Changes to cladding rectification legislation in Victoria

By John O’Kane and Rebecca Pickering

The Cladding Safety Victoria Act 2020 (Vic) (Act) will come into operation on a day yet to be proclaimed – but at the very latest on 1 July 2021. These reforms are primarily aimed at empowering Cladding Safety Victoria to procure cladding rectification works in Victoria, and extend the limitation period for owners of cladding affected buildings.

The Victorian Parliament passed the Cladding Safety Victoria Bill 2020 (Bill) last year (3 September 2020), and the Bill received Royal Assent on 4 November 2020, introducing the Act.

What has changed?

The Bill and Act introduce a number of new policy solutions to rectify combustible cladding that has been installed in many multi-storey residential and commercial buildings across the state. These include:

• establishment of Cladding Safety Victoria as a separate body corporate – The Bill establishes Cladding Safety Victoria (CSV) as a separate body corporate, so that it will no longer operate as a part of the Victorian Building Authority. It prescribes the way in which CSV will carry out cladding rectification in Victoria, and empowers CSV to grant financial assistance for cladding rectification work. Although CSV already had the ability to grant financial assistance for cladding rectification work, the legislation provides a clear mandate to CSV to assist building owners affected by combustible cladding (including in relation to the way in which it provides financial assistance to affected building owners).
• extended limitation period – The Bill retrospectively extends the limitation period for a ‘cladding building action’ under s 134 of the Building Act 1993 (Vic) (Building Act), from 10 years to 12 years. This will allow a subset of owners of buildings affected by combustible cladding to bring a claim up to 12 years after their date of issue of an occupancy permit. The extended limitation period will only apply to building owners whose cladding building actions would otherwise have been time-barred between 16 July 2019 and 12 months after the Bill becomes law.
• subrogation provisions – Part 7 of the Bill amends section 137F of the Building Act, and sets out when the Crown will obtain a right of subrogation after paying financial assistance to building owners in respect of cladding rectification.

If financial assistance has been provided to building owners by CSV, the Crown obtains rights of subrogation, empowering the State of Victoria to bring proceedings against the relevant building practitioners responsible for the installation of non-compliant cladding.  This differs from the subrogation process contained in section 137F of the Building Act, by the insertion of a new 137F(1) which clarifies that the Crown’s subrogation rights are triggered when financial assistance is paid by CSV to owners in relation to cladding rectification work (instead of ‘at the relevant time’, as noted in section 137F of the Building Act).

How to obtain funding – Part 3 of the Bill sets out how CSV will prioritise the provision of financial assistance for cladding affected buildings. Under this part, CSV must prioritise for funding assistance any buildings requiring cladding rectification work which it has been notified of by a municipal building surveyor. If prioritised, the owner or owners’ corporation will then receive an invitation from CSV to apply for potential financial assistance. CSV will then decide whether to grant or refuse financial assistance (which may include funding for a partial rectification solution only).

What does this mean for owners, builders and consultants in Victoria?

The Bill ultimately empowers CSV to enter into funding agreements, and assist owners of buildings affected by combustible cladding to obtain cladding rectification works. Although CSV already had powers (via the Victorian Building Authority) to assist affected building owners in this way, we expect that the new legislation will empower CSV to act more quickly, and more efficiently, in procuring cladding rectification in Victoria.

Further, the time extensions come as a relief to many owners and Owner Corporations who were previously time-barred from making a claim (or soon to be time-barred), allowing those groups extra time to formulate and bring claims against builders and consultants in respect of combustible cladding affected buildings.

Builders and design consultants should be aware of the extended limitation period for bringing claims, and consider this extension when making decisions to renew professional indemnity policies of insurance.