Interest-free loan assistance to remediate combustible cladding

Over recent years, combustible cladding has caused numerous problems in apartment buildings and poses serious risks to building safety and public health.

Combustible cladding is prevalent in many apartment and unit blocks throughout Australia but has more recently come under scrutiny due to the catastrophic outcomes it has caused with fires in apartment complexes.

In New South Wales (NSW) a ban on combustible cladding came into effect on 15 August 2018. This ban aims to mitigate the risks associated with combustible cladding and seeks to enhance building safety standards across the state.

What is Project Remediate?

Project Remediate is a NSW Government program to help remove combustible cladding on an estimated 225 buildings throughout the State. Project Remediate is a voluntary (opt-in) program to replace flammable cladding for eligible class 2 residential apartment buildings.

It was first introduced to help owners corporations replace flammable cladding, by providing a 10-year interest-free loan, to allow them to undertake replacement of the cladding sooner rather than later. Because rectifying combustible cladding is a costly exercise, the program is designed to provide an incentive to owners corporations to prioritise the work to be completed in a timely fashion.

While owners corporations have the option to pay for remediation works through existing funds or special levies, the program recognises the required works will be a financial strain for many, so providing an interest free loan option is a cost-effective and efficient method to ensure works are completed as soon as possible.

Lannock Strata Finance has been appointed by the NSW Government as the loan service provider for Project Remediate. They provide support and guidance to applicants through their dedicated loan relationship managers and customer engagement consultants for the program​​​​.

Project Remediate Loan Application Process

The first step for your owners corporation is to register interest in the scheme. Once an inspection of your building has been completed the owners corporation will be provided with two alternative plans to remove and replace the combustible cladding.

Your owners corporation will need to decide which option to proceed with.  The preferred design will be fully documented, quotes for the remediation work will be prepared, and they’ll be offered a fully-priced remediation contract.

A Lannock Strata Finance relationship manager will then present the loan agreement and explain the loan repayments, terms and conditions, as well as how the funds are to be administered. 

Loan Process Steps

1. Loan information session

2. Draft loan contract

3. Credit check and in principle pre-approval

4. Loan contract based on final cost estimate

5. General meeting approval (of your owners corporation)

6. Execute your loan contract

7. Remediation works completed

8. Interest free repayments commence

Loan criteria, management and repayment

To apply for a Project Remediate interest-free loan, your building must be: 

• a residential apartment building (Class 2) in NSW. This includes multi-use buildings, for example part commercial/part residential

• confirmed by the Cladding Taskforce to have a high-risk combustible cladding façade that requires remediation.

An unsecured loan is made to the body corporate (owners corporation) of the building. It is not with individual owners. There are no mortgages, liens, charges, caveats or any registration of interest on the title of the body corporate or on the title of any individual unit. The loan to the owners corporation is serviced by levies from its owners.

The great news is that retrospective provisions have been included in the program for owners corporations that had already initiated steps to remediate their combustible cladding.

If an owners corporation passed a strata resolution to enter into a contract for cladding remediation work before 30 June 2021, they may be eligible to receive a lump sum payment equivalent to the interest that the NSW Government would have paid under Project Remediate.

What happens if levies are not paid or a unit is sold?

Each owners corporation determines its own policies regarding any unpaid levies by unit owners. 

If a unit is sold, the loan levy remains with the title of the unit. Therefore the new owners take on the payment of the levy when they buy. Whoever owns the unit at the time the levy is due is responsible for it being paid to the body corporate.

Hardship Assistance Program

Help is available to individual owner occupiers who are having difficulty paying the extra levies associated with the loan. Project Remediate Hardship Assistance is for those experiencing genuine hardship. You can apply for a period of deferment for the levy payments associated with the repayment of the Project Remediate loan.

The Hardship Assessor will determine the period of deferment on a case by case basis. Your Loan Relationship Manager from Lannock Strata can help individuals navigate the application process.

How to apply

There is an online application that will need to be completed and documents that will need to be submitted in conjunction with the application. These documents include 

• Proof of identity

• Proof of Project Remediate Levy from your owners association

• Proof of acquisition date

• Proof of principal place of residence

• Proof of household income

• Proof of assets

• Proof of liabilities

• Proof of household expenditure

If approved you’ll be issued with a hardship certificate, valid for the granted period of deferment.

Remember, you will still need to pay the levies, but the payment has been delayed. And because you will be in arrears in your levies to the owner corporation you will be classified as non-financial and not allowed to vote at a general meeting or strata committee meeting.

Hardship Assistance Program appeals process

If you disagree with a decision the Hardship Assessor makes under the Hardship Policy, you can lodge an appeal within 14 business days of receiving the decision.

Your appeal needs to be lodged with the Appeal Body which will consider and decide on your appeal. Once an appeal is lodged, the Hardship Assessor will provide all the documents and information you initially provided in your application to the Appeal Body.

Lannock Strata Finance were appointed by the NSW Government as the loan service provider for Project Remediate. This means our team are the experts in working with owners corporations to improve the safety of their apartments and units.