With houses constructed of untreated timber framing, the mould grows from the inside out. It can take five to eight years to appear. That’s why leaky buildings are still being identified today. News of a prospective reclad can come as a bombshell to unsuspecting owners of units who have bought in good faith, thinking they had done due diligence but are now faced with a whopping bill many can’t afford to pay.
In our real estate sales and body corporate work we have first-hand experience of the suffering, hardship and extreme stress experienced by many owners of units in multi-title properties – buildings that are leaking and rotting and which require recladding to meet stringent new local body requirements and the updated building code. Many unit owners are finding it impossible to fund the repairs of these compulsory building reclads, particularly if they are single and/or pensioners and not earning an income.
If you own a leaky home today you’ll find it’s almost impossible to get finance. Banks are increasingly reluctant to lend money to repair leaky homes.
If the owners of leaky homes/units don’t have savings, investments or access to family loans they are often forced to sell at a big discounted price to investors.
It costs on average $250-$300,000 to repair each unit. This cost increases annually as it can often take five years for negotiations for a reclad to be completed.
Owners in their 60s with a debt-free home can suddenly find themselves in the unforeseen position of having to fork out a huge amount of money for their share of repairs to their building. Banks are unwilling to loan to pensioners who have no income. These owners face losing their retirement savings or having to suck-up the prospect of a mortgagee sale. Where else do they buy if they haven’t been able to get market value price for their leaky unit?
If they are able to lay their hands on $300,000 they also have to fund alternative accommodation for up to a year while their building and unit undergoes remediation. If the building is tenanted, the landlord forfeits rent for that time.
I reckon around 50% of owners of leaky units can’t afford to pay. This estimate is based on our extensive experience in managing rentals and body corporates.
Where are such desperate owners to turn if they want to avoid enforced mortgagee sales? Or should they consider walking away and losing everything – and buckling under the pressure?
The impact of the stress and pressure on these owners from being unable to finance their share of high remediation costs can feel overwhelming. For some, it has resulted in suicide and bankruptcies.
The causes of leaky homes included poor design, inadequate building cladding systems and often sloppy workmanship. But the chief cause must be laid at the feet of the Government Department which approved the use of untreated kiln-dried framing timber in the mid-90s. Therefore the Government must take more responsibility for fixing the problem.
There are two clear ways the government could do this:
The bonding process would be protected by the increased value of the property once the reclad had been completed and at no cost to the Government. The bond would be repaid when the unit title owner’s property was sold. The borrower would service the interest costs during the lifetime of the loan.
The government needs to take urgent action to alleviate the unnecessary suffering of these unit title owners of leaky buildings.
And the council could create efficiencies that lower the price of the reclads.