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By Nick Marston, Director, Project Management | 30 August, 2019

It has been two years since the Grenfell Tower fire in London brought global attention to the dangers of flammable cladding on high-rise building exteriors.

In just 90 minutes, fire sparked by a faulty refrigerator engulfed the 24-storey building, tragically killing 72 people in June 2017. Less than three years earlier, in November 2014, the Lacrosse apartments in Melbourne were severely damaged after a late-night cigarette was left to burn in a plastic food container. And in February 2019, fire shot up five floors of the Neo200 apartment in Melbourne after a blaze was sparked by a single cigarette. All three buildings were covered in aluminium composite cladding.

Since then, Australia’s federal and state governments have moved to tighten restrictions on the use of combustible cladding on buildings, prompting multi-million-dollar legal disputes over who is to blame for using the materials, and who is responsible for removing them.

What is combustible cladding?

Lightweight, versatile and modern, metal composite panels are a popular external treatment on buildings. These metal panels can be made from various materials, including copper and zinc, but are most commonly made from aluminium.

Aluminium composite panels (ACPs) are generally two thin sheets of aluminium separated by a core material. The core can be made up of polyethylene (PE), mineral fibre or a combination of both. Derived from petroleum, PE has a poor fire rating performance and is prone to melting and dripping at high temperatures. Aluminium is also a heat conductor.

ACPs in multi-storey buildings pose the largest risk, because of the potential for fire to spread rapidly via the external areas of the building.

But the presence of external combustible cladding does not necessarily mean a building is unsafe. Some buildings with ACPs can still be declared safe, given other safety features, such as fire sprinklers. Where safety issues are found, they should be addressed as a priority.

Navigating the minefield

Australia’s state and territory building ministers are yet to settle on a plan for the coordinated removal of combustible cladding, but in February 2019 they agreed to a national ban on the “unsafe use” of combustible ACPs in new constructions.

The proposal is now undergoing a cost-benefit analysis to assess the proposed ban’s impact on the supply chain and building industry, and to determine an implementation timeline.

The Victorian and NSW state governments have already moved to ban the use of cladding on new construction over certain heights. Recent changes to the National Construction Code effectively prohibit the use of combustible external cladding on high rise buildings.

In NSW, ACPs with a core comprised of more than 30 per cent PE by mass were banned in August 2018 for external use in several classifications of building. This ban is retrospective, which means even buildings constructed before the ban came into force must comply. Building owners are required check for external combustible cladding and register all affected buildings with the NSW Government.

In Victoria, the use of ACPs on new multi-storey buildings was effectively banned in March 2018, and low-cost financing was introduced to help building owners remove dangerous combustible cladding from existing properties.

In Queensland, legislation was passed in October 2018 which compels building owners to complete a combustible cladding checklist.

Many large asset owners are auditing buildings in their portfolios and in some cases undertaking rectification works for buildings constructed many years ago.

All these examples underscore the complexity of the ACP issue, and the challenge facing an industry working across many different jurisdictions.

How combustible cladding is treated is still not uniform, and each state provides a different response to the risk posed by combustible cladding on public and private buildings. Engaging qualified, expert consultants is essential.

Implications for the industry

The implications for the industry are still unfolding as insurers, financiers and lawyers consider the costs:

  • Financial: Modelling published recently by RMIT University has found the bill to replace combustible cladding around Australia could run to billions of dollars.
  • Insurance: Insurers have started raising premiums and inserting policy exclusions for professionals such as building surveyors and certifiers. The Australian Institute of Building Surveyors suggests construction across Australia could slow if building surveyors cannot secure compliant professional indemnity insurance.
  • Project viability: Some banks have conducted audits of new and current building projects they are funding to ensure they comply with the building code.
  • Compliance: Builders, designers, certifiers, engineers, manufacturers, installers and owners/occupiers may find themselves liable for contravening bans on combustible cladding, which is up to $1.1 million for corporations in NSW.
  • Legal: The Victorian Civil and Administrative Tribunal awarded Lacrosse apartment owners more than $5.7 million to cover the cost of replacing non-compliant cladding, damaged property, additional insurance premiums and “anticipated future losses”. The builder was found liable, but the court ordered that the fire engineer pay 39 per cent, the building surveyor pay 33 per cent and the architect 25 per cent. A further $12.7 million sought by apartment owners is yet to be resolved.
  • Valuations: Several media outlets have reported of “dramatic drops” in real estate value “overnight”.
  • Reputational: An Australian developer agreed to share the cost of $9.3 million rectification works to replace flammable cladding on two apartment blocks it formerly owned in Manchester after tenders for other work in the city were at risk.
  • Project management: There are also significant challenges ahead for building owners looking to replace ACPs – planning approvals, building access, staging of works, building code compliance and more.


Altus Group can help

Powered by technology and data, Altus Group’s people can provide actionable analysis and advisory to support building owners, asset managers and strata managers grappling with combustible cladding.

We work with industry experts to define and scope the project and solutions, provide cost and time certainty, and to document and deliver the replacement or rectification project.

When it comes to combustible cladding, our message is clear. Value engineering should never be applied as a cost-cutting exercise at the expense of quality and safety. But with the right people and project management approach, we can meet best practice standards, enhance safety and secure the long-term sustainability of building assets.

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