How the new cladding form could get the flat sales market moving again
Grenfell 'Tower continues to cast its long shadow over the flat sales market - but a new form may help
Yesterday, a new form (EWS 1) was launched, designed to record what testing has been carried out on the external wall construction of HRRBs ? buildings more than 18m high. This is good news for leaseholders ? and building owners and managers.
Since the Ministry of Housing, Communities and Local Government (MHCLG) Advice Note 14 was adopted by lenders, many flat owners have had problems getting mortgages, or even remortgages, on HRRBs (high risk residential buildings).
Developers are often willing to provide a statement of what was specified (but as we know - that might not be what was installed) but lenders won?t necessarily accept them for lending purposes. Flat owners who bought their homes before the Advice Note came into force, are left unable to remortgage - and may even be facing higher interest rates on their mortgage as a penalty for something that is entirely beyond their control.
AN14 called for surveyors to provide proof that buildings don?t have dangerous cladding and has stalled mortgage offers while assessments are done, trapping leaseholders in flats that have become unsellable. In many cases, valuers have erred on the side of caution and set the value of some properties at zero. ARMA CEO Nigel Glen reports that one of his members has at least 500 stalled sales as a result. That firm is not alone.
So what?s the difference between AN14 and the new EWS 1? One big change is that there is now a line telling lenders and buyers that they cannot rely on the form - only the building owner/manager can. At first glance this doesn?t sound helpful but the authors have worked hard to ensure it will unlock the current snarl-up in the flat sales market.
This is how it is hoped it will work:
To-date, fire risk assessors have provided their opinion on the safety or otherwise of blocks to the building owner and so could end up answerable to any third party who relies on the report. That assessor is potentially liable to multiple lenders and buyers. Assessors' indemnity insurance premiums have gone through the roof ? and some can?t get insurance at all. This means buildings can?t be assessed and the whole process grinds to a halt.
The new form allows assessors to disclaim liability to everyone but the person who commissioned the report. Mortgage lenders can decide for themselves whether or the information can be relied on. The general feeling is that at least some will.
There are also two distinct alternatives listed in EWS 1 for assessors to choose:
Option A - external wall materials are unlikely to support combustion; or
Option B - combustible materials are present in the external wall.
It is likely that an invasive inspection will be almost always be required - desktop exercises are out. Good. And any investigation must include evidence of the fire performance of the actual materials installed. This means safe buildings can be recorded in a way that will ? hopefully - get the market moving.
We are pleased that there is now an approved form and 'declaration' to give much-needed help to leaseholders. However, the challenge is that ultimately this cladding problem is still costing the homeowner. Invasive testing is now pretty much a requirement on HRRBs, often at more than £5,000 a time.
Remediating the many buildings that are failing inspections has to be a priority for 2020. And it?s one the government should not leave to chance.
Author : Mary-Anne Bowring
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