Clad all over
The Grenfell Tower fire was a tragedy for all concerned and even three and a half years on it remains etched on the public consciousness. The ramifications of this horrific incident continue and it is still having an impact on many people’s lives. In 2018, James Brokenshire, then Housing secretary, declared through amendments to the building regulations, that the government had banned the use of combustible materials in the external walls of residential buildings over 18 metres. This came into effect in December 2018. The ban also applied to insulation, window spandrel panels and infill. Also in December, the government brought out Advice Note 14. It was supposed to give building owners clear advice on non-aluminium composite material (ACM) cladding systems but has resulted in confusion for many leaseholders across the country. The definition of buildings affected i.e. those over 18 metres or more than six (above ground) storeys high became blurred by the Advice Note as it recommended remedial action for smaller dwelling blocks.
The resulting shockwave had an immediate impact on the housing industry. Mortgage lenders started breaking ranks and refusing to lend on properties in blocks both in excess of 18m and below.
In December 2019 the External Wall Fire Review (EWS1) process was launched by the Royal Institute of Chartered Surveyors (RICS) and banking trade bodies including the Building Societies Association (BSA). The EWS process requires a fire safety assessment to be conducted by a suitably qualified professional.
Changes in government advice in January 2020 then brought all buildings into scope. Thus some residential buildings below 18m with specific concerns may now require an EWS1. This effectively left an open door for mortgage lenders to demand the EWS1 form before agreeing to offer loans on pretty much any buildings they wished.
So, here we come to the rub. As they say, follow the money. Remember those over 18m buildings – the government has pledged £1.6bn to help but that nowhere near covers the cost of replacing the cladding on all the buildings affected. Then there’s the matter of the EWS1 certificates. Who is going to pay for them? The obvious choice is the freeholder of each building who would reclaim via the service charges. Not much doubt on the larger buildings but when you get to smaller blocks of say three or four storeys the freeholder and in turn the tenants, can rightly say it’s only a recommendation rather than a legal requirement. Some rightly say there is no cladding to test. What happens then?
A further complication is that of finding a suitable professional to conduct the EWS1 process and sign off on a building. As you can imagine those in the fire safety industry are already fully occupied. Many of these professionals have been refused professional indemnity (PI) insurance to allow them to conduct this type of work.
So we have a sort of perfect storm. Many mortgage lenders demand EWS1 certification before approving a loan. Some mortgage lenders do not recognise the validity of the EWS1 anyway. Getting the freehold owner and in turn the tenants of a block of flats to agree to and fund an EWS1 is difficult. If the freeholder does agree to produce an EWS1 it may well take months before a professional fire security person is available. If one is available and goes through the process there is a high probability of remedial work being required and that could take years to complete.
This all leaves a significant number of homeowners unable to sell or buy properties. And it’s not just them because there is often a chain of buyers and sellers affected by this situation.
What of the future? Well a draft Building Safety Bill was published in July 2020 and if implemented, will bring focus to the issue of fire safety throughout the building process and rightly so. There is no free lunch here and every building of a qualifying type will be required to engage a Building Safety Manager. As a result, a Building Safety Charge will be introduced, probably payable by leaseholders (who else?) in respect of building safety costs; there being no requirement on the landlord to pay for the costs incurred. We don’t know when this bill will pass into legislation but sometime in 2021 is the best guess.
For those in the middle of this situation, the costs and delays, the lack of EWS1 professionals and the natural hesitancy of the mortgage market are very real (and sometimes devastating) issues. For those not directly involved, there may be an impact in buying and selling properties particularly where there is a chain that involves a leasehold flat – usually but not always, in a high rise development. Sadly there is no quick fix available but we can only hope for a safer future and that we never have to see another Grenfell Tower disaster.