Aluminium Composite Panel Ban commenced 15 August 2018

On 15 August 2018 the Commissioner for Fair Trading banned the use of Aluminium Composite Panels (ACP) containing more than 30% polyethylene in any external cladding, external wall, external insulation, façade or rendered finish in residential buildings over two storeys and commercial buildings which are higher than three storeys.

This is the first building product safety ban made under the Building Products (Safety ) Act 2017 (“the Act”) which came into effect on 18 December 2017.

The Act forms part of the ten point plan for fire safety of the NSW Government in response to the Grenfell fire in London.

We have written previously about how the Act works. Our article can be accessed here.

How does the ban work?

With the ban now in place:

• it is an offence to use the banned ACP or to represent in trade or commerce that the banned ACP is suitable for use.

The maximum penalties for the offence are fines of up to $1.1m for corporations and $220,000 for individuals.

• the ban applies retrospectively to any buildings which have had these products installed before the ban was introduced.
• If the Commissioner for Fair Trading is satisfied that a building has used the banned ACP the Commissioner may issue an affected building notice on:
  • the owners and occupiers of the affected building
  • the local council and other agencies including the Commissioner for Fire and Rescue.
• An enforcement agency (usually council) may issue a building product rectification order on the owner of an affected building to:
  • eliminate or minimise a safety risk posed by the use in the building of a building product to which a building product use ban applies, and to then
  • remediate or restore the building

Are there Exceptions?

The ban will not apply where:

• The ACP passes a test in accordance with Australian Standard 1530.1-1994 ‘Methods for fire tests on building materials, components and structures’ or
• The ACP and proposed external wall assembly:
  • passes a test for both external wall fire spread and building-to-building fire spread in accordance with Australian Standard 5113; and
  • a statutory declaration is provided stating that the Building Product will be installed in an identical manner to the prototype wall assembly in the test.

These tests will need to be supported with a report from an Accredited Testing Laboratory which describes the methods and conditions of the test and the form of construction of the tested prototype.

Why was the ban imposed?

The Commissioner for Fair Trading introduced the ban after considering industry submissions and advice from NSW Fire and Rescue, various expert reports, and information about approaches taken by other states on the use of certain composite panels and the NSW Cladding Task force.

The reasons provided by the Commissioner for the ban included the following:

• That ACPs with a Polyethylene (PE) core on type A & B construction¹ pose a high fire safety risk due to combustibility
• That ACPs with a core comprised of more than 30% PE core use in contravention of the National Construction Code (NCC) poses a safety risk within the meaning of the Act
• The National Code of Construction is not currently sufficient to regulate building products and cannot be relied on in isolation to address the safety risk associated with ACPs with a core comprised of greater than 30 percent PE by mass.
• Based on expert advice and other sources; the safety risk posed by ACP with a core comprised of greater than 30% PE by mass can be managed if the product meets the testing requirements of AS 1530.1 and/or AS 5113.

What does the ban mean?

The ban of ACP’s has a number of immediate consequences and implications. These include:

• A building owner served with a rectification order may be compelled to remove and replace the banned ACPs if it is not possible to otherwise eliminate or minimise the safety risk.
• An owner served with an affected building notice or a rectification order will be required to:
  • disclose the affected building notice and rectification order in any contract for sale (Conveyancing (Sale of Land) Regulation 2017 schedule 3 Part 1 clause 1(a) and Part 3 clause 13A and 13B)

A failure to disclose such an order or notice in a contract for sale of land will breach the warranty implied into the contract by s52A of the Conveyancing Act 1919

• Under the Strata Schemes Management Regulation 2016 the Owners Corporations served with a rectification order will be required to disclose particulars of outstanding building product rectification orders to an owner, mortgagee or covenant chargee of a lot in a strata scheme.
• planning certificates issued by a council the Environmental Planning and Assessment Act 1979 (NSW) will need to include a statement of:
  • any affected building notice,
  • any outstanding building product rectification order,
  • any intention to issue a building product rectification order in respect of the land.

See Schedule 4 Planning Certificates – Environmental Planning & Assessment Regulation 2000 Reg 21

• the banned ACP is a major defect for the purposes of section 18E of the Home Building Act 1989 (NSW). This means that the banned ACP will be the subject of the 6 year statutory warranty period for major defects instead of the 2 year statutory warranty period which may have otherwise applied.

Clause 69A of the Home Building Regulation 2014 which commenced in April 2018 also designates external cladding which is likely to threaten life safety in the case of a fire a major defect.

• in live projects, builders must stop using the banned product and discuss other options with the principal contractor, developer or other relevant party.
• A licenced builder who uses the banned ACP will be guilty of improper conduct under s 51 of the Home Building Act 1989 (NSW)

What is the Status of draft regulations

In our February article “Draft Regulation For Identifying Combustible Cladding In NSW”  https://kreisson.com.au/draft-regulation-identifying-combustible-cladding-nsw/

we wrote about a draft Environmental Planning and Assessment Amendment (Identification of Buildings with Combustible Cladding) Regulation 2017  (the draft Regulation) that will require owners of buildings with combustible external wall cladding to register the building with the government.

We will provide further information closer to the introduction of the final Regulation.

How does the ban interact with the strata defects bond scheme?

The introduction of the ban should not prevent an owners’ corporation from pursuing a claim under the strata defects bond scheme

An Owners’ Corporation will be able to use all or part of the bond to pay for the rectification of any defective building work that is identified in a final inspection report, including the rectification of a banned building product.

MORE INFORMATION

For more information please refer to our previous cladding articles: https://kreisson.com.au/insights/

A copy of the product ban can be accessed here:

https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0007/392821/Section-91-Notice-SIGNED.PDF

This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.

¹Type A construction – Class 2, 3 and 9 buildings with a rise in storeys of three or more and Class 5, 6, 7 and 8 buildings with a rise in storeys of four or more

Type B construction – Class 2, 3 and 9 buildings with a rise in storeys of two or more and Class 5, 6, 7 and 8 buildings with a rise in storeys of three or more.