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Spencer Street Tower Blaze – A Timely Reminder Of The Recent Cladding Rectification Charges

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By Evelyn Marcou, Senior Associate, MST Lawyers

The life-threatening Spencer Street Tower blaze serves as a reminder of the recent reforms introduced to reduce the cost of removing dangerous combustible cladding from properties with changes to the Local Government Act 1989 (Vic) that will create Cladding Rectification Agreements (CRA). CRAs will enable owners to rectify the cladding on their property and pay it off via their council rates.

New service charges may be placed on land under part 8B in the Local Government Act 1989 (Vic) inserted by the Building Amendment (Registration of Building Trades and Other Matters) Act 2018 (Vic). The new part came into operation on 30 October 2018 and provides for:

  • councils to enter into cladding rectification agreements to facilitate a loan from a third party lender to land owners or owners corporations to pay for the cost to rectify flammable cladding on buildings; and
  • councils to declare and levy a cladding charge for the loan to fund the rectification.

The loan to fund the rectification is treated as a “service charge” under the Local Government Act. The current owner of land is liable to pay any service charges, even if that owner did not own the land when the cladding rectification agreement was entered into, and the charge created.

When buying or selling a property, it is important to consider whether the property is affected by such a charge. If applicable, the charge should appear in the council rates notice and land information certificates like the fire service levy.

What You Should Do                     

These changes, along with other recent changes to the law such as the GST withholding tax regime, make it now more important than ever to engage a lawyer when selling or purchasing a property.

Depending on whether you are a purchaser or vendor, your lawyer will be able to advise you on whether:

  1. A charge in does exists; and
  2. The implications of such charge for either a vendor or purchaser. A purchaser will need to be aware that the responsibility of repaying the cladding loan will fall to them upon purchase. A vendor will require their lawyer to include a special condition regarding the charge, making sure that the charge is disclosed in the section 32 to avoid the contract potentially being void and deal with how such charge should be adjusted.

If you require assistance with a planning or leasing matter, please email our Property and Leasing team or call us on +61 3 8540 0200.