A strata lawyer sheds light on the cladding crisis

A Deakin University and Griffith University study found that cladding was one of the most common problems in a study on 212 building defects across NSW, Victoria and Queensland

In New South Wales more than 600 buildings were identified as having high-risk cladding, only 100 short of Victoria. So how is the cladding crisis affecting property owners and buildings across the country?

While in Victoria owners might be able to access the government’s cladding fund, property owners in New South Wales and Queensland are currently left to fend for themselves.

We spoke to strata defects expert Paul Jurdeczka from Chambers Russell Lawyers in regards to the predicament that owners corporations with cladding may now find themselves in. Mr Jurdeczka is working with a number of strata schemes who are dealing with the problem.

“Property owners can’t underestimate the importance of dealing with high-risk cladding.” He said.

“Defective cladding is a fire and safety risk. In my view, the government response has come quite late given the problems the industry is facing. For instance, the cladding fire in Melbourne’s Lacrosse building was back in 2014 but Australia didn’t seem to react until London’s Grenfell Tower tragedy in mid-2017, when 72 people died. It’s a crisis and a huge problem affecting the strata industry, insurers and Australian state governments.”

The lawyer said owners corporations are also dealing with lengthy legal battles involving builders and developers.

“Owners corporations are responsible for their own buildings, but third-parties may stand to be liable for remediation or compensation including builders, developers, insurers and others.  The law is far from settled in this space. Detailed investigations on cladding are necessary if third party liability is being considered so clear advice can be provided. In some instances, court cases have commenced but in the meantime, councils are auditing buildings and wanting to know how cladding is being dealt with.”

Mr Jurdeczka believes the Victorian government is taking the right approach.

”This crisis is serious enough that governments should step up and help owners corporations. One measure to resolve these issues is low interest, long term loans from the government to help owners deal with the huge costs of repairs. But in my view, those who are responsible for cladding in the first place should still be held to account, as has occurred with Lacrosse.”

There have also been reports of problems surrounding insurance – with some insurers hiking premiums and excesses, or refusing to insure.

“Owners corporations will hold insurance required under the Strata Schemes Management Act. Generally, these insurance contracts have a number of discrete policies, which may respond in certain circumstances to at least some of the losses arising from cladding on a building.

Having high-risk cladding on a building is an issue that insurers will need to know about. If the insurer isn’t notified about it, they might be able to deny liability for claims down the track. The challenge here is when owners corporations tell their insurer, the insurer may in the future only offer insurance on terms with significantly increased premiums or excess. We have also seen situations where insurers exclude indemnity for loss arising from cladding or have simply refused to insure at all.”

His professional advice?

“If your building has faulty cladding, make sure you talk with the right advisers – your strata manager, your insurance broker and get expert legal advice. It’s important to be pro-active and deal with flammable cladding if it affects your strata scheme. There’s never been a time more crucial than today as laws continue to change and evolve.”

If you’d like to find out more on building compliance for your strata property, click here to download your free Community Living guide.