding that it can cost hundreds of thousands or even millions of dollars to remove combustible cladding.

We await feedback from owners who are tempted by the state government’s offer of cladding “rectification” loans that can be paid off through council rates.

Planning Minister, Richard Wynne, has been reported as saying “these financing agreements allow cladding to be removed quickly, without affecting property prices”. 

While we can hope these loans will be readily accessible and not tangled in red tape, the property prices have already been affected, Mr Wynne!

On top of that, We Live Here is hearing that builders are charging a pretty premium for any project related to the C-word – with abashed building companies that installed the cladding in the first place now finding the word “cladding” oddly ineffable. 

Speaking of premiums, ignored by all governments is the devastating effect that cladding has had on insurance premiums, with eye-watering increases just adding to the already huge financial burden on owners.

Perhaps we need a royal commission on cladding gouging, inviting builders and insurance companies to “rectify” themselves?

Cladding in the courts

With $24 million at stake, Lacrosse apartment owners have instituted legal action against some heavy hitters in the building industry. Four years after a major fire ravaged their building, owners are still seeking to have cladding removal paid for by the parties responsible. Just who is responsible is the big question. 

The legal action by Lacrosse owners is against eight parties including the builder, building surveyors, architects, and fire engineers. 

Notably absent from the invitation list is the developer (a $2 holding company) and perhaps for obvious reasons, the state government.

The legal action has spawned a flurry of accusations and counter-accusations in the media as the targeted parties position themselves for a lengthy, expensive legal stoush. 

Meanwhile the hapless owners pick up the tab, with apartment values having reportedly dropped at least 30 per cent and some lenders calling in debts on the basis of diminished loan to value ratio.

We Live Here – representing owners and residents

We Live Here has been successful in giving a voice to owners and residents. We have developed ongoing and cordial relationships with politicians across the spectrum with the aim of making sure that owners and residents are heard.

We Live Here also offers support in this column to business interest groups where we believe they may help the cause of apartment residents and owners.

Recently one such business group, Strata Community Australia (Vic) (SCA), started a campaign to influence political policy in the lead up to the state election.

Since news of the SCA campaign started circulating We Live Here has received many enquiries from those wanting to know what our position is on this issue.

What we can tell you is this:

Strata Community Australia (Vic) (SCA) is the peak industry body for owners’ corporation managers in Victoria, i.e. SCA represents businesses that manage the apartment buildings in which 1.6 million Victorians live.

We Live Here was created in 2015 to give a voice to residents who live in these apartment buildings, and for whom it is their home.

There will be some but obviously not complete alignment between We Live Here, representing residents and a group that represents management businesses.

For example, We Live Here is in complete agreement with two of the three issues in the SCA campaign: 

The long-overdue reforms to the Owners Corporation Act 2006 which commenced in 2015 by the Department of Consumer Affairs as part of its Property Law Review, but still has not surfaced despite being promised in early 2018; and

The vexed issue of combustible cladding, and who should take responsibility for paying to replace defective material.

Short-term letting, however, is where we do have a very different view from SCA. It is the issue where the impact on owners and residents – those who live in strata communities on a day-to-day basis with the consequences of short-term letting – is most pronounced.

The solution is not simply having laws to address wild short-stay parties – the focus of the SCA’s campaign. It is a far bigger issue than that and one which we have written about many times.

The SCA has also said that the recent passage through Parliament of the unamended Owners Corporation Amendment (Short-Stay Accommodation Bill) 2006, which We Live Here opposed for more than two years, was a big step forward, which, in our view, it clearly is not – otherwise we wouldn’t have opposed it in the first place! 

So, while we support SCA in its campaign to put the political leaders on notice about the need for reforms in the strata industry, we would like it to correct the misconception that SCA speaks for the 1.6 million Victorians living in residential apartment buildings, when it is the strata management businesses for these buildings that it represents. This would dispel any confusion.

In the meantime, We Live Here will continue working actively to see that the out-of-control short-stay industry is regulated.

Campaign donations

As a not-for-profit organisation, donations from individuals and buildings keep our campaigns going. To register as a supporter of We Live Here or to make a donation please visit our website at welivehere.net

We Live Here does not accept donations from commercial tourism interests. 

We welcome your comments and feedback and invite suggestions for topics you would like us to address in this column.

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