The non-bank lender has announced that a unit or apartment in buildings with non-compliant cladding will not be considered a valid security type across its prime and specialist loans.
Resimac announced that, from Monday (20 May), it will no longer accept as security any unit or apartment located within a building or development with non-compliant external cladding, or where compliance cannot be determined.
The policy change applies to new prime and specialist applications for units and apartments, as well as pipeline applications where a valuation had not been received and reviewed by 20 May.
In cases where the valuation report notes that the unit or apartment is located within a building that “appears” or is known to be clad, Resimac will require confirmation by a relevant expert (such as an engineer, builder, surveyor or certifier) that the cladding is compliant.
Additionally, where the unit or apartment is located within a building or development known to have compliant cladding, evidence will need to be provided that the strata insurer was aware of the cladding, as well as the compliance status of the cladding, prior to approving cover.
In a statement to The Adviser, Daniel Carde, general manager of third-party distribution at Resimac, said: “The cladding issue has become a known risk and we have therefore adjusted our lending policy to provide clear guidance for our borrowers and business partners.”
Building-cladding fire risks are well known, with the recent Neo200 high-rise apartment building fire on Melbourne’s Spencer Street, as well as West London’s Grenfell Tower fire, widely publicised around the world for revealing the urgent need for building regulation reform.
Prior to these disasters, Melbourne had a cladding fire at the Lacrosse building in 2014, which prompted an audit of external wall cladding on buildings by the Victorian Building Authority.
Victoria’s Cladding Rectification Agreement scheme, which was launched in October last year, was designed to provide home owners with low-interest loans to remove non-compliant cladding. The loans were supposed to be paid off loans through the owners’ council rates over a minimum period of 10 years.
An ABC investigation, however, found that no loans had been granted since the launch of the scheme.
State and territory governments have agreed in principle to a nationwide ban on the use of flammable cladding.
Karen Andrews, Minister for Industry, Science and Technology, said in February that the agreement is “subject to proper investigation and some discussions with industry”.
“Victoria and NSW have already moved to ban the use of cladding on new construction over certain [heights],” she told reporters in February.
“The states can now work on how they’re going to further implement changes in their own jurisdictions. Each state or territory can proceed immediately to implement bans in full, but I’m going to encourage them to bring industry with them.”
[Related: Non-bank updates lending policy]