Cladding Rectification Program in Victoria

What it is

The Cladding Rectification Program is a $600 million Victorian Government initiative delivered by Cladding Safety Victoria (CSV). It removes and replaces combustible external wall cladding on privately owned residential apartment buildings identified as higher-risk after the 2017 Statewide Cladding Audit. Half of the program is funded from consolidated revenue. The other half comes from a cladding rectification levy on the building permit levy. CSV operates under the Cladding Safety Victoria Act 2020 and from 1 July 2025 audit and notice oversight passed to the Building and Plumbing Commission.

Eligibility for the program

To be considered for funding an owners corporation must satisfy three threshold tests. First, the building must be referred to CSV either by the Victorian Building Authority or by the relevant local council through the Statewide Cladding Audit. Second, the building must be subject to a Building Notice or Building Order related to combustible external wall cladding. Third, CSV must assess the building as higher-risk and prioritise it for rectification.

CSV defines higher-risk flammable cladding as external walls on apartment buildings with a rise in storeys of three or more that operate as Class 2 Type A construction and that include aluminium composite panels with a polyethylene core greater than 93 per cent by mass. Buildings that fall below this threshold or that are clad in expanded polystyrene render systems are assessed on a case by case basis.

Buildings outside scope

Detached and semi-detached houses are not covered by the program. Single dwelling Class 1 buildings rarely use the panel systems that triggered the audit. Class 2 buildings under three storeys generally fall outside the higher-risk pool, and commercial buildings are excluded from the residential program even where they have similar cladding. Owners of these buildings carry the rectification cost themselves under the Building Act 1993 enforcement framework.

How the funding works

CSV funds the removal and replacement of all combustible cladding identified in the assessment, the supply of replacement cladding, sarking and insulation where needed and any external fire rated linings required to give the wall system its Fire Resistance Level. CSV does not pay for non-cladding latent defects uncovered during the works. Owners corporations carry the cost of replacing rotten timber studs, mouldy insulation, non-compliant timber framing and any structural items that depart from the building permit approved plans.

The owners corporation enters a funding agreement with CSV. CSV procures the head contractor through a panel of pre-qualified builders, manages the building permit and acts as project manager. Owners corporation contributions sit at a small fixed share of the in-scope works plus the full cost of any latent defect rectification triggered during opening up.

The cladding rectification levy

The cladding rectification levy applies to building permits with works value above the prescribed threshold. The levy is collected by the relevant building surveyor at permit issue and remitted to the BPC, formerly the VBA. The levy raised approximately $297 million to cover half of the $600 million program. Building practitioners should treat the levy line on permit cost estimates as a non-negotiable statutory charge that cannot be passed to subcontractors.

What the program means for a builder

Builders engaged on CSV works sit inside a tighter compliance envelope than a normal Class 2 project. CSV requires evidence of NCC compliant performance solutions for the new wall system, third party fire engineering sign-off, photographic records of every cavity barrier installation and a building manual update lodged with the owners corporation at completion. Failure to deliver these items can delay the final payment milestone by months.

For builders not engaged on CSV works the program still matters. Apartment buildings under construction or sold within the past decade may carry latent cladding risk that surfaces during conveyancing, lender due diligence or insurance renewal. A defect of this category triggers section 137F implied warranties claims against the original builder and a Domestic Building Insurance claim against the policy held at the time of construction.

TradeLens risk flags

For TradeLens clients the cladding pipeline shows up as three distinct risk patterns. Builders with completed Class 2 stock from 2010 to 2017 face latent warranty exposure on any building still inside the implied warranty window. Builders newly engaged on CSV works face panel pre-qualification audits and ongoing compliance review. Builders working on Class 2 projects today face NCC 2022 cladding performance requirements that did not apply when most audit-affected buildings were permitted.