Since the Grenfell disaster Mortgage Lenders can no longer rely on Building Regulations sign off to confirm that a block of flats is actually safe.
Aluminium Composite Material (ACM) cladding was used on Grenfell tower and is commonly used on private and social sector buildings. It has of course been established since the disaster that this cladding is not fire-retardant and does not meet safety standards.
It is important to note this is not the only combustible material used for cladding. Non-ACM cladding can include metal composite materials (MCM), high pressure laminate (HPL) panels, and timber (wood). Some of these also do not comply with building control due to fire risk.
The issue of cladding, and being able to prove the safety of a flat, is causing a delay in getting mortgage offers where the property is in a high-rise building.
Valuers are reluctant to value the property for mortgage purposes, and therefore lenders are not issuing mortgage offers for these types of properties.
External Wall Fire Review
BSA and UK Finance who represent almost all lenders in England and Wales, have come together with RICS to agree a new industry-wide process to be used by valuers, lenders, building owners and fire safety experts in the valuation of high-rise properties.
The External Wall Fire Review process requires a fire safety assessment to be conducted by a suitably qualified and competent professional and confirmed using the EWS1 form.
EWS stands for External Wall System. The EWS1 form checks these for safety.
The form should be used where the highest floor is 18m or more above ground level. This would (as a generally accepted average measurement of up to 4m per storey) mean anything with more than 5 storeys would need the form, and those will 4 storeys or less would be exempt. 5 storey buildings may come under the exemption depending on height.
Note: It is expected the Government will amend this to any building 11m or higher at some point in the future, but no date or announcement has yet been made.
The EWS1 form is not a requirement for all buildings, only those with some form of combustible cladding or combustible materials in the balconies or external walls. However, we have seen Lenders and Valuers insisting on these forms even if there are no external signs of cladding, worried that the rules could change in the future, or without having any evidence as to the materials used in the construction.
The Government have also confirmed that some blocks of lower height (below 18m) could also require a safety check and EWS1 assessment “if the type of occupation significantly increases risk to life in the event of a fire”. In the opinion of RICS a private block is unlikely to fall into this category – it would apply to residential / care homes where residents are elderly and/or disabled and could not easily leave a lower rise building during a fire.
Only one assessment is needed for each building, and it is valid for 5 years. The cost of the EWS1 assessment can be reclaimed through service charge and is estimated to cost approx. £10,000 per building.
When do I need a EWS1 Form?
When selling, and also when remortgaging to a new Lender.
Up to 3 million flats could be affected in England, although separate figures show that the government believe there are 2,155 blocks with unsafe cladding issues.
In January 2020 Government Guidance was issued stating that all buildings with any cladding (not just ACM) are caught by the rules requiring the issue of an EWS1 form. Before January, only high rise buildings required this form.
Due to the backlog in fire-risk assessments (only 300 chartered fire engineers in England are qualified to carry out an EWS1 survey) and only 1 engineer for every 10,000 flats affected, the backlog has been quoted to be as much as 10 years.
High rise buildings are being prioritised, so lower buildings less than 6 storeys, are at the bottom of the list.
A recent survey in July 2020 revealed that 90% of the flats that have already had an EWS1 report carried out require works, with either a B2 or A3 rating. 86% had the worst result with unsafe cladding requiring immediate attention. Of course, the blocks with ACM cladding were prioritised for the EWS1 first, so this is perhaps not altogether surprising. It does show that getting the EWS1 form is only the first step in being able to sell the property.
If the building owner will not undertake the required assessment, what can the owner/lender/valuer do?
If the building owner does not acknowledge their legal responsibility and refuses to undertake the necessary assessment, the local council can provide further advice, or it should be referred to the Fire and Rescue Service. No one should be living in a building which is unsafe, and the building owners are the ones who can progress this.
Building Owners have a clear responsibility reinforced by MHCLG advice to arrange for the wall system to be checked and have a route to remediation where needed. Home owners should continue to engage with the building owner or their agent to ensure this happens.
What is an EWS1 and what does it do?
The Form has 2 options – where external walls are not combustible (option A) or if they do contain combustible cladding materials (option B).
Where Option B is picked, there are two options;
B1 – that the fire risk is sufficiently low that no further action is required.
B2 – that the property is potentially unsafe and measures are required.
The form itself is not a fire risk assessment, just a summary used for valuation and mortgage purposes.
It is also important to note what the form will not do. Where a building is found to need remedial works this will need to be carried out by the building owner, to ensure safety of the building, before a mortgage can proceed unless the lender agrees otherwise. The form in itself is just to highlight the problem, or confirm if no further action is required.
The latest guidance from RICS including a cladding Q&A can be found here;-
https://www.rics.org/uk/news-insight/latest-news/fire-safety/cladding-qa/
If we have a form containing Option A3 or B2, then that is where we are likely to see a problem affecting conveyancing or people being able to move home. Another problem is obtaining these forms, in a timely and cost-effective way to enable the property to be sold.
New Build Properties
Newly built high-rise developments are now banned from using combustible materials in cladding as part of building regulations. This includes buildings currently under construction, but not any building that already had the cladding installed when the rules were changed.
This is covered in Amendment to Building Regulations 2018 legislation which came into force in November 2018.
The Government has also made sprinkler systems and floor/flat signage compulsory in new high rise blocks over 11m tall (over 2-3 storeys), however this regulation does not come into force until 26 November 2020.
Therefore a newbuild property is exempt from the requirement for an EWS1 form and it should not be required by the valuer or lender.
Issues for Buyers and Home Owners:
The cost of the EWS1 assessment can be reclaimed through service charge (therefore the flat owners will end up paying), and is estimated to cost approx. £10,000 per building.
Unfortunately the flat owners would also have to cover the cost to remove and replace the cladding, and no claims are available on buildings insurance. The cost per flat is estimated to be £20,000 – £90,000 per flat.
Government Contributions
In May 2019 the Government announced that they will fully fund the removal and replacement of unsafe ACM cladding on privately owned buildings over 18m. Unfortunately, the same guarantee was not given for non-ACM cladding.
As of April 2020, 307 high rise towers in England were still waiting the completion of remedial works to unsafe ACM cladding (163 of those were privately owned).
On 11 March 2020 the Government confirmed they will meet the cost of removing and replacing unsafe non-ACM cladding where the buildings are social or Local Authority housing blocks. Non-ACM cladding on privately owned buildings was not included in either announcement, until the new Building Safety fund was announced (see below) in June 2020.
Building Safety Fund
A new £1billion Building Safety Fund was announced in June 2020. This fund will meet the cost of removing and replacing unsafe non-ACM cladding, to stop this being passed to home owners.
However, it has been made clear that building owners who are already undertaking remedial works should carry on doing so, and that building owners should try and fund this work elsewhere before seeking government funding.
Funding is available for fully residential, mixed and commercial developments, however where work has already started, or where work was previously agreed or committed to prior to the announcement in the March 2020 budget, this will not be eligible for the funding.
Claims on the Building Safety fund closed in July 2020 and no further claims are being accepted.
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