02.12.2019

Building Amendment (Cladding Rectification) Bill

A Building Amendment (Cladding Rectification) Bill was introduced to Victorian Parliament on 14 October 2019.

The purpose of the Bill is to:

  • to confer further functions on the Victorian Building Authority in relation to cladding rectification
  • to provide financial assistance for building work associated with cladding rectification
  • to provide for the subrogation of the Crown to the rights and remedies of an owner to whom financial assistance is given
  • to establish a new account in the Victorian Building Authority Fund
  • to impose an additional levy on certain building permits
  • It is anticipated this legislation will be enacted before the end of 2019, however Design Matters will keep members up to date with any progress.

So what does the proposed Bill mean for registered building designers?

1. Additional levy

An additional levy will apply to all Class 2, 3, 4, 5, 6, 7 or 8 buildings which are not in regional Victoria.

The additional levy (on top of the standard levies) is proposed to be:

Cents in every dollar Construction costs
0.128 $800,000 or more but less than $1,000,000
0.256 $1,000,000 or more but less than $1,500,000
0.820 $1,500,000 or more

This cost should be factored in to any feasibility studies or any projects you have in the pipeline (pre building permit), especially given the anticipated commencement of the final legislation is prior to the end of the year.

2. Rights & Remedies

Additional powers are proposed so that the State Government can pursue building professionals in relation to the installation or use of any non-compliant or non-conforming external wall cladding product, or other building work, that required the cladding rectification work to be undertaken.

Given that building surveyors and inspectors are no longer indemnified by insurers (that is, exemptions are permitted in their PI insurance for registration with the VBA) if they are sued for cladding related defects they will have to carry this personally.

 As Justin Cotton, Director, Lovegrove & Cotton noted in his article “How Cladding Exclusions May Change the Way Building Cases are Run” dated 15 October 2019, “sole traders unable to firewall themselves with the corporate veil of the company structure may face bankruptcy if large awards are visited upon them in circumstances where their policies do not respond. This may well precipitate a wave

of asset protection activity as companies migrate assets to either trust structures or spouses. The spectre of the ‘man of straw’ building practitioner defendant may resume currency.”

It also leaves the registered building designers and registered engineers very exposed, as they are the only practitioners remaining in Victoria that have mandated PI insurance with no exemptions. While a large volume of building designers are not affected due to the scope of work they undertake, for those of you who are in the commercial space, we have taken this matter to the Government.