NSW Class 2 Residential Cladding Rectification Rules

What it is

NSW Class 2 residential cladding sits inside a layered regime that emerged after the 2014 Lacrosse and 2017 Grenfell fires. NSW has the Building Products (Safety) Act 2017, the combustible cladding register run by NSW Fair Trading, the NSW Cladding Taskforce, Project Remediate and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020.

A Class 2 residential building with combustible cladding has three problems at once. The cladding has to be identified and registered, the building has to be assessed for fire safety risk, and the cladding has to be rectified if it cannot stay in place safely. Each layer has its own deadline and its own consequence.

The combustible cladding register

Under the Environmental Planning and Assessment Regulation 2021 and earlier the Environmental Planning and Assessment (Statement of Expectations) Order 2018, owners of Class 2 to 9 buildings with combustible external cladding have to register the building with NSW Government through the cladding register. Registration is the responsibility of the building owner, not the builder, but the builder usually feeds the original cladding specification into the registration. The register is administered by NSW Fair Trading.

What needs to be registered

A building goes on the register if it has any external cladding panels made of metal composite or expanded polystyrene, or any external insulation and finish system where the cladding may be combustible. Building owners are required to register within four months of being occupied for new buildings, and within the deadline set by Fair Trading for older buildings.

NSW Cladding Taskforce audits

The NSW Cladding Taskforce was set up in 2017 to identify buildings with potentially combustible cladding. It audited around 185,000 building records and inspected over 4,000 buildings. The Taskforce sits inside Building Commission NSW now and continues to refer high-risk buildings to local councils and Fire and Rescue NSW. Where a Class 2 building is identified as high risk the local council can issue a fire safety order under the Environmental Planning and Assessment Act 1979 requiring the owner to remove the cladding or upgrade other fire safety measures.

Project Remediate

Project Remediate is the rectification program for eligible Class 2 buildings. It is voluntary and opt-in. Owners corporations on eligible buildings can access a 10-year interest-free loan for cladding rectification plus expert assistance from program advisors. The program covers around 225 buildings identified as priority. NSW Government pledged $1 billion to the program in 2020.

Eligibility

• Class 2 residential apartment building
• Combustible cladding identified by the Cladding Taskforce or a fire engineer
• Owners corporation has resolved to opt in
• Rectification scope agreed with the program

Retrospective assistance

Owners corporations that paid for cladding rectification before Project Remediate became available may be eligible for retrospective assistance. The retrospective stream covers work done from a defined date and requires evidence of original scope and cost.

Rectification path outside Project Remediate

If the building is not eligible for Project Remediate the owners corporation has to fund the rectification through the strata sinking fund, a special levy, or a litigation recovery against the original builder, developer or certifier. The statutory duty of care in section 37 of the Design and Building Practitioners Act 2020 applies, and the High Court confirmed in Pafburn Pty Ltd v The Owners that the duty is owed to subsequent owners and is not delegable.

Where NSW differs from its east-coast siblings

Victoria runs Cladding Safety Victoria with similar finance for eligible buildings, funded through a building permit levy. Queensland runs the Safer Buildings program with a register and self-assessment but no central rectification finance. NSW is the only jurisdiction with a $1 billion central rectification finance pool, a statutory duty of care in section 37 confirmed by the High Court, and the RAB Act giving Building Commission NSW direct rectification order powers up to 10 years post-completion.

What triggers a Building Commission audit

Building Commission NSW will audit a Class 2 cladding question on three triggers. A failed cladding sample test, a Cladding Taskforce referral, or a complaint from the owners corporation or a resident. Where an audit identifies a serious defect the Commission can issue a building work rectification order under section 33 of the RAB Act.

Rectification cost

Median cladding rectification cost on a NSW Class 2 building runs from two to five thousand dollars per square metre of facade, with mid-rise buildings typically landing in the two to eight million dollar range and high-rise towers running well above ten million.