SA Government loans for cladding remediation

Since the 2017 Grenfell Tower fire in London, cladding or ACP (Aluminium Composite Panel which is used to cover the external walls of apartment buildings) has been under review with Government and insurers seeking the replacement of high risk flammable cladding.

Closer to home was the less widely pubicised Lacrosse building where it was reported that in November 2013 a tenant deposited a smouldering cigarette in a makeshift ashtray on level 8. Less than 13 minutes later fire had spread up 14 floors on the external face of the building leading to a damage bill of over $12 million. A wonderful article on this can be read here

Personally, I (Michael Haines, Director of Strata Management SA) have helped 5 apartment buildings to work through the cladding replacement process.

These owners received letters from their local council indicating that their building was unsafe which left some uncertaintainty and fear among the apartment owners.

As Body Corporate Managers, Strata Management SA arranged approvals from the Management Committees to engage fire engineers to report on the situatio and the remediation and issued communication to the owners to calm the situation while the corporations were in the information gathering stage.

From here we had meetings with owners allowing questions to ensure owners with widely different understandings of the issue could wrap their heads around what was happening.

The fire engineers reports and recommended actions needed to be agreed by the corporation and the council which left the owners then needing to raise the requisite funds (or take out loans to cover the cost of works) prior to engaging the contractors to proceed with the replacement works.

The challenge with these remedial works is that the common property for the Community Title is being altered and as such owners need to meet and agree on a way forward with the cost of the expense to be met determining whether the resolution required is ordinary, special or unanimous.

At this stage the resolutions are ordinary for an expenditure under $2000, special for $2000 to $5000 and unanimous for over $5000 (s21 of the regulations in support of s119 of the Community Titles Act 1996).

Given that these amounts are per lot, it is very easy for the cost to pass $5000 per apartment and while I have found people generally agree without much persuasion on wanting a safe building, it is unusual to find all apartment owners with spare cash on hand at the same time to be able to afford the immediate upfront outlay.

There have been limitations with corporations seeking to find traditional funding sources with one lender advising a corporation I was working with that their levies could more than double (as a result of the repayment of the loan).

A potential saviour for Community Corporations in South Australia may be the amendments to the legislation allowing mandated remedial works to proceed with 75% rather than unanimous vote, but the fantastic news is the announcement the South Australian Govenment has opened applications to provide building owners with financial support for the removal of combustible cladding which has a fixed interest rate, a term of up to 10 years, no application fees and can provide up to $15 million in funding.

You can read more from the South Australian Government on this here