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Owners’ Corporation Law

10 Sep 2019

Refund stamp duty to those affected by flammable cladding

Barely a fortnight passes in Melbourne these days without word that another residential building with dangerous cladding is evacuated by the Victorian Building Authority (VBA). If we aren’t already at a crisis point already, we are definitely approaching one.

Of course, people are right to ask, how did it get to this stage? How could the relevant authorities turn such a blind eye to these compliance issues for so many years?

As a lawyer acting for owners’ corporations (OCs), my response is, unfortunately, that I’ve known for years. The best part of a decade I’d say. I’ve acted for dozens of buildings with these types of issues. Sure, they haven’t been as bad as the ones that are now getting evacuated. Those buildings were 10/10 in terms of the threat to life safety. The ones I’ve been dealing with are further down the spectrum, perhaps a 6/10.

But of course, confidential settlements and deeds prevented my clients and I from going public. And so, the band played on. Nothing changed. Builders and developers continued to build sub-standard buildings. The state government continued to keep “red tape” and “bureaucracy” away from the process, all in order to boost the state’s coffers with swollen stamp duty proceeds.

However, by keeping away “red tape” and “bureaucracy” (which are interchangeable terms for “compliance” and “adherence to relevant standards” and the Building Code of Australia (BCA)) the state government created this vacuum, and is now squarely responsible for creating and perpetuating this mess.

The announcement of a cladding fund of $600 million for affected buildings is a welcome first step towards rectifying the issue. Of course, others have already reported that this fund is actually only allocated $150 million in total for affected buildings (as the federal government has declined to put in $300 million, and $150 million is already allocated to fixing public buildings affected by the flammable cladding). It is speculated that only the worst-affected buildings will be rectified by the state government, and with some reports that the true cost of remedying the cladding issues on the 1000 affected buildings expected to cost at least $1 billion in Victoria, then it is clear that not all owners will be compensated by the cladding fund.

The stamp duty issue is an interesting one. Consider this: stamp duty was introduced as a means of defraying the government’s administrative costs of transferring a Certificate of Title from one party to another, and to ensure that the property records were properly held. In the modern era of course, this doesn’t actually hold true, as there is no possible way that it costs the state government $30,000 - $50,000 to transfer a Certificate of Title. In fact, you pay extra for that anyway in the administrative fees charged by Land Victoria and the relevant mortgagors.

And of course, in NSW the state government sold off its Land Titles Office two years ago to private interests, so stamp duty really shouldn’t be charged at all anymore in NSW.

So, my argument is simple. The state government ought to clearly and succinctly articulate why it should keep affected owners’ stamp duty payment when it has actively removed most of the consumer protections that were in place in developing and constructing a residential building? It should answer the question as to why it failed to properly administer and enforce building regulations and standards, and failed for over a decade to properly fund and resource the VBA to act as its watchdog?

I won’t hold my breath for an answer.

Tom Bacon - Principal, Strata Title Lawyers

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