cladding safety victoria Archives

Jun 28 2023

An Interplay Between Cladding Safety Victoria Funding and Demands for Cladding Regularisation

With more and more Victorians residing in apartment buildings, and the spotlight firmly on the compliance and fire safety of cladding products, apartment owners are having to learn more about rights and responsibilities they may once have presumed to be the domain of fire safety engineers.

What does it mean to owners when a building requires cladding rectification works?

There is a flavour of apartment owners, as the members of an Owners Corporation responsible for the cladding on an apartment building, finding themselves sandwiched between the demand for regulatory compliance on the one hand and the need to prioritise rectification funding on the other.

One could then see the apartment owners as the innocent inheritors of the problem when fire safety compliance is called into question. The owners are subsequent purchasers of dwellings within the building after completion. They did not design or build the property, they did not specify the building materials and nor did they issue the approvals for the design and construction.

How is a property determined eligible for financial support for the rectification of combustible cladding?

When Cladding Safety Victoria (“CSV”) was established several years ago, there was a sum of money allocated to its funding scheme while investigation continued into the most high-risk buildings with combustible cladding. The was following an audit scheme where a Risk Assessment Tool or “RAT” analysis was employed to identify the highest priority buildings for rectification.

The criteria would look at such matters as the type of ACP product used, the extent of the cladding on the building, and its location. For example, is the product near the main exit from the building, close to potential fire sources on neighbouring property or sensitive areas like fire hydrant cabinets, and is there is a risk of vertical fire spread up the building?

However, the pool of money for cladding replacement funding was always finite, meaning that a “triage” system of ranking the highest risk buildings for prioritisation was always going to be necessary.

Secondly, the Ministerial Prohibition Declaration, whereby the Minister of Planning declared that a range of ACP products would be prohibited for use on buildings in Victoria, came into effect on 1 February 2021. This had the effect of removing for use not only the most combustible ACP products, but also any cladding product that did not have at least 93% inert material core.

This was a departure in that previously an ACP with less than 30% combustible polymer core was seen as lower risk and was assigned risk category “B” under the Insurance Council of Australia guideline.

Consequently, even cladding products such as Alpolic / FR, which has a fire-retardant core, is banned under the Ministerial Prohibition. This is even though it has been used in Victoria on a hospital building and has a less than 30% combustible polymer core.

While the “ban” by the Minister of Planning is not retrospective and applies to future projects after the date of coming into effect, the issue for Owners is that it can affect insurance for the building and potentially the value of apartments in the complex.

However, if one looks at a cladding material that has a fire-retardant core, such as Alpolic / FR, it is the very existence of the fire-retardant core that has been given as the reason by CSV to deny funding for cladding replacement.

There is another danger here, that Owners will become the “meat in the sandwich” between regulatory authorities seeking cladding replacement on the one hand, and on the other hand CSV that wishes to prioritise only the most high-risk buildings for replacement funding.

Just because, based on a triage system, CSV decides that a cladding product used on a specific building is not dangerous enough to warrant eligibility for replacement funding, does not necessarily mean that a Local Authority (ie a Council) will agree to cancel a Building Notice for the same cladding or building.

Potentially a denial of CSV funding can be a reason used to argue, amongst other matters, that certain cladding should be permitted to remain on the building. After all, a lower combustibility of the product’s core must be one factor that a Local Authority should consider when deciding whether to cancel a Building Notice or Order.

Commonly, a Council will serve a Building Notice on an Owners Corporation alleging that the cladding as found on the structure is a danger to the life, health or safety of the owners and occupiers, anyone using the building or to the public, or could cause damage to property. The Owners may be requested to “show cause” within a certain period why the cladding should not be replaced or a compliance assessment obtained from the Building Appeals Board to allow the cladding to remain.

If the Council won’t agree to cancel a Building Notice, even after a CSV approach for funding has been declined, then the Owners are faced with certain alternatives, for instance:

Making written submissions with the use of fire engineering expert advice, to argue that the Building Notice should be cancelled, and if the authority refuses cancellation, appealing that decision to the Building Appeals Board;
Applying to the Building Appeals Board for a section 160A compliance assessment, with the aim of having the Board confirm that the cladding as found on the building complies with performance requirements of the Building Code;
Conducting extensive replacement of the cladding at the building with a non-combustible product and suing the relevant building practitioners for the associated costs.

As you can see, there are not necessarily any easy or convenient options for the Owners Corporation faced with such a quandary.

With the Risk Assessment Tool, or RAT analysis, the grading for a building’s fire safety will result in a rating of Low, Moderate, High or Extreme. It is understood that the RAT analysis was initially utilised to prioritise the most high-risk buildings for the Statewide cladding audit, that assesses the cladding alongside all active and passive fire safety systems.

While in the past there has been some “push back” on Owners Corporations using an RAT analysis to support submissions on compliance at the Building Appeals Board, there seems little reason why this analysis cannot be used in this capacity – at least as part of the argument for allowing cladding to fully or partially remain on a building.

Are there other considerations for compliance?

The cladding though should not be seen in isolation when assessing compliance with the performance requirements of the Building Code. There is the entire wall system to be factored, including the combustibility or otherwise of any insulation or sarking behind the panels. In addition, there are the active and passive fire safety systems at the property. These include such features as:

Automatic Fire Sprinkler system in accordance with Australian Standards
Building Occupant Warning system
Nature and location of the cladding product itself
Fireproof doors and smoke seals
Location of fire hydrants and other Essential Safety Measures
Paths of travel and egress for residents, taking into account the number, nature and likely mobility of residents
Access for fire fighting personnel and proximity to a fire brigade station
Design of the building, such as a stepped back layout for higher levels (or “wedding cake” design to lessen vertical fire spread)

In the Building Appeals Board case decision of In the matter of 14 Elliot Avenue, Carnegie [2020] VBAB 19, the Board determined that the prescriptive “deemed-to-satisfy” test for compliance of combustible cladding, such as Expanded Polystyrene (EPS) panels, would not necessarily be the relevant test:

If the performance requirements in CP2 and CP4 of the Building Code were satisfied as an alternative path to compliance; and
If the holistic or over-all fire safety situation at the property otherwise results in a satisfactory level of fire safety.

In this case, a building with four storeys above the basement carpark and 21 self-contained apartments, there was a mixture of EPS cladding on the top two levels and an eyebrow canopy on the top level consisting of Aluminium Composite Panelling (ACP).

There was automatic sprinkler protection pursuant to AS2118.4 that covered the entire building including the basement carpark. Also, each level containing apartments was supplied with an internal fire hydrant set in an enclosed fire isolated cupboard, and other fire safety features.

In accepting a performance-based solution for the property, the Board stated that the assessment of fire risk for a building is “an integrated assessment which is not automatically determined from a single variable.” Consequently, the probability of ignition was just one factor relevant to determining the overall fire safety of the building, which was a holistic assessment considering active and passive fire safety features in addition to the combustibility of the cladding product.

Based on this holistic analysis, and because other factors are relevant over and above whether the cladding product itself is combustible under the deemed-to-satisfy tests in the Building Code, the question may be asked whether:

the Ministerial Prohibition on cladding products is broader than it needs to be; or
the Ministerial Prohibition fails to properly recognise the myriad of other factors that contribute to the fire safety matrix at a building.

This is a Lovegrove and Cotton publication, authored by Justin Cotton. Justin has more than 20 years of construction lawyering.

For related articles on cladding please see:

How to Respond to Cladding Rectification Notices and Orders in Victoria

Full Replacement of all EPS Cladding on Apartment Buildings may not be Ordered if Performance Based Solutions are Satisfied

Appealing cladding related building notices under the Building Act 1993 (Vic)

Disclaimer

This article is not legal advice and discusses it’s topic in only general terms. Should you be in need of legal advice, please contact a construction law firm. The experienced team at Lovegrove & Cotton can help property owners and building practitioners resolve any type of building dispute.

Lovegrove & Cotton Cladding Compliance and Regularisation Lawyers

For thirty years, Lovegrove & Cotton have provided advice and represented property owners, builders, and building practitioners in cladding regularisation matters. Please see the cladding section page for more information.

Please see our page for more information. If you wish to engage the firm, feel free to contact us via our website, by emailing enquiries@lclawyers.com.au, or via phone at (03) 9600 4077.

Filed Under: Articles Tagged With: cladding rectification, cladding safety victoria, planning lawyers, resolving building disputes

Dec 05 2022

Cladding regularisation is the key to repairing leaky buildings, mould and fire dangers in apartment buildings. If you have received a building notice or building order for cladding in Melbourne contact Lovegrove & Cotton

Over the last few years in Victoria, there have been many applications for compliance assessments for Aluminium Composite Panels, or ACPs.

These applications are seeking approval from the Building Appeals Board for “combustible” cladding material to remain on a building.

This determination is applied for even though the cladding material is deemed “combustible” under the Building Code and is therefore seen as non-compliant with the prescriptive Code requirements.

Which regulations currently apply?

Such an application may be made under section 160A of the Building Act 1993 for a compliance assessment.

It is often made in response to a Building Notice or a Building Order from either a local Council or the Victorian Building Authority.

A legitimate and arguably more amenable route would be to apply to the Building Appeals Board to appeal a Building Notice or Building Order (rather than pursuing a s160A compliance application).

The Notice or Order will generally call for the ACP cladding to be:

removed entirely from the building; or
that there be a determination obtained from the Building Appeals Board (“the BAB”) that there is sufficient compliance with performance requirements under the Building Code to allow some or all of the cladding to remain.

There are two routes to compliance with Building Code standards, in order to meet the minimum benchmarks.

This is via satisfaction of the “prescriptive” deemed-to-satisfy Building Code requirements, or alternatively via a “performance” based solution that can be demonstrated to be at least equivalent to the prescriptive standards.

As part of that BAB application, it will be necessary to have a supporting fire engineering report that looks at all active and passive fire safety mechanisms and features at the building, such as:

any automatic sprinkler system;
building occupant warning systems;
paths of travel and egress;
accessibility to fire-fighting personnel; and
an examination of the nature and location of the cladding product itself.

There is also the ability of the owner of a building, or an Owners Corporation (responsible for common property in apartment buildings) to make an application to Cladding Safety Victoria for a funding application to replace the combustible cladding on a building.

Consideration would need to be given by a building owner about whether to pursue such a funding application with CSV.

If funding is accepted, then subject to a funding agreement being entered into with CSV and a builder engaged for the rectification work, the Owner will not need to pay for the cost of replacement.

Also, an expensive and uncertain BAB proceeding would not be necessary.

Recent legislation in regard to Cladding Safety Victoria (“CSV”) and funding for cladding replacement commenced from 1 February 2021.

Namely, there is the Cladding Safety Victoria Act 2020 (“the CSV Act”) and the Cladding Safety Victoria Regulations 2020 (“the Regulations”).

Sections 27-29 of the CSV Act are the funding requirements with CSV. Pursuant to section 27, a notification can be made by the Municipal Building Surveyor of Council to CSV.

That notification is that, in the opinion of the municipal building surveyor (MBS), a particular building is in need of cladding rectification work (which can mean replacement of cladding with non-combustible material).

Following any section 27 notification by the Council MBS, the provisions of sections 28 to 29 of the Act are activated.

Section 28 states that CSV must prioritise for “potential financial assistance” any buildings in respect of which it has been notified by an MBS that cladding rectification work is needed.

CSV must have regard to “the prescribed criteria” when prioritising a building in this way. (Refer to Clause 7 of the CSV Regulations in this regard).

Pursuant to section 29 of the CSV Act, CSV may invite the owner or Owners Corporation of a building that has been prioritised under section 28 to apply to register for potential financial assistance for cladding rectification work.

Subsection 29(2) says that: “After considering an application to register an owner or owner’s corporation of a building for potential financial assistance, Cladding Safety Victoria may accept or refuse to accept the application.”

It is said at s29(3) that CSV must consider the prescribed matters when deciding whether to accept or refuse to accept the application.

Clause 7 of the Regulations contains CSV’s funding assessment criteria. The previous VBA system of risk categorisation of “low”, “moderate”, “high” or “extreme risk” is no longer the criteria.

Section 5 of the CSV Act states that Cladding Safety Victoria is a body corporate with perpetual succession and that may sue or be sued. There is no discernible and specific right of appeal should the CSV decline an application for CSV funding made by Owners.

That said, and noting the requirement of the CSV to give written reasons for a decision declining a funding application (s29(8)), there is likely a general administrative law right of judicial review to the Supreme Court.

This could be on the grounds that any decision to decline an application for funding was made unreasonably or by misapplying the prescribed matters, taking into account irrelevant considerations, and so forth.

The Minister’s Prohibition Declaration effectively ‘banned’ the new use of certain combustible cladding products from 1 February 2021.

As a consequence, it may be harder to argue that a large apartment building is not able to qualify for full replacement funding from CSV.

Clause 7 of the Regulations refers to “Prioritisation of buildings for potential financial assistance” and it says (amongst other things):

“(1) For the purposes of section 28(2) of the Act, Cladding Safety Victoria must have regard to the following criteria when prioritising a building for potential financial assistance –

any written advice from the Authority, the municipal building surveyor or Fire Rescue Victoria about the overall risk to the building associated with any non-compliant or non-conforming external wall cladding product;…”

From 1 February 2021, various ‘combustible’ cladding products including for instance, Alpolic / fr cladding, was banned by the Minister of Planning (pursuant to the Ministerial Declaration), due to not having at least 93% inert material core composition.

This ban is prospective only and not retrospective. A number of cladding products are now effectively banned for use on new buildings.

While previously some thought that ACP products that had less than 30% combustible polymer core were seen as lower risk, and only risk category “B” under the Insurance Council of Australia guideline, this marker is now effectively superseded by the Ministerial Prohibition Declaration.

While there may be fire engineering experts who disagree with the Minister’s ban on certain cladding products, this situation is now something that Owners should take into consideration in terms of:

(i) likely increased insurance premiums (or excess increases) in the future (the Minister’s Risk Impact Statement prior to the Minister’s Declaration anticipates this may occur); and

(ii) possible reduced property values (also known as “the Stigma effect”) due to having a banned cladding product in large quantities on a building’s façade (compare for example the New Zealand experience in terms of the Stigma effect of ‘leaky’ buildings).

We note the stated grounds behind the Minister’s Prohibition includes a declaration that a “risk of severe damage” is likely (in the future).

This is not something that is necessarily covered by a performance-based section 160A compliance assessment through the BAB process, which is an assessment on compliance with the Building Code performance requirements for the building as designed and constructed.

It is also not something that would be covered by a Section 142 application to appeal a Building Notice or Order. However, it will have an effect on Insurers and consumers into the future.

For instance, if we look at the situation with asbestos on buildings this has created insurance issues and reduced the property value of buildings decades after construction.

In some cases, Insurers will not even offer coverage for buildings that contain asbestos because of the likely clean-up costs and risks.

This is despite any consideration that the asbestos may have been compliant at the time of construction, and despite the asbestos ‘ban’ not being retrospective.

Where authorities such as the VBA or the MBS call for cladding replacement or make statements that the product is seen as “high risk”, this can support an argument that the building comes within the Reg 7 criteria for cladding replacement funding.

Owners need to be mindful of the risks of embarking on an application for a compliance assessment at the BAB.

For instance, there could be a decision that large sections of cladding need to be replaced, and then finding later on that CSV does not regard the situation as “high priority” enough to qualify for replacement funding.

In such a situation the Owners will be required to pay for cladding replacement themselves in what will be a very expensive exercise.

Even a BAB outcome that no cladding needs to be replaced could be problematic if it leaves a “banned” cladding product in large quantities on a building, due to the possible increased insurance costs and diminution in property value.

We will now look at some recent case law decisions with regard to combustible cladding.

“Lacrosse” Case decision

The earlier decision at VCAT was upheld on appeal by the Supreme Court of Appeal that the primary wrongdoers in relation to combustible cladding (and the ignition) were:

the Fire Engineer;
the Relevant Building Surveyor;
the Architect;

as opposed to the Builder, who was only liable for a very small portion of the loss and damage.

The percentages of liability for the other co Respondents were in the range of about 29% to 39%.

The primary allegation against the Fire Engineer was that he failed to conduct a “full engineering assessment” of the proposed building design pursuant to the appropriate level of detail called up by the IFEG. This is what was required by the terms of the consultancy agreement.

There was not the systematic hazard analysis that would have discovered the use of 100% polyethylene core ACP.

This should have led to the conclusion that there was an unacceptable risk of spread of fire in the location and configuration proposed on the architectural drawings.

Tanah Merah Vic v Owners Corporation No 1 [2021] VSCA 72

Performance Based Solutions

The prescriptive Deemed to Satisfy test for compliance of combustible cladding (such as EPS) won’t necessarily be the governing test if:

the performance requirements in CP2 and CP4 of the Building Code are satisfied; and
if the holistic fire safety situation of the premises otherwise results in a satisfactory level of fire safety.

Passive and active fire safety features can include: an automatic sprinkler system, smoke detection system, a reinforced concrete structural frame, internal smoke proof walls between SOUs and corridors, fire separation between basement carpark and habitable levels above.

In the Matter of 14 Elliot Avenue, Carnegie [2020] VBAB 19.

This was a section 160A compliance application made to the BAB.

The Board found that at the time of construction, the design of the building complied with the relevant BCA performance requirements for fire safety. Key factors were:

Reliance on CodeMark Certificates and a BRAC certificate in regard to EPS and ACP panels;
Fire risk mitigated by a sprinkler system to AS2118.4;
ACP only installed to the top level as an eave feature with no risk of vertical fire spread;
EPS only installed on the top two storeys and not the ground level and the floor above it. No undue risk of vertical fire spread;
Configuration of external walls for the separate storeys to ‘cascade back’ in a ‘wedding cake’ type design.

The Board stated that the assessment of fire risk for a building is “an integrated assessment which is not automatically determined from a single variable”.

The probability of ignition was just one factor to consider when deciding the level of risk for the building as a whole.

If in doubt about your rights in a dispute situation including those concerning cladding regularisation, do not hesitate to engage expert advice from lawyers well versed in building dispute resolution and Owners Corporation requirements.

By Justin Cotton, Director, Lovegrove & Cotton Pty Ltd

Disclaimer

This article is not legal advice and discusses it’s topic in only general terms. Should you be in need of legal advice, please contact construction law firm. Lovegrove & Cotton Lawyers and our experienced lawyers will assist you based on the facts and circumstances of your case.