Standfirst: The External Wall Safety review (EWS) process has proved to be a minefield while the resale market of flats in tall buildings is in chaos. Alan Bevan discusses.
Just a cursory internet search will throw up all sorts on the subject of External Wall Safety and cladding because this is a dense and controversial issue which is live and ongoing and seemingly will take years to resolve.
In the last four years most of us have become pretty familiar with the word ‘cladding’. We wish we hadn’t of course, because it really came into the national consciousness with the Grenfell Tower disaster in London in June 2017. Inferior cladding was at fault for the shocking deaths of 72 people. It has had a profound effect on how we all – and not just the public – view tall buildings and the materials they are wrapped in.
This tragic tale is one of lost lives but has now also become one of escalating insurance costs, four Housing Secretaries in as many years, broken promises, increased anger and confusion, homes that can’t be sold and leaseholder lives in freefall or on hold.
How did we Get Here?
The initial focus in the wake of Grenfell was rightly on how the fire spread so quickly, but the subsequent effect on the housing market (in particular apartments) has been huge. Flammable cladding was found to be the cause. In the proceeding four years apartment blocks nationwide have been surveyed to see if they share similar fire safety risks and combustible cladding became just one of a list of issues causing concern with an estimated 600,000 high-rise homeowners now affected by these findings, as well as millions more in medium-rise blocks.
Eighteen-months after the tragedy, the Building (Amendment) Regulations 2018 came into force, banning the use of combustible materials in the external walls of high-rise residential buildings and applying to all new residential buildings above 18m.
A year after that saw the creation of the EWS process by the Royal Institute of Chartered Surveyors (RICS) and other stakeholders as a way also to reassure mortgage lenders that buildings over 18m are safe. It involves a fire safety assessment by a suitably qualified professional, of whom there are only a few hundred in the UK, who completes an EWS1 form.
Then after the Government published updated advice in January 2020, mortgage lenders began to insist on EWS1 forms for buildings under 18m as well.
Unfortunately, where noncompliant cladding was identified, many buildings have overnight became potential fire hazards and leaseholders have found themselves, stuck in the middle, living in unsafe homes which they are unable to sell, while facing spiralling costs for insurance, service charges and 24-hour fire patrols. Even Prime Minister Johnson has said in parliament that it’s an unfair situation they are facing.
As 2020 progressed we began to see lenders further tighten the criteria just as more problems became apparent with issues relating to non-compliant construction, missing fire breaks and other fire related matters.
In November last year, the previous Housing Secretary Robert Jenrick announced an agreement between the government, RICS, UK Finance and the Building Societies Association, that owners of flats in buildings without cladding will no longer need an EWS1 form to sell or re-mortgage their property, clearing the way for up to nearly 450,000 flat owners to sell, move or remortgage their homes. In July of this year, he announced plans to work with lenders to end the need for leaseholders in medium and lower-rise blocks to provide the EWS1 cladding forms when applying to buy, sell or remortgage their home.
Yet still no progress, because an earlier safety advisory note has not been removed meaning that no lenders have changed their policy requiring an EWS1 form to grant a mortgage.
Also, earlier in 2021, through its updated fire safety bill, the Government pledged nearly £5bn to cover the cost of remediation work of buildings over 18m high – although some estimate the cost at closer to 10 times the allocation. This bill still left leaseholders in buildings under 18m having to pay for remediation aided by Government backed loans.
Additionally, the Government also revealed plans to tax developers over the coming years which should raise around £2bn. It will be targeted at the larger developers many of whom were responsible for buildings that have subsequently been found to contain combustible cladding or had fire compliant issues.
Where are we Now?
Last month the current incumbent of the MHCLG hotseat, Michael Gove, at select committee questioned why flat owners should have to pay anything for dangerous cladding to be removed from their buildings, saying that leaseholders were “innocent parties” and plans to make flat owners take out loans to pay for the work would be put on pause.
It promoted cautious optimism from the campaign group End Our Cladding Scandal (EOCS) but called for a stop to the unfairness. In their statement they wrote: “The Consolidated Advice Notes must be withdrawn but this must be done in conjunction with a holistic risk-based assessment process to make buildings safe, including central grant funding of risk mitigation measures, where required. Key stakeholders, such as mortgage providers, insurers, surveyors, and fire experts must be brought into this process to ensure there is a coordinated and consistent approach.”
So maybe an end is in sight to what leaseholders call a “living nightmare” and everyone else is calling a housing crisis of mammoth proportions.
The Situation in Liverpool
There are relatively few 18m or higher buildings that have combustible cladding as part of their exterior in the city, but many other buildings have been caught up in the EWS1 “scandal”. We have seen examples of buildings that are free from cladding and with very limited fire risk failing EWS1 tests because of the lenders’ view on accepting any risk at all. Ironically, many lenders are refusing to lend on buildings that have failed an EWS1 in which they currently have many mortgagees that they have already lent to.
This EWS1 situation has been dragging on for some time but with more and more voices joining everyday demanding decisive action and clarity, both in the world at large and across the benches in the House of Commons, more rapid movement might at last be seen. The RICS understands the problem and is keen to see a solution but must work harder with lenders to bring a sensible plan to fruition which offers existing leaseholders/owners the ability to sell/remortgage.
At the same time many surveyors have spoken about their frustration that some buildings they believe should be fully mortgageable are failing for the wrong reasons. The Government does not want a million people defaulting on their mortgage payments and going into repossession at the same time. That would be a catastrophe especially as we are still battling the impacts of both Brexit and the pandemic and trying to build back better.
City Residential has been closely monitoring this situation and the market as the situation has grown. So, if you are affected and need advice, we can talk you through all the latest information, the progress, the risks and your options.