There are five things that will cause owners to take action if there is combustible cladding on their building: concern for personal safety; compulsion by government; unwillingness to pay higher insurance premiums; declining property values; and inability to sell affected units.
Each of these on their own should be sufficient to ensure immediate action from owners, but it’s a sad fact that safety concerns alone will not lead to significant change.
The various state governments are working through their processes, which, one way or another, will lead to many buildings being forced to rectify their cladding. But it will take time.
At Lannock, we’ve been slightly sceptical that insurance premiums alone would force action, but given the stories we’ve heard of some insurance premiums increasing up to 800% and the related changes in excesses due if a claim is made, owners’ concerns about premiums may well be a catalyst for rectification.
The last two items – declining property values and inability to sell affected units – are inter-related.
Last week, Resimac announced that it will no longer lend to enable people to purchase apartments known or suspected of being clad in combustible materials.
Don’t be surprised when other lenders follow suit.
This will have a direct and negative impact on property values in affected buildings: Lenders refusing to lend means intending purchasers can’t bid at auction which results in reduced demand which decreases values which means losses for owners. And the losses can be expected to be far greater than the cost of rectification. In some cases, it will mean the property can’t be sold.
Also, lenders’ reluctant to lend to cladded buildings means that it will be more difficult for current owners to re-mortgage in order to fund a special levy.
Our promise is simple:
Lannock will fund 100% of all the costs of all of the cladding rectification required by an owners corporation or body corporate.
And, we’ll lend so that other improvement works can be done at the same time. And we’ll lend so that the owners corporation can pursue litigation, if owners feel that this avenue should be pursued.
It’s an unambiguous win for owners: value is restored or even enhanced, compliance is achieved, properties can be sold and insurance premiums return to normal.
And people can sleep safely at night.
Contact Lannock for more information on financing options for strata fire safety compliance.