PROPERTY valuers are expected to play a key role in identifying the presence of cladding within a building and assessing the market value having regard to cladding.
Hall & Wilcox Lawyers partner Matthew Curll told the Australian Property Institute’s National Property Conference that following the Grenfell Tower tragedy in London, some valuers had expressed that the interpretation of cladding is wide and varied, and that they may not be necessarily be able to identify cladding or know what they’re looking for.
Curll also said the response from state governments has differed.
The New South Wales, Queensland and Victorian governments have instigated audits and may publish non-compliant buildings, with NSW having over 1,000 buildings with cladding to be audited.
In Victoria, of the 170 buildings audited, 85 were found to be non-compliant.
In South Australia, the first stage of the governments audit has classified almost 200 buildings within the Adelaide CBD as “of concern”.
The cladding issue prompted the $100 million, 20-storey U City Building in Adelaide’s CBD to have its exterior design altered in order to be built free of the cladding.
In QLD, the government has introduced a bill, which will make responsible all parties in the chain of responsibility for a non-compliant building including officers of a company. Whereas in NSW, the onus falls with fire safety inspectors.
Curll said going forward, it is unlikely that non-compliant Polyethylene cladding will be used in new buildings and if they do, the cladding would need to be replaced as insurers are refusing to provide cover and banks are unlikely to provide finance.
He added that there are cases where insurers had previously provided cover but are refusing to renew the policy for PE cladding building.
Curll said this is also affecting the re-sale value of properties and whilst the banks are hesitating to take hard line with existing mortgagees due to reputational risk, the banks are expecting valuers to play a role.
“I have spoken to a few of the big banks and the banks recognise valuers are not building engineers or fire engineers,”
However Curll said the banks expect valuers to look for, identify and disclose in clear terms the presence of any form of cladding.
“Banks do not expect valuers to identify what type of cladding is present… One bank suggested valuers should suggest that banks understand further enquiries about the nature of the cladding president,” he continued.
“Some cladding is obvious enough, but sometimes cladding isn’t that obvious,” he said.
“Sometimes there’s cladding in or about the roof structure. That’s going to be very hard to identify and a valuer doesn’t know he or she might looking for in that regard.”
He said cladding presented “quite a significant problem”, noting that the Lacrosse building fire in Melbourne’s Docklands in 2014 spread across 15 levels in around just 11 minutes.
It will cost residents of Lacrosse $10 million to replace the PE cladding.
Curll said when valuing a new property or valuing a refinance where cladding is apparent, valuers will need to assess market value having regard to cladding and predicting the future impact of cladding in the event of a resale particularly a forced resale.
Curll said it cannot be assumed that all banks and lenders will take a uniform approach and valuers are best placed if they take an industry consistent approach.
“One considering is for valuers to disclose in clear terms, whether the valuer has looked for the presence of cladding in the lot being value and the property as a whole.
“Whether cladding has been identified. Whether there were any limitations or reservations in relation to looking for or identifying cladding.
“Whether the type of cladding could be ascertained.
“Whether banks should be warned to undertake further investigation to identify the presence of and/or the type of cladding present,”
Curll said at present it is very difficult to asset the future impact of these factors, but it is worth noting that the future value of a property may depend on the regulatory response, ability to insure buildings on an ongoing basis and at what cost, rectification costs and the impact on resale of the property.
Australian Property Journal