Concessional Loan

Owners corporations are eligible to apply for a concessional loan if they:

• participated in the Testing and Assessment Scheme, and
• obtained a testing and assessment report which indicated that the cladding on their building posed a moderate or higher risk.

Owners corporations who have taken out a loan with a commercial provider to remediate their cladding may also be eligible if they can provide evidence that the cladding posed a moderate or higher fire risk. If an owners corporation with a pre-existing commercial loan is offered a concessional loan, their outstanding commercial loan balance will be paid out by the Loan Administrator.

A concessional loan can be spent on the following categories of expenses:

• the cost of undertaking eligible works including all materials and labour, project management costs and any other professional services required to complete the works
• investigation and tender costs if needed (up to $100,000)
• administration costs (up to $10,000) to assist the owners corporation to administer the loan, and
• the fees associated with regulatory approvals.

The following are considered eligible works that may be undertaken under the concessional loan:

• works necessary to remediate the cladding, including removing the cladding, and replacing it with non-combustible material
• make-good works only required because of the cladding remediation (for example; retiling, or reinstating landscaping), and
• works on the external wall which are necessary for certification.

Expenses that are not covered by the concessional loan are:

• Pre-existing defects unrelated to cladding, such as structural issues, lack of proper fire and smoke barriers, roofing.
• Works in the external wall related to windows, extensive mould, extensive rotten timber, or other pre-existing defects.
• Additional improvement works not related to the cladding, such as general re-paint of the building etc.

A member of an executive committee or a strata manager can apply on behalf of an eligible owners corporation.

Applications opened on 29 August 2022 and close on 30 June 2024.

Applicants will undergo an eligibility assessment and, if found eligible, will have to undertake a financial assessment.

Eligibility Assessment

Owners corporations applying for the concessional loan will first need to be assessed for eligibility assessment by the ACT Government.

Where an owners corporation has participated in the Testing and Assessment Scheme, they will only need to complete and submit an application form.

Where an owners corporation has participated in the Testing and Assessment Scheme, and has also undertaken the tender process to choose a builder, they will have to complete and submit an application form and along with the following documents:

• The scope of works that was used in the tender process; and
• The quotation from the builder which was accepted by the owners corporation.

If an owners corporation has not participated in the Testing and Assessment Scheme, but are transferring from a commercial loan, they will need to complete and submit an application form, along with:

• the quotation from the builder which was accepted by the owners corporation
• the most recent statement on their cladding loan from their financial institution, and
• evidence that the cladding on their building posed a moderate or higher fire risk before it was remediated.

If the owners corporation is found to be eligible, the ACT Government will send the owners corporation a participation deed which must be signed and returned. When the signed deed is returned, the owners corporation’s application details will be provided to the Loan Administrator.

Financial Assessment

The Loan Administrator, Lannock Strata Finance, will contact the owners corporation directly to commence the loan application process. The Loan Administrator will then undertake financial and credit checks as with any standard loan approvals process.

If approved and if the owners corporation wishes to proceed, it must enter into a loan contract agreement with the Loan Administrator.

If the loan is not approved, the Loan Administrator will advise of their reasoning. The decision of the Loan Administrator is final and there will be no opportunity to appeal this decision.

Following approval of a concessional loan application, owners corporations who have not undertaken a tender process will need to commission a site investigation to identify the scope of works required in the external wall. They must then conduct a tender process to attract a suitable builder to undertake the eligible works. This is called the investigation and tender process.

Costs of up to $100,000 to fund the investigation and tender process can be funded through the concessional loan.

Once the investigation is completed, a report on what was found in the investigation must form part of the documentation that is provided to builders who wish to submit tenders to undertake the eligible works.

As part of the Investigation and Tender Phase, owners corporations will undertake a tender process to find a suitable builder to undertake their remediation. Prior to signing a contract with their preferred builder, the owners corporation must submit the accepted quotation and final scope of works for assessment by the ACT Government. This is to ensure the final scope of works includes only eligible works under the loan.

The Loan Administrator will then finalise the loan amount using the accepted quotation.

The Register of Suppliers has been established to help owners corporations find service providers who have qualifications, experience, licences and insurances relevant to cladding work in the ACT.

Owners corporations applying for a concessional loan are required to use project managers, builders, architects, façade engineers, structural engineers and building surveyors who are on the Register of Suppliers or eligible to join the Register.

Use of Suppliers not on the Register or that have not been assessed as eligible to join the Register means that concessional loan funds are unable to be utilised to pay for that Supplier. Owners corporations and project managers should seek the express agreement of the ACT Government before engaging a Supplier who is not on the Register. Where an unregistered supplier subsequently seeks to join and is found by MPC not to be eligible to join the Register, concessional loan funds cannot be used to pay for any services provided by that supplier.

To be included on the Register, services providers must meet minimum qualification, insurance and license requirements. Inclusion on the Register is a confirmation of a business’ compliance with these minimum requirements, it should not be considered an endorsement by the ACT Government.

Owners corporations should undertake their own inquiries to assess whether the chosen service provider is suitable for their cladding needs and is reasonably costed.

Please note, a project manager is recommended for all projects, but for works $1 million or more, a project manager is required as condition of obtaining a Concessional Loan.

Before remediation works commence, owners corporations will need to obtain a Building approval (BA). Other approvals may be required depending on whether works other than cladding remediation is being undertaken.

Further information may be found at the Build Buy Renovate website.

All remediation work must be completed within 24 months. During the remediation period, owners corporations will pay the interests on the loans amount that they have drawn.

Remediation work must be conducted in accordance with the Concessional Loan Guidelines and the Participation Deed that is entered into with the ACT Government.

Some of the requirements of remediation are:

• only eligible work must be undertaken
• all combustible cladding is to be recycled and no cladding is to be disposed of at landfill facilities, and
• owners corporations must advise the ACT Government of any changes in their key service providers (project managers, builders, building certifiers/surveyors, architects, façade engineers, fire engineers and quantity surveyors).

It is the owners corporation’s responsibility to ensure compliance with all requirement, and ensure that any requirements are also reflected in their contracts with the project manager and builder.

A Program Assurance Officer will undertake sporadic checks of all cladding remediation sites to assure the ACT Government that this is occurring. Where works are found not to comply with the Deed, milestone payments may be paused until compliance resumes. The Program Assurance officer cannot give advice to the Owners Corporation or their suppliers on the work being done. The role of the officer is only to provide assurance to the ACT Government that the work is being carried out in accordance with the Participation Deed between the ACT Government and the Owners Corporation.

The building contract between the owners corporation and the builder must include a milestone schedule for payments. Disbursements from the Loan Administrator can only be made when milestones have been achieved – all work must be billed in arrears by the builder and other service providers.

The final milestone payment will be made after the Certificate of Occupancy is granted and must be at least 10% of the total costs. This provides assurance that the builder will complete the work and that the work is able to be certified.

Once a Certificate of Occupancy is granted, remediation works are considered to have been completed. At this stage the Loan Administrator will provide the owners corporation with a Final Repayment Amount.

During the remediation period, owners corporations will pay the interest on the loan amount that they have drawn. Owners corporations will have 10 years to repay the final repayment amount during which both the principal and interest must be paid.

Lannock Strata Finance is a specialist strata financing company, established in 2004 by Founder & Chief Executive Officer, Paul Morton. Lannock Strata Finance finances capital works for bodies corporate and owners corporations around Australia including repairs, renovations, professional services, litigation and re-development.

Visit the Lannock Strata Finance website.

The ACT Government provide assistance to owner-occupiers facing difficulty in paying their concessional Loan repayments through the Hardship Scheme, which is administered  by the ACT Revenue Office. More details about the Hardship Scheme may be found here: Cladding Hardship Scheme | ACT Revenue Office - Website.

All inquiries about the Hardship Scheme should be directed to the ACT Revenue Office.

Below are check-lists of all steps that an Owners Corporation will need to undertake to get a Concessional Loan and to provide all the necessary documents to the ACT Government and the loan administrator during the loan application and remediation stages. Also below is a document relating to payments and repayments.

• Checklist - Investigation, Tender Stage & Remediation
• Checklist - Tendered and Seeking Commercial Loan
• Checklist - Tendered and Seeking Final Loan
• MPC Cladding Program Owners Corporation Payments Factsheet

For enquiries relating to the ACT Cladding Program, including the Register of Suppliers and the concessional loan, please contact Major Projects Canberra (MPC) at claddingprogram@act.gov.au or by phone on 6205 3303.

You can also submit an enquiry using this form.