The commencement of the Building Amendment (Cladding Rectification) Act 2019, which will take effect on the 1 January 2020, will see millions of dollars added to the cost of projects across Victoria.
The new Act enacts the State Government’s consumer focused ‘rescue package’ in relation to the funding of ‘cladding rectification work’ associated with ‘non-compliant or non-conforming external wall cladding products’.
The new Act will ‘give the Government the ability to pursue dodgy building practitioners on behalf of owners of apartments covered in combustible cladding’. The new Act does so by amending the Building Act 1993 to:
- confer further functions on the Victorian Building Authority in relation to cladding rectification work;
- provide (continuing) financial assistance for building work associated with cladding rectification work;
- provide for the subrogation of the Crown to ‘step in’ to the rights and remedies of an owner/payee who has received financial assistance;
- establish a new account in the Victorian Building Authority Fund; and
- fund the rectification cladding works by imposing an additional levy on building permits in certain circumstances. The levy will not apply to buildings in regional Victoria. The levy for projects over $1.5 million is substantial at 0.82 cents in every dollar of the cost of the building work for which the permit is required.
The State Government’s rectification program is expected to cost $600 million and take 5 years to complete.
Hundreds of projects already underway will retrospectively incur significant cost increases. Many of these projects received approvals prior to the announcement of the Cladding Rectification Fund or the introduction of the Building Amendment (Cladding Rectification) Bill 2019 into the Parliament.
Cressida Wall, Executive Director, Property Council Victoria, says the retrospective nature of aspects of the legislation are particularly problematic.
“It is essential that an exemption from the increased rates of the Building Permit Levy is implemented for those developers that had projects committed and already under development, who are now facing unavoidable and unforeseen cost increases from 1 January 2020,” Ms Wall said.
“The retrospective components of the Act are placing developments, companies, homes for Victorians and jobs under threat.”
“The Property Council supported the Government in its proactive approach to addressing cladding and consumer certainty in Victoria, however this rushed legislation is now placing the industry, and the jobs it supports, at great risk.”
“While we agree that addressing combustible cladding is essential, changes to the Building Permit Levy, which place the viability of the property industry at risk, are not the solution.”
“This levy will drive up prices on future projects as developers attempt to offset charges not factored into current projects. This is a bad outcome for Victorians and a bad outcome for the property industry, Victoria’s largest employer,” Ms Wall said.