Cladding Safety Victoria: Not a Cladding Cure-All

Date: September 23, 2020
Author: FAL Lawyers
Posted in: Insights

Executive Summary

  • Apartment buildings must satisfy four key criteria in order to be eligible for CSV cladding rectification funding.
  • Legal costs incurred will not be reimbursed or funded by the CSV, other than those necessary for the BAB process.
  • Given the substantial amount of cladding issues in Victoria, it is unlikely that CSV will be able to fund cladding rectification works for all affected apartment complexes.
  • Owners may still need to fund part, if not all, of the cladding rectification works for their buildings.

The Victorian Building Authority (VBA), in cooperation with the Victorian State Government, has conducted inspections on over 2,500 buildings. Of these inspections, more than 400 buildings have been categorized as “high risk” with an additional 72 further classified as “extreme risk”. An agency dedicated to the remediation of cladding issues, Cladding Safety Victoria (CSV), will have access to $600 million to fund rectification works.

Cladding Safety Victoria Program

Currently, there are four essential criteria that must be satisfied in order for a building to be eligible for CSV funding:

  1. The building must be deemed a “high risk” or greater by the state-wide cladding audit;
  2. A Building Notice or Order must note the building’s combustible external wall cladding;
  3. Either the VBA or the City of Melbourne must refer the building to the CSV; and
  4. The building must be prioritized for rectification by CSV.

To date, 487 buildings have been referred to the CSV. And the CSV has reviewed approximately 60 buildings a month for prioritization allocation.

If a building satisfies the above criteria, the owner’s corporation in charge of that building will then enter into a funding agreement with CSV. CSV will only fund works associated with cladding rectification. Any additional works will need to be financed by the building’s owners and may not be covered.

What is covered

CSV have clearly stated that they will only fund those works associated with, and necessary to, cladding rectification. Any additional works will then need to be financed by the building’s owners. For example, CSV will not fund:

  • Rectification works not directly linked to combustible cladding. This includes building infrastructure, general building maintenance, upkeep and any other additional defect works;
  • Services not directly or reasonably sought for achieving compliance with a Building Notice of Building Order. Including non-essential items such as internal fixtures, exterior blinds and awnings, solar panels and reticulation systems;
  • Cladding or wall system works that are not within the scope of the recommended rectification solution. For example, fixing other problems with cladding such as glazing, leakage in unrelated areas, inadequate structure, full removal of cladding where only partial rectification is required; and
  • Legal costs that fall outside matters requiring resolution with the BAB processes. Such as costs incurred for action against a practitioner or any other cost recovery actions.

The establishment of the CSV does not relieve owner’s and owners corporations’ obligation for rectification of non-compliant combustible cladding. Owners corporations receiving a building notice or building order under the Building Act 1993 must comply with it. Cladding rectification work pursuant to a Building Notice or Building Order may receive retrospective CSV funding. However they must demonstrate that:

  1. The rectification works related to combustible cladding and did not commence prior to the establishment of the CSV; and
  2. The rectification works meet the same requirements and standards of the CSV Program.

Limitations of CSV Funding

The costs of rectifying all combustible cladding works within Victoria will vastly exceed the $600 million that CSV has been entitled to work with.  Meaning that most owners and owners corporations will still be out of pocket when attending to the cladding rectification works. Additionally, there is no guarantee that for those buildings that the CSV has agreed to fund, that they will fund all of the costs. Even for those “high risk” buildings, owners and owners corporations may still be required to foot part of the bill themselves. The recovery of such costs may then only be available through insurance claims or actions against practitioners.

For further information on how you may be impacted by the Cladding Safety Victoria Program, contact our Building and Construction team!

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