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New service charges may be placed on land pursuant to a new part 8B in the Local Government Act 1989 (Vic) inserted by the Building Amendment (Registration of Building Trades and Other Matters) Act 2018 (Vic).

The new part came into operation on 30 October 2018 and provides for:

  • councils to enter into agreements to facilitate a loan from a third party lender to land owners or owners corporations to pay for the cost to rectify flammable cladding on buildings
  • councils to declare and levy a cladding charge for the loan to fund the rectification.

The loan to fund the rectification is treated as a service charge pursuant to the Local Government Act. The current owner of land is liable to pay any service charges, even if that owner did not own the land when the cladding rectification agreement was entered into and the charge created. When acting for a vendor or purchaser it is important to consider whether the property is affected by such a charge and make the appropriate inclusions in the sale of land documentation.

If applicable, the charge should appear in the council rates notice and land information certificates like the fire service levy.

The LPLC Key Risk Checklist: Sale of land – questions for the vendor has been updated to include question no. 30 about cladding rectification agreements.

Read the new part 8B to the Local Government Act.

Include particulars of any cladding rectification agreement in the section 32 statement. Refer to s.32A(b) of the Sale of Land Act 1962 (Vic) which requires a vendor to provide particulars of any charge over the land.

Consider whether to include special conditions in the contract of sale dealing with any cladding rectification agreement issues such as:

  • how to adjust the outstanding loan amount
  • delivery of cladding rectification agreement documents at settlement
  • conduct of vendor prior to settlement in complying with any cladding rectification agreement.