Buying a property with flammable cladding: how to manage the risks

In recent years, a number of large properties in Victoria experienced fires due to flammable cladding used in the construction process. Although the Victorian Government has announced a ban on flammable panels and rendered polystyrene from being used for all future multi-story developments from February 2021, there are still many properties with flammable cladding currently on the market. These properties pose both safety and commercial risks that buyers should be aware of before deciding to purchase.   

What is the cladding on a building?  

Cladding is the material used for the external surface of a building to provide thermal insulation, weather resistance, and decorative detail. This is typically seen in apartment blocks. If these materials were used inappropriately or installed incorrectly, there is an increased risks of fires breaking out. Most existing properties constructed with flammable cladding have now been issued with rectification orders from government authorities. Specifically, this entails building works to remove and rectify the risks associated with the cladding material. This can be a costly exercise that purchasers may run the risk of bearing.   

What do I need to know before buying property with flammable cladding? 

Before buying a property that is subject to any building cladding issues, always seek legal advice to review the owners corporation certificate provided as part of the Section 32 statement by the Vendor. The Section 32 statement contains details of:

  • ongoing fees
  • insurance cover
  • maintenance works carried out
  • any notices issued to the property owners by government authorities
  • any building compliance works that need must be conducted

It also details any proposed works, fee increases and any potential or existing legal claims affecting the property. 

Additionally, flammable cladding is often used in the construction of apartment blocks, which are usually managed by an Owners Corporation. If the building has been affected, the Owners Corporation is likely required to fix the cladding issues. Post-purchase, property owners can try to make a claim against the builders that constructed the building, or against the building insurer to rectify or replace the materials. Regardless, there will likely be unexpected costs to fix any cladding issues. It is important to obtain advice prior to purchasing any property subject to cladding remediation requirements. This is to ensure you are aware of the additional risks and costs associated with the property.  

How Wealthsource can help 

Buying property presents a number of challenges and requires careful consideration. Wealthsource cares about our clients’ needs and concerns by providing contract reviews that outline the key points of the contract conditions and important information in the Section 32 which the purchaser should draw attention to. Have a chat with us and we are more than happy to help with your decision. 

If you have any questions or wish to engage with our services, email us at [email protected] or call us on +61 3 9590 6180.