Christopher Kerin was quoted in the Australian Financial Review in relation to the off-the-plan apartment building frenzy. To read the full article click here.
On 28 December 2018, Christopher Kerin did an interview with 2GB discussing Sydney’s Opal Tower. The full interview is provided below.
Across Australia the growth of strata title buildings is continuing. Over the Christmas break NSW residents would have looked on in horror at the structural defect concerns raised at the Opal Tower building in Olympic Park causing an evacuation of the complex. The most important thing you can do to prevent a similar situation is to do your due diligence in three key areas. Read more here.
Strata managers need to be aware of this key change if serving notices by post. Section 160 of the Evidence Act 1995 (NSW) has recently been amended. Instead of being deemed served four working days after the item has been posted, the item is now deemed served after seven working days after it has been posted.
This change reflects the new “priority” mail system established by Australia Post which meant regular mail now takes longer.
What does this mean? Essentially, if you are sending out any sort of notices by ordinary post you now need to allow seven working days for it to be deemed served.
Consider the following scenarios where a strata scheme still sends some or all meeting notices by ordinary post:
|Strata committee meetings:||72 clear hours’ notice + 7 working days for postage of the notice|
|General meetings:||7 clear days’ notice + 7 working days for postage of the notice|
|Initial general meetings:||14 clear days’ notice + 7 working days for postage of the notice|
(where strata proposal is put to lot owners)
|14 clear days’ notice + 7 working days for postage of the notice|
Remember to allow for weekends and public holidays when setting your meeting schedules.
The Owners Corporation Network (OCN) is calling on all residential owners facing potential financial imposts due to flammable cladding to contact the OCN on email@example.com ASAP, to be part of a Flammable Cladding Action Group.
The OCN has seen the benefits of strata owners pooling resources to resolve shared challenges. In addition, OCN is holding a seminar:
Simplifying Strata – Successfully Managing Building Defects & Major Projects on Saturday 6 October 2018, 9.00am – 11.30am, at the Kirribilli Club
to assist people dealing with building defects, flammable cladding or looking to carry out major projects. Cost for non-members is just $55 (incl GST), which includes OCN membership to 30 June 2019.
The Minister for Innovation and Better Regulation, The Hon. Matt Kean will open the session, outlining recent regulatory changes which will benefit strata owners.
OCN will introduce you to Better Living in Strata (BLISS!). OCN is run by strata owners for strata owners with the aim to deliver Better Living in Strata Schemes for the increasing number of people choosing to make strata home.
Global building specialists, Sedgwick (formerly Sergon), will explain how to successfully manage building defects identification and resolution, including combustible cladding, as well as major repairs and upgrade projects.
For more information and to book, visit www.ocn.org.au/events.
Deakin and Griffith Universities are undertaking a research project on building defects. One part of the project involves interviewing stakeholders (including committee members) about their experiences and opinions dealing with building defects.
All participant information will be re-identified to provide anonymity.
If you are interested and available, the researchers can interview you via teleconference at any time between now and mid-December 2018.
If you are a committee member who is interested in participating, please email Christopher Kerin (firstname.lastname@example.org) who will forward your details onto the relevant academics.
There has been a huge amount of publicity around non-compliant building cladding but what does it all mean? Kerin Benson Lawyers has created a four part series explaining What the Building Cladding Crisis is about, the Governmental Response, Fire Safety Orders and Insurance. Below is the third of these Newsletters.
A range of stakeholders in the residential apartment building sector have indicated concerns regarding the impact non-compliant external cladding materials will have on building insurance policies.
The Insurance Council of Australia (ICA) has indicated that the non-compliant use of building products such as external cladding materials ‘critically undermines the ability for an insurer to rely upon the safety and performance of the building’. This directly impacts the insurer’s ability to establish their risk exposure which, the ICA stated, influences the setting of insurance premiums.
The ICA has established a protocol for the identification of residual risk presented by Aluminium Composite Panels. This protocol is reproduced as the Appendix to this Newsletter and recommends the approach insurers should take in relation to whether a building should be insured or not. However, each insurer is considering the issues individually and is taking their own approaches to underwriting and considering how terms and conditions might be tailored in relation to coverage, pricing and excesses. Consequently, the responses of insurers range from electing not to insure through to applying higher deductibles and premiums.
It should be noted that, in particular, the testing and identification of aluminium composite panels as recommended by the Protocol will be difficult to comply with given the number of buildings required to be tested and the fact that there are currently no more than four places in Australia which can test to AS 5113 (the new Australian Standard for fire propagation on external walls which will come into force in March 2018).
Raising similar concerns, Insurance Australia Group (IAG) noted the non-compliant use of PE cladding has increased in recent years posing a fire risk much higher than other materials available, particularly when paired with equally combustible plastic foam insulation. IAG also commented that these materials are often being used in a way that does not conform with the National Construction Code and Australian Standards, which was a particular concern to IAG as:
- this threatens the safety of customers, employees and the broader community;
- it increases the fire risk of buildings placing upward pressure on premium cost for consumers; and
- non-compliance is a hidden risk. If the insurer cannot accurately assess risk, the uncertainty results in sub optimal outcomes for customers and insurers.
The Owners Corporation Network has also noted there are insurance implications for existing buildings which discover non-compliant cladding material and do not disclose it to their building insurance company. Conversely, the Owners Corporation Network was aware of one building that did disclose and is now unable to get building insurance, leaving all the owners in that building ‘jointly and severally liable for any debt’.
In addition, the Australian Institute of Building Surveyors (AIBS) has expressed concern surrounding professional indemnity insurance for building certifiers overseeing the initial building work:
… an emerging area of concern for the regulatory system and consumers is the issue of professional indemnity insurance. The current public debate on external cladding is already having a negative impact, with AIBS recently being advised that some insurance companies are inserting exclusion clauses for external cladding and non-complying building products into their policies.
CHU, the country’s largest underwriting agency of strata schemes (it insures 100,000 strata schemes under the QBE brand), has said it has not yet refused insurance to bodies corporate based solely on cladding that does not meet the building code. But the insurer said it had already priced the risk in some buildings as too high to make insurance worthwhile for some property owners. That is, it would be better to spend money on the removal of the cladding rather than pay for annual insurance.
The inability of an owners corporation to obtain insurance has a number of ramifications.
Firstly and most obviously, the need to replace the building with the owners’ own funds in the event of a fire.
Secondly and less obvious is the fact that adequate building insurance coverage is a normal requirement of a mortgage and the mortgagee is likely to take action to ensure the asset is protected.
In addition, some valuation reports prepared for lenders and insurers are indicating that some buildings are not fit for purpose and have an increased risk of fire.
Westpac has commenced an audit of developers of all its residential and commercial projects that are under way and is looking to confirm the compliance of all external wall cladding products with the National Construction Code (https://www.propertyobserver.com.au/forward-planning/investment-strategy/property-news-and-insights/75813-cladding-aftermath-westpac-auditing-projects-for-compliance-with-safe-building-practices.html).
One of the particular problems facing residential apartment buildings is the fact that premiums for building insurance for residential apartment buildings are generally lower than premiums for commercial buildings. That is, premiums on commercial buildings are sufficiently profitable for the insurer to look for solutions to any problems associated with building cladding. However, where the profit margin is slim on a residential apartment building, an insurer has no incentive to accommodate that building and could potentially withdraw coverage entirely.
In the light of the above, some buildings are simply removing the cladding and not replacing it.
Naturally, some building owners will consider simply not informing their building insurer of the fact that there are Aluminium Composite Panels on their building. This approach is flawed given insurance coverage may be voided by failing to disclose such a material fact. Further, some insurance policies have exclusions that apply if the building does not comply with the Building Code of Australia.
The Anstey Square Apartments in Sydney Road, Brunswick, are clad in a mix of expanded polystyrene and aluminium composite panelling, the same material that was used on the Grenfell Tower.
Last year, the apartments suffered a small, quick-spreading fire that brought attention to its cladding.
Consequently, in November 2017, the owners were required top pay an insurance premium of $134,000 (which was $29,000 the previous years). In addition, their excess rose from $1000 to $100,000.
Further, in December 2017, Moreland Council gave the Anstey Square owners corporation orders to carry out works to make the 105 apartments safe within three months. The order required immediate action that will cost owners around $250,000.
Finally, the owners corporation researched replacing the cladding, and discovered that it would cost between $2 million and $3 million to replace the non compliant cladding.
The owners have begun legal action against builder to recover the costs of fixing the nine-level tower.
Insurance Industry Aluminium Composite Panels Residual Hazard Identification / Reporting Protocol
Recent multi-level building fires in Australia and overseas have resulted in Federal and State governments inquiring into the potential exposure for buildings in relation to non-conforming and non-compliant building products. Governments are particularly focused on the potential exposure caused by inappropriate use of some types of aluminium composite panels (ACPs).
Insurers providing policy cover for buildings and set premiums according to the residual risk (after any effective risk mitigations present are considered) of damage occurring and a claim being made against the policy. The higher the probability of a damaging event occurring, the higher the premium.
Insurers have invested in the expertise necessary to measure residual risk. Using this, the industry has considered the challenges posed by non-conforming ACPs, beginning with the most fundamental of issues: its identification.
Through the ICA, insurers have agreed upon a Residual Hazard Identification Protocol for the identification of residual risk presented by the use of this building material.
Critically, the evaluation of exposure for each building that has ACPs present needs to be conducted on a case-by-case basis by qualified fire protection professionals including fire safety engineers, to evaluate the most critical exposures, safety to life and code compliance.
Building owners should also consider working closely with their insurer to ensure that the identification and evaluation process adopted for the building, including those engaged to undertake the process, will be considered sufficient for ongoing underwriting of the building.
The purpose of the Residual Hazard Identification/Reporting Protocol is to provide a consistent methodology, in circumstances where ACP-type materials are considered to be present, for assessment and reporting of the residual risk, suitable for both building owners (to make decisions) and underwriters (to set premiums).
This protocol should be referenced by all stakeholders involved in assessing building risk posed by ACPs. Adopting this protocol will produce reports that are consistent across all jurisdictions and will be meaningful to building owners and their insurers.
The approach includes both the identification of the material used and the installation methodology. This will enable assessment of the risks posed by the use of the materials, which may then trigger consideration of remedial actions to lower a building’s residual risk to acceptable levels.
Residual hazard identification protocol
Reports commissioned by a building’s owner should address 10 critical questions through three steps:
Step 1 – Identification of Materials
The identification of ACPs is the critical first step in the process of identifying the potential hazard to life and property presented by the ACP. It must be undertaken with an almost 100 per cent confidence of the results.
The primary purpose is to accurately classify and quantify the materials present in order to determine the fire load along with its location and proximity to ignition sources.
Once identification and quantification is achieved, this enables respective parties to consider Steps 2 and 3 of this protocol.
Insurers have observed that ACPs typically come in four general categories defined by the composition of their core materials:
A. 50%-100% Polyethylene (PE, EVA Ethylene-vinyl acetate) – Category 3 in the BRE appendix
These are considered the problem materials.
B. 30% PE and 70% inert materials – Category 2 in the BRE appendix
Typically identified as FR (Fire Rated). Inert materials are typically mineral compounds.
C. 7% PE and 93% inert materials – Category 1 in the BRE appendix
These are considered close to non-combustible
D. 0% PE – Category 1 in the BRE appendix
Typically an aluminium honeycomb or similar core. Also considered close to non-combustible.
In cases where there is no documentation associated with the building’s construction, or where available documentation lacks the necessary information to positively identify the ACPs that have been installed; or where there is sufficient doubt that the ACPs installed are what is documented (substitution), it is necessary for samples of the ACP, along with sarking and insulation materials behind any ACP, to be subjected to testing to clearly identify the composition of the core material and combustibility of the insulation/sarking.
Importantly, visual examination of the ACP or small flame application of a sample, in these circumstances, is insufficient for identification purposes.
ICA members, together with the Engineers Australia, the Fire Protection Association of Australia and registered fire safety engineers, have worked with accredited laboratories to agree upon a series of controlled tests that will adequately identify the core composition of installed ACP materials (including an insulation) on a building.
The tests have been verified by providing known samples of each category of ACP for testing. Each sample was coded and provided to independent labs for testing. Results were then compared to ensure that the testing methods used provided results that accurately identified the ACP into the correct category.
The laboratories that consistently identified the ACP samples into their correct categories are listed in the Appendices to this protocol.
Reports commissioned by a building owner using this protocol should answer the following questions for Step 1:
- Who has carried out inspections and testing for the building owner, and testing of the cladding material, what are their relevant competencies, qualifications and experience and what testing laboratories were used to test the samples?
- What category(s) of ACPs are present on the building (A, B, C or D)?
- What quantity of the material is present (m2)?
- What substrate or insulation is present behind the ACP?
- What potential ignition sources exist for the ACP given the configuration of the building?
Step 2 – Evaluating the exposure
Using the identification and quantification outcomes of Step 1, the purpose of this step is to provide a consistent report into the exposure of the building regarding the presence of ACPs.
This output is dependent upon the category of the ACP determined in Step 1 and should make findings with regard to four questions:
- What exposures exist to the safety of the occupants based on the Step 1 outcomes?
- Is the building compliant, with regard to ACPs, with the National Construction Code and associated Australian Standards?
- What are the exposures to the property and consequential business interruption risk of a fire involving the ACP?
- What exposures exist to the reputation, image and market value of the building as a result of the ACP identified?
Making findings for each of the questions is necessarily complex. Each building with ACPs present will vary in terms of quantification, insulation materials, ignition scenarios, fire protection and suppression systems, as well as occupation type.
Reports commissioned by a building’s owner to make findings on the exposure should consider the following factors identified by insurers:
Step One identified 50%-100% PE or EVA Ethylene-vinyl acetate core ACP
The exposure should be considered similar to that demonstrated by the Lacrosse Building fire (Melbourne), which was an ACP panel fire with fibreglass insulation and reflective foil sisalation in the cavity and an internal building sprinkler system (combined sprinkler/hydrant system sharing a redundant water supply). The Grenfell fire had the added impetus of a combustible foam-based insulation material behind it and no internal sprinkler protection[i].
Where the quantity of 50%-100% PE ACP present is considered to be sufficient to sustain a fire, and relevant ignition scenarios exist, adverse findings to the four questions above should consider the risk as HIGH and Step 3 remedial action may be required.
Step One identified 30% PE core ACP.
The evaluation of the exposure to this type of ACP is more complex, with the existence of a combustible or semi-combustible (fire retardant) insulation or sarking in the cavity being a defining factor.
Recently completed and published full-scale façade fire tests (BS 8414-1:2015) conducted by BRE Global (a fire testing laboratory in the UK) on behalf of the UK Department for Communities & Local Government showed this category of panel, when combined with a PIR or Phenolic insulation, with horizontal and vertical non-combustible cavity barriers (not typically provided in Australia), resulted in flaming above and to the top of the test structure respectively. The prime concern for Australian stakeholders is how much more severe the fire spread would have been without the cavity barriers.
Where a quantity of 30 per cent PE ACP present is combined with combustible or semi-combustible insulation materials, and relevant ignition scenarios exist, adverse findings to the four questions above should consider the risk as HIGH and Step 3 remedial action may be required, unless appropriate internal fire suppression and protection systems exist to reduce the risk.
Where the insulation is considered close to non-combustible – mineral wool or fibreglass, and the sarking has a flame spread rating of less than 5 to AS 1530.2, the risk could be considered as low.
Step One identified 7% or less PE core ACP.
The fire risk presented by this material can be considered as LOW regardless of quantity, ignition scenarios and type of insulation.
Step 3 – Remedial actions for consideration
Remedial actions (if any are required) will be different from building to building and dependent on the category of ACP and insulation/sarking installed. Depending on the quantity of ACP installed, its configuration and installation, there is the potential for actions to be taken that would not necessarily involve 100 per cent replacement.
The report submitted to the building’s owners with regard to Step 3 should address, in detail if necessary, a response to the following question:
- What remedial actions are necessary (if any) to address unacceptable risks to the building due to the presence of an unsuitable ACP?
The acceptability of any such (alternative or performance) solutions should be agreed by all parties involved – such as the appointed fire safety engineer, the owner, insurer, regulator and fire authority – before any work is carried out. The importance of consulting with the relevant jurisdiction’s building regulator and urban fire authoritiy cannot be stressed enough in response to this question.
Testing and References
The BRE reference document referred to above can be downloaded here.
The ICA and its members conducted round robbin testing with laboratories to identify those that could accurately classify the different categories of ACP.
The ICA has received positive results from two organisations, both of which can provide the confidence required to identify ACPs correctly for the purposes of this protocol:
CETEC Pty Ltd is a technical and scientific risk management consultancy. With more than 30 years’ experience, CETEC is acknowledged as a leading provider of specialist technical and scientific risk management solutions for the built environment. Through Foray Laboratories, which is wholly owned by CETEC, we can use a range of analytical techniques to assist building owners, building managers, building insurers, fire engineers and other stakeholders to provide advice relating to the flammability potential, composition and toxicity of cladding materials. Foray Laboratories is a NATA-accredited laboratory and is ISO/IEC 17025 compliant. Please contact our head office on 03 9544 9111, visit our website at www.cetec.com.au or email email@example.com for further information.
CSIRO offers a wide range of specialist laboratory and engineering services to Australian industry and building owners. CSIRO experts can provide testing and identification ACP cladding core via TGA, FTIR or XRD techniques, delivering a comprehensive report classifying materials in accordance with the ICA categories. CSIRO is a Registered Testing Authority accredited by the National Association of Testing Authorities (NATA) for a wide range of materials performance tests. In addition to ACP characterisation, we can provide fire testing to the AS 1530 series of standards as well as full-scale evaluation to the new AS 5113 test for external walls. Our fire safety engineering experts can provide building audit and assessment, advice on structural fixing, regulatory compliance, help with selection of test methods, and independent third-party peer review. Please contact us at firstname.lastname@example.org or call our telephone enquiries team on 1300 363 400 and ask for ACM core categorisation. More information at https://research.csiro.au/infratech/fire-safety/
Inspections, assessments and reports commissioned by a building owner to determine the risk associated with the presence of ACPs on a building should be carried out by competent fire protection professionals and including fire safety engineers.
A consistent methodology – yielding responses to the 10 questions above and able to be accepted by the broadest possible regime of underwriters and other building professionals – is essential.
For further information contact:
General Manager Policy, Risk and Disaster Planning
[i] *The insulation used was PIR (polyisocyanurate), which does not melt but chars and typically has good fire retardant properties.
 The Senate Economics References Committee, Non-Conforming building products, Interim Report: aluminium composite cladding, February 2017, p.12.
 Ibid, p. 12.
 Ibid, p. 12.
 Ibid, p. 12 and 13.
 Insurance Council of Australia, “Insurance Industry Aluminium Composite Panels Residual Hazard Identification/Reporting Protocol”, 20 November 2017.
The website Sourceable has reviewed the new building defect bond scheme which came into force on 1 January 2018 under the Strata Schemes (Management) Act. Christopher Kerin is quoted in relation to some of the issues surrounding the new scheme. To read more, click here.
There has been a huge amount of publicity around non-compliant building cladding but what does it all mean? Kerin Benson Lawyers has created a four part series explaining What the Building Cladding Crisis is about, the Governmental Response, Fire Safety Orders and Insurance. Below is the second of these Newsletters.
The Building Cladding Crisis has been met with responses from both Commonwealth and State governments.
This Newsletter summarises the responses from both the Commonwealth and NSW governments.
a ) Commonwealth Parliament
On 23 June 2015, the Commonwealth Parliament Senate referred the matter of non-conforming building products to the Economics References Committee for inquiry and report.
In the light of the Grenfell Tower fire in June 2017, the Committee agreed to prepare an additional interim report on the implications of the use of non-compliant external cladding materials in Australia and on 6 September 2017 the ‘Interim Report: aluminium composite cladding’ was produced.
This Interim Report contained 8 recommendations being:
i. Recommendation 1. The committee recommends the Australian government implement a total ban on the importation, sale and use of Polyethylene core aluminium composite panels as a matter of urgency.
Within a short time of the release of the Interim Report (ie on 11 September 2017), Senator Nick Xenophon introduced the Customs Amendment (Safer Cladding) Bill 2017 which intends to amend the Customs Act 1901 and ban the importation into Australia of polyethylene (PE) core aluminium composite panels. However, this Bill has not progressed very far.
Indeed, some of the problems outlined with the bill include:
- the bill does not define what constitutes a “polyethylene core aluminium composite panel”. Is it an Aluminium Composite Panel with a 30% PE core or one with a 100% PE core? and
- it doesn’t address Aluminium Composite Panels with a PE core that are already within Australia or the use of Aluminium Composite Panels with a PE core.
ii. Recommendation 2. The committee recommends that the Commonwealth work with state and territory governments to establish a national licensing scheme, with requirements for continued professional development for all building practitioners.
The committee acknowledges that greater enforcement of existing regulations is needed. However, current building regulations appear inadequate and are too easily evaded, largely due to existing deemed-to-satisfy and performance-based pathways, which provide avenues to circumvent the Australian Standards in the National Construction Code.
The committee also considers that a national licencing scheme for all trades and professionals involved in the building and construction industry including building surveyors, building inspectors, builders and project managers, would improve compliance and provide greater consumer protection and public safety outcomes.
iii. Recommendation 3. The committee recommends that the Building Minister’s Forum give further consideration to introducing nationally consistent measures to increase accountability for participants across the supply chain.
The committee supported the implementation of nationally consistent mandatory on-site inspections throughout the construction process. Whether this is done though the reinstatement of the role of Clerk of Works or some other process is eventually a decision for governments.
In addition, the committee agreed that responsibility for building compliance was weighted too heavily at the end of the supply chain. Consequently, measures need to be put in place to ensure greater accountability across the supply chain.
iv. Recommendation 4. The committee strongly recommends that the Commonwealth consider making all Australian Standards and codes freely available.
In the committee’s view, making Australian Standards freely available would reduce the overall cost of compliance and insurance and most significantly, it will reduce the cost and impact on future state and territory emergency, fire and medical services.
v. Recommendation 5. The committee recommends the Commonwealth consider imposing a penalties regime for non-compliance with the National Construction Code such as revocation of accreditation or a ban from tendering for Commonwealth funded construction work and substantial financial penalties.
The committee considers that the Federal Safety Commissioner (FSC) has an important role in ensuring compliance with the National Construction Code on Commonwealth funded projects but is concerned that it is not adequately resourced.
vi. Recommendation 6. The committee recommends the Commonwealth ensure the Federal Safety Commissioner is adequately resourced to ensure the office is able to carry out its duties in line with the new audit function and projected work flow.
vii. Recommendation 7. The committee welcomes the Commonwealth’s decision to give further consideration to Director Identification Numbers and recommends that it expedites this process in order to prevent directors from engaging in illegal phoenix activity.
The committee is concerned that it has been nearly two years since its report on insolvency in the construction industry was tabled and the Productivity Commission’s report was released and considers that a Director Identification Numbers (DIN) initiative should be considered as a matter of urgency. A DIN initiative would go some way to preventing directors engaging in illegal phoenix activity.
viii. Recommendation 8. The committee recommends that state and territory governments work together to develop a nationally consistent statutory duty of care protection for end users in the residential strata sector.
The committee believes that there needs to be a greater awareness and protection for consumers in the residential strata sector. The committee considers there is an urgent need to provide a statutory duty of care to cover the discovery of non-compliant or non-conforming building products for the increasing number of the Australian public who purchase residential apartments.
It should be noted that the above eight recommendations are only recommendations and derive from an interim report.
In February 2018, the Australian Government response to the Interim Report: Aluminium Composite Cladding was released and responded to each of the above recommendations. The responses ranged from Supported, Supported in Principle and Noted to Not Supported.
Prior to December 2017, Craig Laundy was the Assistant Minister for Industry, Innovation and Science and as such, was responsible for this issue. Upon his move to another portfolio, concerns have been raised that any progress on this issue will flounder. However, the Office of Mr Laundy has confirmed that he retains responsibility for this issue.
The Economics References Committee is expected to hand down its Final Inquiry Report on 30 April 2018.
b) Building Ministers Forum
The Building Ministers Forum (BMF) (a body of Commonwealth, state and territory Ministers responsible for building and plumbing policy and regulation) oversees the implementation of nationally consistent building and plumbing regulations through the 2015 Intergovernmental Agreement for the Australian Building Codes Board (ABCB). The Building Ministers Forum meets annually or on a needs basis and is responsible for setting the regulatory agenda for both the administration of building control and reforms to the National Construction Code.
At the end of June 2017, the Building Ministers Forum announced that it:
- would direct the Australian Building Codes Board to expedite the implementation of measures through the National Construction Code to prevent the non-compliant use of cladding;
- has directed the finalisation of the implementation of the recommendations set out in the Strategies to Address Risks Related to Non-Conforming Building Products report published in 2016, particularly the establishment of a national forum of building regulators;
- has, with the Australian Building Codes Board, created a website providing information about non-compliant building products and allowing members of the public to submit a complaint or enquiry about a product (see https://www.abcb.gov.au/NCBP/Non-conforming-building-products); and
- will commission a report by an independent expert on the compliance and enforcement problems affecting the implementation of the National Construction Code.
On 24 August 2017 it was announced that Professor Peter Shergold AC and Ms Bronwyn Weir had been commissioned as experts to assess the compliance and enforcement problems within the building and construction systems across Australia that are affecting the implementation of the National Construction Code.
c) Australian Building Codes Board
On 14 August 2017, the Australian Building Codes Board announced that the National Construction Code would be amended out-of-cycle prior to the next scheduled edition of the National Construction Code in 2019. The key aspects of the amendment cover:
- a new verification method that adopts the external wall testing standard, AS 5113;
- improving the evidence of suitability provisions;
- clarifying the Deemed-to-Satisfy provisions relating to the fire performance of external walls; and
- referencing an updated sprinkler standard, AS 2118.
Feedback on the public comment draft of the NCC 2016 Volume One Amendment 1 was due on 10 September 2017, with the amendment’s anticipated adoption from 12 March 2018.
2. State Response – NSW
Following the Grenfell Tower fire on 14 June 2017, each State and Territory in Australia (with the exception of the Northern Territory) announced audits, or the extension of existing audits, into Aluminium Composite Panels. We shall focus on the New South Wales response.
In the immediate aftermath of the Lacrosse Apartments fire, the NSW Government conducted an audit of buildings affected by combustible cladding and found that the number of buildings at risk could be between 1,500 to 2,500 although this figure was later disputed by the NSW Minister for Emergency Services, Troy Grant. Mr Grant indicated that the number of buildings fitted with potentially dangerous panels could not be known exactly.
Following this, the NSW Government then admitted that there were 1,011 buildings that may have dangerous cladding. The Minister at the time, Matt Kean, also indicated that “there are a number of remedies available that currently exist in law, that enable people to claim for defects. We’re not proposing any changes to the defects rules at the moment.” This is a curious comment given:
- recommendation 8 of the ‘Interim Report; aluminium composite cladding’ specifically recommended that a nationally consistent statutory duty of care be developed; and
- the NSW Government is making owners corporations (rather than builders) responsible for the rectification of non-conforming Aluminium Composite Panels.
Finally, the NSW Government did ultimately change the “defects rules” by amending section 18E of the Home Building Act 1989 (see the section headed “Building Products (Safety) Act 2017 (NSW)” below).
a) Fire Safety and External Wall Cladding Taskforce
The NSW Government also established a Fire Safety and External Wall Cladding Taskforce in June 2017. The Taskforce has representatives from the Department of Finance, Services and Innovation, the NSW Data Analytics Centre, the Department of Planning and Environment, Fire and Rescue NSW, the Office of Local Government, Treasury and the Department of Premier and Cabinet.
The priorities of the Taskforce were outlined in a ten point plan. The ten point plan will apparently ensure unsafe building products are taken off the shelves, buildings with cladding are identified and notified and that only people with the right skills and experience can certify buildings and sign off on fire safety.
The plan includes:
- a comprehensive building product safety scheme that would prevent the use of dangerous products on buildings;
- identifying buildings that might have aluminium or other cladding;
- writing to the building/strata managers or owners of those buildings to encourage them to inspect the cladding and installation of cladding, if it exists;
- Fire and Rescue NSW visiting all buildings on the list, as part of a fire safety education program, to gather information to prepare for a potential fire at that building and provide additional information to building owners;
- creating a new fire safety declaration that will require high-rise residential building owners to inform state and local governments as well as Fire and Rescue NSW if their building has cladding on it;
- speeding up reforms to strengthen the regulation of building certifiers;
- creating an industry-based accreditation to ensure only skilled and experienced people can carry out fire safety inspections;
- establishing a whole-of-government taskforce to coordinate and roll out the reforms;
- instructing all government departments to audit their buildings and determine if they have aluminium cladding, with an initial focus on social housing; and
- following up with local councils on correspondence local councils received in 2016 from the NSW Government after Melbourne’s Lacrosse Tower fire.
Determining precisely what the consequences of the above ten point plan are is unclear. Indeed, there is no specific mention of orders under section 121B of the Environmental Planning and Assessment Act which is curious given it appears to be the very particular mechanism the NSW Government will use to deal with existing buildings which have dangerous cladding.
In addition, points 6 and 7 appear to relate to reforms that were already proposed following an investigation and report into the building certification system in 2016 (which recommended a significant overhaul of the system).
Further again, the regulatory framework for building work in NSW is quite fragmented as Local Councils, the Department of Planning and Environment, the Building Professionals Board and the Department of Fair Trading are each tasked with separate and distinct regulatory functions. The Department of Fair Trading may investigate complaints made against builders and issue rectification orders, Local Councils (and other entities) may issue orders pursuant to section 121B of the Environmental Planning and Assessment Act and the Building Professionals Board administers the law in relation to certifiers. This will make the execution of the ten point plan more difficult than if one body oversaw the regulatory framework.
Finally, some Councils in Sydney have also introduced programs and audits aimed at identifying buildings with non-complaint cladding (see Ku-Ring-Gai Council http://www.kmc.nsw.gov.au/Your_Council/Organisation/News_and_media/Latest_news_-_media_releases/Kuringgai_Council_steps_up_fire_safety_inspections_for_new_apartment_buildings and Inner West Council https://www.innerwest.nsw.gov.au/news-hot-topics/media/media-releases/council-fast-tracking-high-rise-fire-safety-checks).
b) Legislative Changes
It is helpful to observe what has occurred in other state jurisdictions, and in particular Queensland, when considering the steps NSW has taken.
The Queensland Government was the first state government to react to the Grenfell Apartment fire. It introduced an amendment bill to impose duties on all participants in the chain of supply to ensure building products are safe for their intended use, and increased the powers of the Queensland Building and Construction Commission (QBCC).
The Building and Construction Legislation (Non-Conforming Building Products – Chain of Responsibility and Other Matters) Amendment Act 2017 (Qld) commenced on 1 November 2017. This Act amended the Queensland Building and Construction Commission Act 1991 (Qld) by:
- imposing various duties regarding building products upon supply chain participants in the “chain of responsibility” (designers, manufacturers, importers, suppliers and installers of building products). The duties imposed on those in the chain of responsibility include a primary duty to ensure, insofar as reasonably practicable, that a product is not a non-conforming building product for an intended use (ie to halt the use of non-conforming building products). Executive officers must exercise due diligence to ensure their companies comply with duties. The effect of this is to extend the responsibility to use the correct building products, currently on builders and certifiers, to other parties in the supply chain;
- broadening and clarifying the powers of the Queensland Building and Construction Commission (QBCC) and the Minister; and
- establishing a Building Products Advisory Committee.
In Victoria in 2015, an audit of external wall cladding on high-rise and public buildings in Melbourne’s CBD was conducted and identified 85 buildings as non-compliant with the National Construction Code.
However, on 1 December 2017 the Victoria Cladding Taskforce released its Interim Report and identified 1,400 buildings “as most likely” having aluminium composite panels with a PE core or expanded polystyrene. The Interim Report also found that systems failures led to major safety risks and widespread non-compliant use of combustible cladding. It was found that the failings identified by the Victorian Building Authority in 2015 were not merely administrative, or paper-based, but were significant public safety issues, which are symptomatic of broader non-compliance across a range of areas within the industry.
Victoria is yet to put in place any legislation addressing cladding but rather has focused on auditing buildings for the use of combustible cladding materials. The Interim Report did however recommend that consideration be given to amending the Building Act to ensure building surveyors and fire safety engineers act independently, supported by a code of conduct developed by the Victorian Building Authority.
i) Building Products (Safety) Act 2017 (NSW)
In NSW the Building Products (Safety) Act commenced on 18 December 2017. This legislation prevents the unsafe use of building products and provides for the rectification of affected buildings. It is not specifically directed at cladding but gives extensive powers to the Commissioner for Fair Trading to:
- by written notice published on the internet, prohibit the use of a specified building product in a building if the Secretary is satisfied on reasonable grounds that the use is unsafe (a “building product use ban”). A building product use ban may be imposed even if the building product or the use of the building product concerned complies with the requirements of the National Construction Code. A person can contravene a building product use ban by either:
- causing a building product to be used in a building (including by doing the relevant building work that attaches/incorporates the banned product to the building); and/or
- representing, in trade or commerce, that a building product is suitable for use in a building if such a use would contravene a building product use ban. It is therefore possible for manufacturers and suppliers to contravene a building product use ban if they represent that a banned building product is suitable for use.
It is an offence to contravene a building product use ban and an individual may be fined (maximum penalty of $220,000) or imprisoned (up to 2 years) or both. The maximum penalty for a corporation is $1.1 million;
- issue a notice under section 18 of the Building Products (Safety) Act 2017 (an “affected building notice”) where the Secretary is satisfied, on reasonable grounds, that a particular building is or may be an affected building. An affected building is one where a building product the subject of a building product use ban has been used in the building for a use that is prohibited by the building product use ban; and
- issue a notice under section 19 of the Building Projects and (Safety) Act 2017 (a “general building safety notice”) where the Secretary is satisfied, on reasonable grounds, that a class of buildings may be affected buildings.
A relevant enforcement authority (which may be a local council or the NSW Department of Planning and Environment or any other authority who may give orders under section 121B of the Environmental Planning and Assessment Act 1979) may also sign a building product rectification order. A building product rectification order is an order that requires the owner of a building to do such things as are necessary for either or both of the following purposes:
a) to eliminate or minimise a safety risk posed by the use in the building of a building product to which a building product use ban applies;
b) to remediate or restore the building following the elimination or minimisation of the safety risk.
For the purposes of any proceedings relating to a building product rectification order or proposed building product rectification order, an affected building notice or a general building safety notice is evidence that the use in a building of the building product specified in the notice poses a safety risk of a kind specified by the Secretary in that notice.
It should also be noted that the Environmental Planning and Assessment Act 1979, and any regulations under that Act, apply to a building product rectification order in respect of a building as if the building product rectification order were an order made under section 121B of that Act.
The other important aspects to note regarding the passage of the Building Products (Safety) Act was the amendment of a number of other Acts including:
a) the Home Building Act 1989. In short, the definition of ‘major defect’ in section 18E(4) of the Home Building Act 1989 has been expanded to include “the use of a building product (within the meaning of the Building Products (Safety) Act 2017) in contravention of that Act”. In addition to this, Schedule 1 of Part 2 of the Building Products (Safety) Act 2017 provides that “the power to make a building product rectification order under this Act in respect of a building product used in a building extends to building products used in a building before the commencement of Part 4 of this Act”. This effectively extends the limitation period within which court proceedings may be commenced for non-conforming cladding from 2 years to 6 years after the completion of the building work;
b) the Strata Schemes Management Regulation 2016. Form 4 (Certificate under section 184 of the Strata Schemes Management Act 2015) in Schedule 1 Forms of the Strata Schemes Management Regulation 2016 provides that the owners corporation must provide particulars of any outstanding building product rectification order under the Building Products (Safety) Act 2017 (a section 184 certificate is a certificate by the owners corporation as to the financial and other matters relating to a lot and is otherwise known as a “strata information certificate”); and
c) the Conveyancing (Sale of Land) Regulations 2017. The Building Products (Safety) Act 2017 amends the Conveyancing (Sale of Land) Regulations 2017 such that an implied warranty is created that there is no outstanding building product rectification order or affected building notice for residential property under an option for purchase or contract for sale if no such order or notice is disclosed.
v) Building Products (Safety) Bill vs Building Products (Safety) Act
While this Act was introduced in response to the Grenfell Tower fire, it is not specifically directed at cladding. The draft Bill, which was circulated to various building industry stakeholders in early October 2017, was similar to the Queensland legislation and inter alia imposed duties on those in the supply chain to ensure that non-conforming building products were not used.
However, the final version of the legislation had 80 clauses deleted from the version circulated in early October 2017 and only contains provisions to act after a non-conforming product has been brought to the attention of Government.
Curiously this outcome is arguably contrary to:
- recommendation 3 of the ‘Interim Report: aluminium composite cladding’ which focused on increasing the accountability for participants across the supply chain; and
- the agreement at the Building Ministers Forum (at which the NSW Government was present) that the powers of building regulators would be enhanced to respond to instances of non-conforming building products.
vi) Environmental Planning and Assessment Amendment (Fire Safety and Building Certification) Regulation 2017
Under the Environmental Planning and Assessment Regulation, all new buildings and building work must comply with the fire safety requirements of the National Construction Code.
The National Construction Code requires minimum fire resistance levels for certain building components, fire separation, fire compartmentation and fire exits. Fire safety systems are also required to be installed such as fire hydrant systems, portable fire extinguishers, smoke alarm systems and emergency evacuation lighting. The external walls of residential buildings two storeys or more in height are required to be non-combustible. Any attachments to these walls must also meet fire safety requirements.
For high-rise buildings classified as more than 25 metres in height, additional requirements also apply. These include a fire sprinkler system and additional exits. In this regard it should be noted that the National Construction Code will be amended next year to require sprinklers on all buildings with external aluminium cladding more than two storeys tall (rather than the current 25 metre (eight storey) cutoff.
On 1 October 2017 the Environmental Planning and Assessment Amendment (Fire Safety and Building Certification) Regulation 2017 commenced. This regulation amends the way in which annual fire safety statements are issued and submitted by the building owner to their local council and Fire and Rescue NSW. A copy of the annual fire safety statement must also be displayed in a prominent location in the building it applies to, with a copy of the fire safety schedule (which lists the essential fire safety measures that the building must comply with).
Up until 1 October 2017 there were no attributes of a properly qualified person who might issue an annual fire safety statement, leaving the building owners to determine who might be a properly qualified person. The risk of this being that building owners might inadvertently select the services of someone who is not properly qualified.
Under the changes brought in on 1 October 2017, building owners will need to select a competent fire safety practitioner to undertake the necessary assessments and inspections before an annual fire safety statement or supplementary fire safety statement is issued.
In addition to the maintenance of fire safety measures, the amending regulation also addresses issues relating to the design, approval and construction of buildings (such as critical stage inspections for class 2 – 9 buildings during construction, a new alternative solution report for the fire safety alternative solutions for class 1b – 9 buildings and the requirement for plans and specifications to be submitted in relation to work on certain fire safety systems in class 2 – 9 buildings).
vii) Environmental Planning and Assessment Amendment (Identification of Buildings with Combustible Cladding) Regulation 2017
The Environment Planning and Assessment Amendment (Identification of Buildings with Combustible Cladding) Regulation 2017 is not yet in force and was on exhibition for public comment until Friday 16 February 2018. If it becomes law, it will require owners of buildings with combustible external wall cladding to notify and register with the NSW Government and undertake an independent fire safety assessment within set deadlines.
Accompanying this draft regulation is an Explanation of Intended Effect for proposed amendments to eight State Environmental Planning Policies which is intended to reduce the risk of non-compliant combustible cladding being installed on high risk buildings as exempt developments.
viii) Building Professionals Act 2005
The NSW Government has acknowledged the need to improve the Building Professionals Act 2005 to strengthen requirements relating to the accreditation, investigation, auditing and disciplining of certifying authorities.
The NSW Government intends to replace this Act with a new Building and Development Certifiers Act and intended that a draft exposure Bill would be placed on public exhibition in late 2017. However, to date, no such Bill has been released.
c) Other Steps Taken by the NSW Government
In addition to the above mentioned legislative changes, the NSW Government has been advertising in newspapers such as the Sydney Morning Herald to raise general public awareness of the dangers of cladding (See Newsletter – Image).
Kerin Benson Lawyers wrote to the NSW Government and requested a response as to what steps the NSW Government is taking on the issue of compliance and enforcement. Set out below in italics is the response received.
NSW Government response
- Consistent with the Government’s 10-point plan response to combustible cladding risks, the NSW Cladding Taskforce has written to owners for 1,041 buildings identified from data obtained by the Data Analytics Centre (DAC), Department of Finance, Services and Innovation (DFSI). The letter requests owners to take steps to ensure their building is fire safe.
- The task of identifying buildings with combustible cladding is ongoing:
- More than 40 councils have conducted independent audits identifying additional buildings.
- Fire & Rescue NSW is conducting ‘kerbside’ visual inspections of buildings identified by DAC and Department of Planning and Environment, prioritising residential high rise and conducting home safety visits and pre-incident planning.
- Also in line with the Government’s 10-point plan, the Building Products (Safety) Act 2017 was recently assented to. This allows DFSI to restrict the use of specific building products.
Department Planning and Environment response – Policy
- The Department of Planning and Environment has released a draft regulation that will require owners of buildings with combustible cladding to:
- register with the NSW Government; and
- submit statements on their cladding after commissioning independent fire safety checks. Set timeframes will apply to register with the NSW Government.
- The draft regulation is on exhibition until 16 February 2018. Under the regulation, registration and statement details will be sent to councils and Fire & Rescue NSW to undertake any necessary follow up enforcement / fire safety functions.
Department Planning and Environment response – Compliance
- The Department Planning and Environment has been reviewing developments approved by the Minister for Planning and identifying buildings with potential combustible cladding.
- Notices are being issued to the owners or managers of those buildings requiring them to undertake an evaluation of the cladding by an accredited certifier. Responses to the Notices are being reviewed by a fire safety expert.
- Under the DPE Notices if the building does not comply with the Building Code of Australia (BCA) the owner is required to engage a fire safety engineer to develop a performance solution in consultation with Fire & Rescue NSW as a key stakeholder in the fire engineering brief (FEB) process.
- 815 developments approved by the Minister have been reviewed by the Department via aerial data reviews and inspections where required to determine the presence of external cladding.
- 441 potentially clad buildings have been referred to NSW Taskforce for letters to be sent.
- The types of buildings have been prioritised in consultation with Fire & Rescue NSW.
- Classes 2 & 3 building up to 8 storeys have been given priority as sprinklers are not required in these buildings.
- Government buildings are being excluded at this stage.
Types of Notices
By way of explanation there are two types of notices the Department is issuing:
- For developments that are State Significant approved by the Minister for Planning (SSD, SSI & Part 3A) we are issuing Notices under s122C of the EPA Act imposing a condition to conduct an audit. The notices mostly consist of this type of notice.
- For developments approved by a former Minister for Planning that are not State Significant (older developments) we are issuing Notices of intention to issue an Order 6 under s121B of the EPA requiring an audit. There are less of these types of notices.
Finally, the Department has issued 97 notices to owners (s122C Notices and Notice of intention to issue an order.) Responses to notices are being reviewed by our fire safety experts. At this stage no orders have been issued.
 The Senate Economics References Committee, Non-Conforming building products, Interim Report: aluminium composite cladding, February 2017, p.1.
 Ibid, p.2.
 Minter Ellison, “Cladding: To Ban or not to Ban, that is the Question”, 12 September 2017.
 The Senate Economics References Committee, Non-Conforming building products, Interim Report: aluminium composite cladding, February 2017, p. 8
 Minter Ellison, “Cladding: the Australian landscape since Grenfell”, 12 September 2017.
 The Senate Economics References Committee, Non-Conforming building products, Interim Report: aluminium composite cladding, February 2017, p. 14.
 Ibid, p. 21
 Ibid, p. 21
 Ibid, p. 14 and 15.
 McDonald, P., “London tower fire: NSW documents reveal thousands of buildings could have cladding issue”, ABC News, 15 June 2017.
 Gerathy, S., “NSW Government identifies 1,000 buildings with possible dangerous cladding”, ABC News, 28 July 2017.
 Higgins, S., “Who’s liable? Combustible cladding prompts building reform in NSW”, August 2017.
 Grace Lawyers, “Inside Strata”, September 2017, p.19.
 Minter Ellison, “Queensland chain of supply legislation commences on 1 November 2017”, 1 November 2017.
 Section 9, Building Products (Safety) Act 2017.
 Section 85, Building Products (Safety) Act 2017.
 Section 15(1) and (2), Building Products (Safety) Act 2017.
 Section 15(3), Building Products (Safety) Act 2017.
 Section 20, Building Products (Safety) Act 2017.
 Section 21, Building Products (Safety) Act 2017.
 Aliento, W., “Industry Fury as NSW government waters down building products legislation”, The Fifth Estate, 22 November 2017. See also letter to The Hon. Matthew Kean from the Building Products Innovation Council dated 17 November 2017.
 Letter to The Hon. Matthew Kean from the Building Products Innovation Council dated 17 November 2017.
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