Second extension announced for cladding claims

Close-up on the exterior cladding of a high-rise residential building.

In an unprecedented development, the limitation period for Victorian-property owners to pursue cladding claims has been extended for a second time.

Last month, the innocuously titled Building Amendment (Registration and Other Matters) Bill 2021 came into effect.

Under the Bill, owners whose cladding claims would otherwise be time barred between 16 July 2019 and 1 December 2023 now have 15 years to pursue legal action to recover the cost of removing and replacing combustible cladding.

The introduction of the Bill follows the Victorian Government's previous extension in December 2020 from 10 to 12 years.

These two extensions to the relevant limitation period have left contractors and consultants alike both frustrated about the retrospective operation of the change and anxious regarding the potential for future extensions.

Whilst the reform has been justified on the basis of protecting consumers, it is clear that the Victorian Government also has its own interests at heart. Namely, after sinking $600 million into removing and replacing flammable cladding on private apartment buildings, the state has an interest in exercising its subrogated rights and recovering these funds from industry participants. As such, the Victorian Government stands to gain as a result of the recent reforms.

This latest reform is a further disturbing development for builders, consultants and their professional indemnity insurers who are concerned about the prospect of cladding claims as:

  • they are retrospective and many professionals have, quite reasonably, arranged their affairs on the basis of the existing state of the law, namely the 10-year "long stop" applying.
  • many professionals and others formulated bulk notifications prior to the introduction of cladding exclusions on their professional indemnity policies, based on the 10-year long stop being in place. Accordingly, older projects may not have been notified, which together with cladding exclusions being rife in the industry could result in uninsured exposures.
  • the extension of time applies to "cladding claims" and is not limited to claims involving flammable cladding. This may open the door to other claims involving cladding, but which have nothing to do with flammable cladding (i.e. water ingress claims).

For more information or guidance about how the Bill impacts your business, please get in touch.

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