Combustible cladding is a major headache for owners corporation committees. Not only is the safety and health or residents a concern, but the costs of managing unexpected construction and insurance is a complex challenge for OCCs to face.
Strata managers are becoming actively aware of the risks and challenges of combustible cladding after several high profile cases in Sydney making news.
Any building over three storeys high must have non-combustible cladding on the external facade of the building to comply with Australia’s National Construction Code. The problem is that an aluminium and polyethylene composite cladding (abbreviated as ACP) is now considered to be combustible, and was commonly used throughout 2005 to 2015.
ACP was the cladding used in the Lacrosse building in Docklands that caught fire in 2014. It took three years for the builder to agree to replace the cladding - and the costs associated with replacing the cladding are still before VCAT.
The Victorian cladding taskforce estimates that 5000 buildings may be impacted by ACP, with a further 2500 in New South Wales.
In both Victoria and New South Wales, council municipal building surveyors are issuing building notices to committees, requesting owners corporations to submit a written response on how to resolve combustible cladding.
The race to address these issues quickly finds body corporates facing obstacles such as high costs for assessing and remedying the problem, a rise in insurance premiums and perhaps most concerning - the risk of the building's valuation plummeting.
The cost of replacing combustible cladding can range anywhere from $3 million to $10 million, according to ABC news.
So how do you proceed once you have confirmed the combustible cladding issue? First, notify your building insurer. Discuss the option of spreading the premiums across the year, rather than in a large premium that may impact your funds.
The OCC can then begin to look into funding options for how to pay for the repairs. There are options such as strata specific loans from some financial institutions. Such loans can be repaid through additional strata levies, saving individual lot owners from personal liability for the costs involved.
Creating a plan can ensure that your body corporate is ahead of the curve when trouble arises - and means the body corporate can act swiftly to stave off potential devaluation of the property.
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