Fire Risk with Flammable Cladding

August 2017

Fire Risk with Flammable Cladding

A tragedy, unfortunately, is what often initiates conversations and actions for change. The Grenfell fire disaster in London was such a tragedy which has echoed concerns around the world including Australia, due to the speed the fire engulfed the building through the exterior cladding. Cladding which is also extensively used in construction here in Australia. There have been conversations, working parties, promises of law reform and shifting of blame but what are the ramifications for bodies corporate and owners?

 Although it took another wake-up call and the loss of 90 lives for this problem to re-emerge, the conversations around flammable cladding have been circulating on-and-off in Australia since 2010. Australia is no stranger to the issues surrounding un-safe cladding, like the Lacrosse building fire in 2014. 

This building used similar cladding the Grenfell building, using ‘PE’ panels with an aluminium exterior and a flammable polyethylene core. The difference was that the Lacrosse building had effective sprinklers and there was no loss of life, but this does not detract from the fact that un-safe cladding causes numerous problems. Building authorities have known about these problems and there have been many articles written about the importing of cheap, non-compliant cladding into Australia and the implications of this.

Essentially the arguments revolve around the correct use of cladding and whether aluminium composite panels (ACP) are suitable or compliant for high-rise buildings. If owners find that their building is non-compliant, what should they do? They need to consider the cost of replacing the cladding and who is responsible for this, the ongoing fire risks as well as the insurance implications if it is not fixed.

Hopefully there will be enforced compliance through the National Construction Code (NCC) across all states to stop this practice but in the meantime what do owners need to do?

Under NSW strata law, the cladding would currently be categorised as a “non-major” defect, meaning owners only have two years from the building’s completion in which to claim the costs of its replacement. Otherwise they must, by law, repair the defects and do so at their own expense. NSW Fair Trading has proposed a legal reform against non-compliant aluminium cladding, including:

  • Unit conduct audits and issue orders to make owners remove non-compliant aluminium cladding
  • Fire safety statements updated annually
  • Banning all supply of such cladding

Whilst many would assume that builders or developers would be responsible for replacing aluminium panels that are susceptible to fire, industry experts have stated that owners of property with this material installed are likely to bear the costs of replacing the problem building materials. For many, the dream they purchased has now become a nightmare.


So as a body corporate, what do you do?

  1. Organise a comprehensive fire safety inspection
  2. Review the report and if there are problems to rectify you then need to consider options for covering the costs:

a.      use the sinking fund if there are sufficient funds

b.      arranging a special levy if affordable

c.       taking out a strata loan and spreading the cost over several years

Strata loans are becoming a popular option for owners to solve problems they may be facing in their community. Strata loans are not new and have been used by strata communities as an effective and efficient way to cover unexpected costs for many years. A strata loan provides non-mortgage funding direct to an Owners Corporation or Body Corporate so there is no need for financial information from individual owners, plus the loan requires no personal guarantees or mortgages

By using strata finance through StrataLoans you are able to bundle all of the costs into one loan and have everything completed at once.


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Friday, August 4, 2017