Cladding Rectification Agreements (CRAs) are a three-way voluntary agreement between an owner or owners corporation, lender and council to fund cladding rectification works. The lender will loan the funds to an owner or owners corporation and loan repayments will be made over time through the council rates system.
CRAs are an option for funding cladding rectification works; other options include self-funding, securing a traditional strata loan, refinancing an existing mortgage, or taking out a personal loan.
The Building Amendment (Registration of Building Trades and Other Matters) Bill 2018 received Royal Assent on 25 September 2018 and created the enabling framework for CRAs within the Local Government Act 1989. The legislation came into effect on 30 October 2018.
To allow for implementation, it was agreed in October 2018 to provide guidance materials to assist stakeholders to enter into a CRA.
Owners are responsible for providing the necessary information and approvals to enter a CRA and for repayments based on their lot entitlement through the council rates system.
What do owners need to do?
- Work with their owners corporation to agree to rectification works, including agreeing to the cost of the works and provide written agreement to enter the CRA to the owners corporation. At least 75% of owners in the owners corporation must agree to the CRA
- Provide details of any rates, charges, mortgages and taxes on their lot to the local council for an eligibility test
- Advise their existing lender(s) of their intention to enter a CRA
- If the owners corporation enters the CRA, repay the loan as an addition to their rates notice
For more information, please see the Owners Guide to CRAs here:
The owners corporation is responsible for coordinating agreement from owners, liaising with lenders, managing the CRA on behalf of owners and overseeing the rectification works until their completed.
What do owners corporations need to do?
- Work with the local council or Victorian Building Authority to agree what rectification works need to be undertaken
- Get agreement from the owners corporation to undertake rectification works (including the cost of rectification works) and enter a CRA. A minimum of 75% of owners must agree to take part in the CRA and this agreement must be in writing
- Liaise with lenders to determine eligibility for a loan
- Advise the council of the intention to enter a CRA and provide a list of owners and contact details to the council
- If all parties agree to the CRA, manage the agreement on behalf of the owners
For more information, please see the Owners Corporation Manager Guide to CRAs here:
Council must be satisfied of the eligibility of each individual lot owners, declare the loan as a rate on the land, collect loan repayments though the rate system and passing on monies collected to the lender.
What do councils need to do?
- Once the owners corporation advises of their intention to enter a CRA and provides a list of owners and their contact details to council, write to each owner seeking details of all rates, charges, mortgages and taxes for their lot
- Conduct an eligibility assessment for each owner
- If all parties agree to the CRA, execute the agreement, declare the loan as a rate on the land and include the repayment amounts in rates notices
- Forward any payment received from the owner for the CRA repayment to the lender
For more information, please see the Council Guide to CRAs here:
Page last updated: 27/05/20