In December 2017 the NSW government passed into force the Building Products (Safety) Act 2017 (NSW) (BPSA). The purpose of the Act was to create liability for the use of unsafe building products such as combustible cladding.

The use of aluminium composite panels with a core which is made up of more than 30% polyethylene in any external cladding, wall or facade has effectively been banned. Most owners of multistorey residential buildings on which this material has been installed, will be required to remove the cladding.

Moreover, combustible cladding is now included within the definition of a major defect which allows an owner 6 years to take legal action to recover the costs of replacing the cladding rather than the standard 2 years for building defects [i].

Even though the ban operates retrospectively, in those buildings already constructed, the question of who is the ultimate responsible party, from the developer, the builder, the architect, the manufacturer, the supplier or other parties, is a matter that will play out in the Courts over the next few years.

How this affect owners

The BPSA essentially provides for fines and offences to prosecuted under the Act however it does not assist an owner in suing for damages for the costs of repair or any injury caused as a result of the flammable cladding.

If the building does not fall within any of the allowable exceptions, the owner could be compelled by Council to remove and replace the cladding.

The costs of removal and replacement are significant. One reported building, a 282 unit mixed use apartment block in Sydney city, has been quoted $12.5 million to remove and replace 10,000 m² of flammable cladding which is equivalent to approximately $45,000 per unit[ii]

Buildings constructed before August 2012 will have no recourse to any of legal remedies and will be required to remove and replace the cladding at their own expense.

The owners of (most) residential two storey or higher buildings with combustible cladding are required to register the building with the NSW Government Portal with buildings occupied before 22 October 2018 required to be registered by 22 February 2019.

Although a building must be registered if it contains any combustible cladding to comply with the Regulation, they may not be required to replace that cladding (where the cladding is comprised 30% or less polyethylene) so being listed on the register does not necessarily mean that the cladding is required to be replaced.

So how does this issue affect potential buyers?

By amendments to the Regulations[iii], there is an implied warranty under every sale. That is, the vendor is implied to warrant to all purchaser’s that there are no rectification order/s outstanding for the cladding or other banned material at the time of the contract however that does not assist a purchaser if there is no actual rectification order in place at the time they are buying.

Michael Poynder, General Manager of Strata Reporting Services says that he has been unable to access the NSW Government Cladding Portal and has been informed that it is not accessible to buyers or their solicitors and therefore of no use to a potential buyer in their due diligence investigations about the property. He noted that the Portal information will be shared only with the relevant Local Council and Fire & Rescue NSW.

We recommend that the first step to protect yourself as a purchaser is to organise an expert to inspect the strata records and provide you with a strata report about the building in which you are considering purchasing.

  1. Seek as much information about the buildings cladding as possible from your strata expert and/or the owners corporation via the strata manager or via the vendor’s solicitor;
  2. Contact Local Council and ask specifically if they have been advised if your building contains combustible cladding;
  3. do not sign a contract until you have reviewed your strata report and specifically checked the status of the cladding in that particular building.
  4. Ask your expert strata investigator to investigate if possible, what type of cladding material was used in the constructions of the building; and
  5. Always check if the buildings fire safety statement is up-to-date.

We wrote to the Minister for Innovation and Better Regulation, Mr Matt Kean requesting the NSW Government urgently allow access to the NSW Government Portal to conveyancing professionals on behalf of our clients to enable efficient and quick access to information required to empower a purchaser to make an informed choice about the property that they are considering purchasing. The Department of Planning & Environment wrote back to us on 18 March 2019 saying “It is our view that general release of the Cladding Portal data is not appropriate at this time. It is important to note that the presence of external combustible cladding on a building does not necessarily mean that it is a fire hazard nor does it mean that the cladding will need to be replaced. It depends on where the cladding has been applied in the buildings overall fire safety measures. The Cladding Portal is not a list of “high-risk” buildings. The buildings are simply buildings that may require investigation by local authorities.”

We have also written to the Law Society of NSW Property Committee requesting that they make representations to the NSW Government to enable access to the Portal and have not heard back from them about what steps they have taken.

[i] Home Building Regulation 2014 Reg 69A

[ii] article by Frank Chung 3.12.18. Sydney apartment owners face $12.5 million bill to remove flammable cladding.

[iii] Conveyancing (Sale of Land) Regulations 2017, Schedule 3

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