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Recycle, reuse, redevelop: Non-conforming building products and cladding issues for owners in redeveloping commercial buildings

12 December 2018

#Construction & Infrastructure

Recycle, reuse, redevelop: Non-conforming building products and cladding issues for owners in redeveloping commercial buildings

Waste has rarely been a bigger issue, and recycling and upcycling old materials is becoming more and more fashionable. But then the construction industry has been doing this for years. 

It is not always commercially feasible to demolish an entire building or shopping centre so that it can be improved, upgraded or extended. For many years, developers and principals have been changing only the parts of those buildings that absolutely need to be changed. The important question now is whether the legal issues involved in redeveloping a commercial building have changed since the introduction of the combustible cladding rules that came into effect from 1 October 2018 under changes to the Building Regulation 2006 (Qld) (Building Regulation), and the non-conforming building products rules in the new Part 6AA of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act). 

Under the Building Regulation, there is a positive obligation on the owners of some types of private buildings to identify whether combustible cladding exists. This includes owners of office, commercial and industrial, and health and aged care buildings that were built or have had cladding altered after 1 January 1994 but before 1 October 2018 and are more than three storeys high (two storeys for aged care buildings). As set out in our recent article on this, there is a three stage process which must be completed within a specified time to ascertain this. 

Commercial building owners should already have worked out whether they are likely to be affected by these new rules. If they already know cladding works are required, and are considering redeveloping the commercial building, it might make sense to do both jobs at the same time. The issue arises if a different contractor undertakes the main redevelopment, including cladding, based on a report by an unrelated RPEQ fire engineer. 

The pool of RPEQ fire engineers who might be prepared to provide these reports may be limited, which could pose timing issues. It is to be expected that most RPEQ fire engineers will not allow third party contractors to rely on their report, regardless of whether or not they have found the cladding safe.

If the owner then includes the RPEQ’s report in the scope of works but the contractor cannot rely on it, the usual approach of obliging the contractor to satisfy itself has implications. The contractor may not have the time, expertise or access to the building to carry out the relevant testing. This is likely to impede their ability to accurately price for that work, and the contractor’s insurance may be effected if the contractor accepts an obligation to satisfy itself that (for example) the cladding is not combustible. 

As for non-conforming building products, under section 74AGA of the QBCC Act, designers, manufacturers, importers and suppliers of building products in the chain of responsibility must ensure, “so far as reasonably practicable”, that each building product is accompanied by the “required information” for the product. Section 74AGA defines what this information is. 

Under 74AE of QBCC Act, a building owner is not a “person in the chain of responsibility”. The simple answer therefore is to push liability for complying with Part 6AA onto the contractor carrying out the redevelopment, and then down the supply chain. However, there are a number of consequences arising from this approach.  

If “required information” is supplied for every building product included in a redevelopment, careful records of this should be made. That might mean upgrading IT systems to cater for the type or volume of information to be stored, or bringing on additional resources (whether via direct employment or via your building manager), all of which tends to increase the cost of owning and operating a building. 

Some purchasers of commercial buildings are now asking the vendor to provide “required information” in relation to recent renovations as part of their due diligence. If the vendor cannot provide the “required information”, that may in some cases result in the purchase not proceeding, or proceeding at a lower price, or the purchaser only proceeding if the vendor supplies additional warranties and other information to try to make up for the lack of “required information”.

It is also not clear what effect (if any) a lack of “required information” would have on an owner’s insurances. Building owners may want to discuss this with their insurance brokers before a claim needs to be made. 

Risk and innovation are uneasy bedfellows. Building products are regarded as non-conforming for an intended use if, when associated with a building, the product (among other things) “is not, or will not be, safe” (QBCC Act, section 74AB(2)). Whether something “will not be” safe might only be ascertainable in hindsight, with 20/20 vision, i.e. once someone has been hurt. It might only be at that stage that an owner or contractor finds out that its insurance does not respond either. 

Given this, is a contractor likely to want to use the latest building products once they come onto the market, like self-healing concrete? This poses a dilemma for progressive building owners – should they not use the latest products, even if they will benefit your building significantly, or should they accept that contractors may price the risk of these products into their contract. 

Both pieces of legislation are to be welcomed as helping to make Queensland buildings safer. However there will inevitably be an effect on the market from these new rules. That might include less competition and/or higher prices for certain works (including redevelopments), and additional insurance issues and costs. It remains to be seen what will happen in practice. 

The Queensland Government has released a Guideline for assessing buildings with combustible cladding which can be found here

The Queensland Building and Construction Commission has started contacting owners of buildings who may be required to register. But even if you have not been contacted, you are obligated to register if you think you fall within the specified categories of buildings. 

Author: Suzy Cairney

Contacts

Brisbane
Suzy Cairney, Partner 
T: +61 7 3135 0684 
E: suzy.cairney@holdingredlich.com

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