Owners of the fire-damaged Lacrosse building at Docklands, blamed on shoddy cladding material, are suffering vacancies over huge sections of the building as well as lower property and rental values, according to real estate sources, contradicting the Victorian Building Authority’s assertion that the Melbourne building continues to be occupied.
The building is currently undergoing remediation at an estimated cost of $40 million, following a fire in November 2014, but recent assertions that the building continues to be occupied are misleading, with building owners forced to pay for the work.
About half of the 312 apartments were still unoccupied, real estate agent close to the building owners told The Fifth Estate. These are the apartments that were damaged in the November 2014 fire, and the owners have been unable to rent them or occupy them since.
Many other apartments in the complex that suffered water damage or smoke damage were also empty for some time, the source said, but were repaired more quickly so owners or tenants could move back in.
The problem is investor owners of the worst-affected apartments only received six months of landlord’s insurance to cover lost rent, and have had to continue to pay body corporate levies and mortgages even when the insurance money ran out, sources said.
Owner-occupiers have been without anywhere to live.
There’s also been an impact on the balance of apartments that were undamaged or only slightly damaged. Landlords had to drop rents to retain or attract tenants, as the publicity around the dangerous nature of the building’s cladding deterred potential tenants.
Damage to the foyer took some time to repair and also discouraged potential tenants, and the still boarded up appearance of the fire-affected apartments proves to be an ongoing deterrent, they said.
Owners of intact apartments are also in a bind if they have decided to sell, as the value of apartments in the complex has taken a major hit. Even if the owner drops the price substantially, buyers are not keen, the source said.
Also, because the complex is quite new, there has been no real capital value uplift, even before the fire. So selling now, even if it is possible, would mean an enormous loss on the investment, they said.
“They just have to ride it out”.
The repair of the fire damaged apartments will include replacing the cladding with a non-flammable product. Once this is completed, the rest of the apartments will one-by-one also have the external cladding replaced, which means more costs for the owners.
The source said that strata levies – already quite high – have had to be increased by five per cent to cover the cost of increased building insurance.
Another Docklands non-compliance uncovered by owners
But Lacrosse is not the only body corporate feeling the pain of non-compliance in Docklands. The source said another tower commissioned its own independent inspection out of concern it may also have non-compliant cladding.
The inspection found that the internal fire walls were non-compliant and posed a risk to occupant safety. So the owners had to pay to have the walls edited and brought up to standard. Owners and tenants also had to temporarily vacate apartments in a staged process while works were completed.