Since the Grenfell disaster there has been a question in a lot of property owners and occupiers’ minds about the safety of the building that they live in. Now owners of property in high rise blocks are also being left in a difficult position of owning a property that is not mortgageable, preventing them from moving or re-mortgaging.
The Government intends to introduce a Fire Safety Bill to clarify the duties of the responsible person for multi-occupied residential buildings under the Fire Safety Order 2005, to provide greater powers to the fire services and provide a spring board for secondary legislation to implement the recommendations from the Grenfell enquiry. However, this is still at consultation stage.
In the meantime, The Ministry for Housing, Communities and Local Government (“MHCLG”) has issued guidance for building owners of multi storey residential blocks (specifically over 18m). It is recommended that building owners or an appointed competent professional should check the external wall systems to ensure they meet an acceptable standard of safety. This relates not to just cladding but all parts of the external wall including rendering and insulation. If they do not meet the acceptable safety standard there are short term measures building owners or managers should immediately put in place whilst a more long-term plan to resolve the issue is come to.
Selling/ Mortgaging a Property
Following the Government guidance, high street lenders and their valuers have taken a view that evidence should be provided from building owners or their agents that they have taken steps to ensure that appropriate measures are being put into place to ensure their investment is protected. Before a mortgage offer will be issued a written statement from a suitably qualified independent advisor who is a member of a recognised professional body has to be provided. It is not enough for a fire risk assessment to be provided or technical information about the rendering or cladding system which may show its safety.
This is proving to have a stifling effect on the property market as building owners/ managing agents are not able to provide such statements as they have treated the guidance as just that and not a mandatory requirement. Property owners are left in a position that they are not able to sell quickly, or at all, to any parties who require a mortgage nor are they able to re-mortgage to release equity in a property to assist them to buy on, whilst they wait for specialist surveys of the block to be undertaken
Reasons for Delays
The RICS have worked with mortgage lenders to produce a standardised form, EC1W, which mortgage valuers will accept in place of the statement they have been requesting. However, the issue remains that there are not enough sufficiently qualified people who can undertaking the number of surveys and provide the forms or advice needed. Many of those who are qualified are being prevented from undertaking the surveys as professional indemnity insurers refuse to insure firms that could provide these statements due to the high-risk consequences if the advice incorrect. This has reduced the pool of providers, causing large backlog of surveys required.
Tenants and buyers are now having to wait for an undefined period time whilst these can be booked in.
As an example, we are aware of property sales in a large block in London delayed since summer 2019, where the large well-known managing agents have still not been able to put in place a suitable survey and there is still no timeframe for doing so because of the lack of surveyors.
The Government have previously pledged six hundred million pounds to be used towards the safe removal of ACM cladding and in the latest budget has also pledged a further one billion pounds to assist with the removal and replacement of unsafe non- ACM cladding.
An industry group is to be set up to allow for information needed for sales and re-mortgages to be shared with lenders and leaseholders for buildings over 18 metres. It is not clear at present when this will be accessible and what information will be included.
The Government have also pledged to assist companies who are struggling to obtain professional indemnity insurance to allow for more valuers to be available to sign off the ES1W needed by mortgage lenders.
Finally, the Royal Institute of Charted Surveyors are putting together more guidance for valuations of properties under 18 metres, so reasonable judgement can be used by valuers when carrying out valuations.
Whilst all the measures proposed will of course help the process it is uncertain how long it will take before leaseholders will see any benefit. With Covid-19 now taking up large amounts of time and resources it is likely that it may impact on the timeframes in which these initiatives are moved forward.
If you are considering moving or re-mortgaging and live in a high rise block it is recommended you contact your landlord or managing agents before starting any marketing of the property or contacting a mortgage broker. They should be able to advise if they have already put in hand obtaining an acceptable certificate for the external systems or if not then you should encourage them to do so.
If you are a Landlord or Managing Agent of a block over 18m whilst you should always ensure you comply with the requirements under the Fire Safety Order 2005, making sure that regular fire risk assessments are undertaken, you should also now consider following the Government’s guidance on the testing of external parts of the building. Planning, preparation and communication with the tenants are needed if any testing or removal of existing cladding is needed, so it is best to seek advice and putting a programme in place as soon as you can.
Gemma Wright, Partner at Druces LLP