AIBS Statement | External Wall Cladding – A Warning for Australia’s Building Industry

29 June 2018

Issues arising from external wall cladding are the subject of investigations, insurance claims for rectification works, litigation and a soon to be completed Senate Inquiry in the Federal Parliament. They are causing great angst for building industry professionals and building owners and feature in media reports contributing to continuing public disquiet and a loss of confidence in the existing governance framework.

Wall cladding that is non-conforming has been confirmed in many buildings in Australia. There are likely to be many more as investigations continue. All jurisdictions throughout Australia have responded in various ways and each of them is undertaking similar audits into the extent of the use of combustible cladding products. Some of the States and Territories have implemented their own solutions, attempting to resolve issues arising from the use of cladding that has been declared non-conforming.

All of these actions are all well-intentioned. However, the approach is disjointed, with each Australian State and Territory making their own arrangements with respect to audits, assessments and rectification work orders. Further, while governments focus exclusively on the problems around wall cladding, the fundamental issues that led to this problem – a failure of the building regulatory system- are ignored. 

It is imperative that action is taken to recognise and manage some of the issues emerging around external cladding, which in the opinion of AIBS, require urgent attention. It is also vital to develop a longer-term vision on how the issues around non-conforming building products (NCBPs) in general are to be addressed with a firm focus on prevention in future. If there are significant incidences of non-compliant external wall cladding in the Australian market, there is no reason why the same concerns do not exist for the whole range of systems and products that comprise the modern Australian building industry. 

Potentially dangerous non-conforming wall cladding in Australian buildings has been described as the canary in the coalmine. But it is not the first. We have already seen non-compliant electricity cables installed in many homes. The wall cladding issue is another warning of the substantial danger that lies ahead. 

It is essential to develop a consistent nationwide approach to this ongoing issue given the possible causes to the problem are not isolated to any one of the States or Territories. Failure to develop a nationally consistent approach could have serious negative impacts on occupiers and owners of buildings and the building and construction industry Australia-wide. These include: 

  • Increased claims on insurance by building owners seeking rectification works. – occurring now
  • Increased litigation by building owners – occurring now
  • Building owners who are adversely affected and out of pocket will seek redress to compensate for their rectifications work and will be up for further costs of litigation.   
  • More insurance claims and litigation will place increased pressure on the already strained insurance market forcing up the cost of insurance premiums for owners and building professionals.
  • There will be adverse impacts on all parties involved in the building process. However, there is no clarity or consistency around who is responsible for rectification works. 
  • Significant delays in obtaining approvals due to increased assessment complexity brought on by legislative changes, lack of clarity regarding product compliance and disparate regulator actions.
  • Continued confusion and uncertainty among building owners, industry professionals and the general public over external wall cladding and what is next with NCBPs.

Following a meeting in Sydney in March amongst key-stakeholders, it is clear that many of the concerns outlined above in relation to insurance are now a reality and the industry must expect a tsunami of large insurance claims.

The solution - AIBS recommendations 
It is essential that the Federal Government takes control of this issue and facilitates development of ‘whole of nation’ solutions to manage the risks to the Australian building industry from the issues around external wall cladding and other non-conforming building products. This should be done in three distinctive phases:

1. Short term and urgent
Immediate management of issues arising from external wall cladding in general and in particular the insurance crisis is vital. There is already a run on insurance and it is possible that in the near future building surveyors and other industry professionals will not be able to obtain PI insurance without impossible to manage exclusion clauses. Building professionals are likely to be forced out of the industry in future because they are unable to obtain insurance. 

AIBS recommends: 

  • the establishment of a dedicated body with powers to assist building owners to obtain remedies for buildings considered a threat to public safety. This could include the development of a funding model for the required rectification works.

2. Medium term  
AIBS recommends: 

  • A national solution which will include the development of a transparent, nationally consistent assessment process for non-conforming building products based on the International Fire Engineering Guidelines approach and using criteria reflecting the performance provisions of the NCC.  Such an approach will allow prioritisation of those parts of the building requiring remediation and the timeframes necessary for this.
  • A national public register of impacted buildings with all buildings entered onto the register being assessed consistent with the above requirements.

3. Longer term – the prevention phase
The product testing and certification structure for building materials has failed the industry by allowing non-conforming building products into the supply chain. This represents a systemic failure of the regulatory authorities to respond to the fundamental shift from a domestic supply chain to a global supply network.

AIBS recommends:

  • That the Federal Government takes control of the governance of Australia’s building industry and implements serious reform to ensure that non-conforming building products do not enter the nation’s supply chain and that building controls are consistent across all jurisdictions. 
  • Acceptance of the findings set out in the interim report of the Senate Inquiry into Non-Conforming Building Products which identified possible causes of the current systemic failures.

AIBS reiterates the need for a more unified approach to this issue across all jurisdictions. While the proposed solutions contained in this document emphasise the urgency of a short-term solution to the external wall cladding crisis, more detail on the AIBS recommendations for achieving longer term building regulatory reform can be found in the AIBS Policy on Building Regulatory Reform in Australia, here.