If you are buying a strata title property, ensure that the building has no cladding issue as the banks can refuse to accept the security at the 11th hour. This can cost you the deposit and other fees.
If you are buying a strata title property, banks and lenders may ask for a confirmation from strata corporation to affirm that the cladding is not combustible.
What Is Cladding?
Cladding refers to the external covering of a building, often made of materials like aluminum composite panels (ACP), expanded polystyrene (EPS), or other lightweight materials. While cladding enhances aesthetics and insulation, it can also pose significant risks if not properly installed or maintained.
The Combustible Cladding Crisis:
Grenfell Tower Tragedy
In 2017, the Grenfell Tower fire in London highlighted the dangers of combustible cladding. The fire, fueled by ACP cladding, claimed 72 lives and led to global awareness.
Australia responded swiftly, investigating the prevalence of flammable cladding in its buildings.
Australian Context
Many strata buildings across Australia have been identified with non-compliant cladding.
Strata properties with defective cladding are at greater risk of rapid fire spread within the building.
Impact on Home Buyers
Lender Requirements
Banks and lenders often require confirmation from the strata corporation regarding cladding safety. Specifically, they seek assurance that the building has no cladding issues and that the building’s insurance (certificate of currency) is up to date and valid, and stating the building insured amount.
Some lenders will go as far as to confirm that the cladding is not combustible.
Without this confirmation, the banks and lenders may not accept the security even after the loan agreement has gone to formal approval.
Imagine a purchaser signs a contract to purchase a strata unit. If the bank discovers combustible cladding or inadequate insurance coverage, they may deem the security insufficient. As a result, the buyer cannot proceed to settlement, leading to a financial disaster.
Key Takeout
Home buyers must be vigilant when considering strata units for purchase. Engage with experts, verify cladding safety, and ensure proper insurance coverage. Collaborating with experts and professionals, such as our lending specialists at Fairlane Finance can mitigate potential risks and navigate unnecessary disasters.
Speak with our team today to explore comprehensive insights on buying properties in Australia.
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