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Building quality fiasco: the fallout rumbles into dangerous zones as governments fail to govern

building black and white

As the building quality fiasco continues to bite, insurers are starting to insert inconvenient exclusions into their policies, forcing private certifiers in NSW to warn that building in the state could grind to a halt. And in the UK, Lendlease is forking out part of a $9 million bill to replace Grenfell-like cladding on two buildings it did not design or build but owned for a while.


Combustible cladding and poor quality building made parts of Opal Tower at Homebush crumble and the Lacrosse apartments in Melbourne catch fire. 

Partly the failures are bringing home the cost of a boom that swept up quantity and dumped quality in its wake. 

But more important is a deeper problem – to governments failing to govern; happy to create all the laws anyone would want but refusing to police them and hold culprits to account. Laissez faire, under cover of fake laws and regs.

In the UK, suffering under the same delusion as here, that the market will sort it all out and demand and supply will yield a magic equilibrium, the inevitable has happened and angry citizens are taking the law into their own hands.

Australian behemoth Lendlease has been caught up in a kind of vigilante fury in Manchester and has ended up agreeing to pay part of a bill of around $9 million to help replace Grenfell-style cladding on two buildings it used to own – but did not design or build – after local government councillors threatened it with the loss of a lucrative government contract in the city, according to several media reports.

In NSW this week, Association of Accredited Certifiers chief executive Jill Brookfield says the construction industry will “grind to a halt” if the problem is not addressed.

“Insurers are now shying away from offering insurance cover for cladding to accredited certifiers and fire engineers,” she says.

“The industry is facing a crisis and this needs to be addressed as a matter of urgency – this is not just an issue which will impact accredited certifiers but one that will impact the entire industry.”

Two years of trying to get the attention of government has failed, she says.

The Building Ministers Forum failed to act and urgent action from government is needed. “The industry, builders and owners can’t wait for a national solution”.

Vice president of the AAC Robert Marinelli who has also been a member of the Building Professionals Board, which regulates certifiers, told The Fifth Estate that if certifiers can’t get insurance, then by law they can’t be registered. This applies equally to private certifiers – the majority of the industry – and those on local councils.

“In simple terms,” Marinelli said, “building surveyors that are accredited in different jurisdictions can’t have exclusions in PI [public indemnity]. They must be covered for all eventualities.

“If we can’t get clean insurance it means we can’t qualify to be registered.”

He said there are about 2000 building certifiers in NSW and possibly 7000 nationally.

What’s at fault, he says, is not the legislation – there are ample tight legal frameworks and regulations to testify to that – but the reluctance of government agencies to audit and police compliance.

“This is the problem: the basic issue is the government not doing what they are supposed to be doing.

“Our industry wants to be audited. It wants to make sure everyone is accountable for what they’re doing.

“We’ve got all the laws but no policing.”

“The government needs to spend money where it needs to spend money.” But the money goes instead to rebuilding stadia and other items instead.

“The cost of running the Building Professionals Board when I was there was described as a rounding error for the Department of Fair Trading [which has responsibility for the building industry].”

Key to the problem is that builders appoint sub-contractors who are unlicensed. If all subbies on a site paid a licensing fee there’d be money for auditing. Even $50 a year would yield $10 million, he says.

On the other hand, Marinelli is reluctant to blame the Department of Fair Trading. It’s got a “massive charter” – from real estate to car sales to financial advisers  – “and then to be lumped with certifiers…”

And to bring some perspective, there are about 150-200 complaints a year from around 40,000 approvals, he notes.

Others might say this springs from a slight lack of faith that anything will come of complaints and that the industry is rife with stories of consumers routinely ignored and sidelined. Busy lives kick in and people give up, more keen to retain their sanity and pick up the costs of problems out of their own pocket instead.

Jill Brookfield says the Building Professionals Board needs to “articulate a plan for the likely eventuality that compliant insurance will shortly not be available for any construction professionals, including accredited certifiers.”

The AAC has a proposed the following plan to address the issues:

  • All professionals involved in the design, installation and approvals process must be accredited and insured.
  • All key personnel in the process who are not accredited must be licensed and be required to prove their competency at regular intervals.
  • All documents related to the certification of a building should be in a standard form developed by industry and Government.
  • All persons involved in the certification of any engineering design or technical aspect of construction must issue a certificate on a standard form.
  • Comprehensive auditing of all accredited or licensed persons.
  • All parties involved in the building product supply chain need to be accountable for the products they prescribe, specify, purchase and use.
  • Amend the BASIX scheme to allow applicants to design buildings based on predetermined standards.
  • Strengthen the administration of building regulation in NSW by bringing building regulations and control functions into one portfolio, reporting to one Minister.

Meanwhile, there are concerns that the lack of full insurance for properties will impact on the mortgages so that if a property loses its full cover at renewal time, the bank might have to provision for its less secure status. (Anyone hear the chime of sub-prime again?)

But there are other ways and means of obtaining a fix

Some people, sick of governments ignoring the problems and insurers and builders hiding under cover of expensive litigation, are taking their own remedies for shoddy building practices.

In the UK Lendlease has agreed to fork out a share of the cost of more than $9 million to replace Grenfell-style flammable cladding on two apartment blocks it formerly owned in Manchester, reports in The AFRThe Huffington Post and other publications said. (A spokeswoman from Lendlease told The Fifth Estate the figure was incorrectly reported but she did not offer a correct figure.)

This occurred after Liberal Democrats on the local council lobbied to shift financial responsibility to the owners and developers of the buildings, The AFR said.

Lendlease, which did not design or build the Vallea Court and Cypress Place apartment blocks, agreed to pay part of the cost anyway after leader of the minority Liberal Democrat party, John Leech applied pressure and said that, “if Lendlease didn’t cough up for the cladding refit on the towers, then its construction arm should be stripped of a £330 million contract it had won to upgrade Manchester’s historic town hall”.

Huffington Post said: “The Liberal Democrats on Manchester council demanded that Lendlease be blacklisted from council contracts until they agreed to pay the fee, according to a party spokesperson.”

Mr Leech was reported elsewhere as saying: “This is a huge, huge win for local people and I’m delighted that Lendlease and Pemberstone have finally taken responsibility and will pay for the new cladding. I really hope this sets a precedent across the country.”

It might look mighty unfair, but the people who bought into buildings and live in them also think it’s unfair that they pick up the bill for bad practices. We absolutely have not seen the details of the agreement Lendlease and other parties have entered into but regardless, it’s a curious turn in events.

Lendlease said in a statement:

Lendlease has always sought a resolution in favour of the residents, and has worked consistently towards securing that solution since being informed of the situation.

This was a complex situation involving several companies, which has taken longer than anyone would have liked and we regret how unsettling it has been. We have not been caught out, we have been working together with the other parties to agree a resolution for a while.

Lendlease previously owned the properties in Green Quarter and had sold some of the leaseholders their homes. However, Lendlease did not design or build either the Vallea Court or Cypress Place buildings within the Green Quarter development as has been erroneously reported.

Having not owned either properties for considerable time we had very little legal rights to intervene in resolving the cladding issue. Regardless, our aim was to help get a good outcome for the residents and we have been working with all parties involved to enable the remedial works on the cladding to begin without residents having to pay for it.

While it took longer than we had anticipated – these things are never as simple as they seem – an agreement has been reached and the cladding will be replaced without cost to them.”

 

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Comments

10 Responses to “Building quality fiasco: the fallout rumbles into dangerous zones as governments fail to govern”

  • Mark Whitby says:

    Thanks Tina for a fine expose on flammable cladding and worse in the commercial building area.

    There is however, an even larger problem in the Domestic Building Industry with similar betrayals by authorities and certifiers plus grossly unfair dispute forums DBDRV and VCAT in Victoria…, all presiding over defects left in new homes, units and additions to houses well over $3 Billion per annum just in Victoria.

    There is not even a thorough definition of defect in our standards, where reasonable life expectancies, manufacturers minimum requirements and grossly inferior performance solutions are passed by all in the industry as standard, when they are anything but standard… just commonplace.

    The ten most common defects (averaging over $600 each to rectify), are not even mentioned in any of our standards in Victoria, including the Guide to Standards and Tolerances.

    We need a Royal Commission, because of the lack of caring by all authorities and indeed all players in the building industry… including building consultants who are not even required to register, be insured for their reports or have a minimum level of credentials.

    • Tina Perinotto says:

      Thanks Mark. Certainly there is a growing chorus for action. Everyone’s looking to government, but the government is twiddling its thumbs and pretending not to notice. Royal commission? Interesting idea.

  • Anne Paten says:

    The whole industry is lawless, and false ‘certification’ is but one of the myriad of major problems. Certainly certifying non-compliant, super defective and dangerously unsafe buildings as ‘safe to occupy’ is wickedly wrong. But this has become the accepted normal practice and is often labelled ‘best practice’. It is now well established that certifiers are considered ‘Gods’ (as the VBA staff have proclaimed. They are well and truly in the builders’ pockets, and well and truly rewarded for their ‘compliance’ efforts. As to their ‘certifications’, this is the trigger to extract owners’ money when patently no-one should be forced to pay for a building which is known to be very defective, and further one which will endanger people’s lives. However, the real issue is that politicians who ‘govern’ do so for, and in, the ‘commercial interest’. Just look at who controls the politicians, who directs this outrageous policy, and who sits on all the Boards, the Committees and ever-growing number of Taskforces and Talkfests. Not one genuine consumer voice to be seen or heard in the whole country!
    The business of bad building is booming and big business has been ‘legally’ authorized to amass their ill-gotten gains as if they were entitled to be paid. Year-on-year, the protected collect more loot and now it is a mega Billion Dollar booty every year. Cash-cow Con-sumers lose hundreds of Billions of dollars annually – their life savings ‘legally’ and shiftily shifted into the pockets of the recalcitrant rogues. All because the pollies have decreed ‘no punishment’ for playing outside the ‘Rules’. Thus this scandalous scam has been officially legitimized. It is indeed legalized fraud.
    This unconscionable public policy of no enforcement, nil punishment and virtually nil penalties underpins the fraud. When you pretend there are ‘Rules’, but ensure there are no consequences for breaking the ‘Rules’ – these ‘made’ by those making the ‘Rules – you have uncontrolled, crazy chaos. And in 2019, this lack of any regulation has produced our current consumer catastrophe – on such an unprecedented scale that it was once thought unimaginable. Then when you go the next step and legislate a ‘dispute industry’ with ‘No Rules’, the result is legally binding ‘Decisions’ crafted to ensure most owners will ‘lose’. So the lives of millions of owners duped into the ‘Dream’ are destroyed, and simultaneously the rogues are actually again rewarded for ignoring all ‘Rules’. The intentional creation of such a system, one designed to fail the majority of Victorians, constitutes a monumental abuse of power, colossal exploitation of consumers, and an unrivalled betrayal of community trust. This failure by so-called ‘government’ is much more than a fiasco. This is nefariously immoral.

  • Eric says:

    All I can say is: bring back clerks of works, bring back the site architect!
    Architects are regulated in all states in Australia, so that regulation should be connected to industry performance and safety: if an architect designs a building, they should be required (and it included in any contract by statute) to check conformity to design documents and specifications, inspect the works to ensure conformity, be required to certify any changes from specification and require to sight standards compliance of substituted masterials.
    That said, at its time the Lacrosse cladding complied with the NBC.

  • Michael Kelly says:

    Certification improvements are an important part of the mix, but let us not forget that the properties and fitness-for-purpose of products and systems is equally important. The systems that are supposed to place fit-for-purpose products in the hands of installers do not do this with high reliability. Fitness for purpose remains subject to the competence and integrity of the supplier, while the detection of unfit products and systems has almost no resources allocated to it.

  • Frank Mae says:

    Didn’t Robert Marinelli sit as a member of the Building Professionals Board at a time when it didn’t take any significant disciplinary action against private certifiers? If you look up the disciplinary actions when he sat on the board, they were handing out $5,000 fines for professional misconduct of private certifiers multi-million dollar developments.

    Just look at the situation we have today, there are 250 private certifiers in the state who can issue approvals for buildings over 3 storeys. Those 250 people have approved almost all of the buildings with combustible cladding over the last 2 decades and numerous other significant defects.

    The public has finally opened their eyes and seen the mess those 250 people have created and now expect them to pay for the mess they created. The insurance companies have seen the extent of the mess these 250 private certifiers created and do not want to insure them. Does anyone blame the insurance company? If someone writes off a new car every week for 6 weeks, do you think any insurer would give them a policy on their 7th new car?

    They are the ones who are responsible for making sure buildings are safe for occupation and must not issue an approval unless it is safe.

    They have approved buildings which are not safe. But what is the response of the 250 private certifiers? To blame the government for not auditing them to check they are doing the right thing. That’s like saying its not my fault I am a murderer, the police didn’t check I wasn’t murdering anyone so the police are at fault.

  • Kevin Cobley says:

    Class actions against Politicians are the real solution.

  • Rod Shepherd says:

    Did anyone mention the word blackmail (UK Local government solution to cladding issues). Is one persons blackmail anothers social justice?.
    In Australia, governments need to get out and talk to certifiers before they can start to effect positive change. Its not just a case of using an ever larger ministerial stick to beat them with. Certifiers do a difficult job under immense pressure from all sides. A start would be to acknowledge the work they do correctly, almost always. The industry along the east coast of Australia is sophisticated and ever improving in their roles. There are always a few bad apples and auditing / policing is the only option to maintain public confidence. The other issue is understanding the chasm between what the public think a private certifier does and what the private certifier is actually legislated to do. Governments at local and state level constantly exploit this chasm for political gain. Sometimes it is justified, however the public who read about it do not have the knowledge to discern the truthfulness of the statements made. Governments largely ignore the very real issues that certifiers raise for years and decades. Change needs to start at the State Government level through listening. The PI insurance crisis affects all citizens of NSW because it threatens economic prosperity in NSW.

    • Tina Perinotto says:

      Great comment. Thanks Rod. And yes it does look like a lot like blackmail. Hope we didn’t sound like we were endorsing the social justice angle posed by the Manchester councilLors. It looks like an unfair attack on a company just because they’ve got deep pockets. The big wakeup call here is that innocent buyers and occupants of poor quality housing are currently picking up the cost of industry failures. And someone is using a big stick to make someone else pick up the cost. What would be great is if the good quality companies that happen to be powerful can exert some of the fabulous political clout they have to push governments into policing the industry and protect innocent parties from dodgy practices. Everyone would benefit.

  • David Chandler says:

    The AAC suggested actions are sound, but just part of the matrix of issues. Requiring the use of standard form contracts of Build Only (BO) and D&C contracts are part of the mix. How can insurers a certifiers deal with the variable re-allocation dreamed up by some lawyer to help plug the holes created by inadequate design and pre-tender document integration. There are Australian standard form contracts, if these are not up to scratch then fix them, and adopt them. The industry not only has a challenge to resolve insurance cover for certifiers, the next generation of certifiers must be created. The average age of certifiers in the industry today is reportedly +50-years. It is the older practitioners who have the knowledge – they are reporting that it is hard to pass this on. Hopefully government is concluding it needs to attend to an industry in strife.

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