ACCORDING TO the Financial Conduct Authority (FCA), the government and banks are working on a more ‘risk-based’ approach to assessing properties with cladding.
Last month, Prime Minister Boris Johnson revealed in parliament that a reassessment of the form was being undertaken by RICS, after the news earlier this year that the housing, communities and local government committee (HCLGC) had branded the external wall system (EWS1) form ‘slow and expensive’, and asked for the government to step in.
This was not only because the process was ‘not working’, but it should create a ‘faster and fairer’ system, because the ‘industry-designed’ form was ‘slow and expensive’ and ‘applied to an unnecessarily wide range of buildings’. The form, introduced last December, aimed to ‘create a standardised process that would make it easier for brokers and homeowners to find suitable mortgages’.
A valuer could request it from a building owner or representative, and require a building professional ‘confirm that the actual material on the walls posed a limited risk or was non-combustible’. Should it contain materials that ‘posed a significant fire risk’, a ‘detailed description of what was needed to fix it had to be issued’, but lenders began rejecting mortgage applications.
This was because of ‘outstanding cladding inspections trapping borrowers with their current providers’, and so applications were being cancelled due to inspection requests being delayed. As a result of fire safety advice from MHCLG, ‘a much larger number of buildings’ fell into scope ‘than had been envisaged’, and the process ‘lacked sufficient input from leaseholder representatives, but also other important stakeholders, including the insurance industry’.
The Royal Institute of Chartered Surveyors (RICS) urged the government ‘to take greater ownership of the situation’, and more recently, Minister for Fire and Building Safety Lord Greenhalgh held talks with RICS to ‘attempt to resolve confusion’, before Housing Minister Christopher Pincher stated mortgage lenders are reviewing how the forms are used, though some residents have been told by housing associations that they ‘cannot produce’ the form for possibly ‘several years’.
Mr Pincher later admitted that there are ‘fewer than 300’ qualified chartered fire engineers to undertake the surveys. Residents have complained publicly including Wisteria Apartments in London, tenants of One Housing properties in London and Slough, residents of Zenith Close in London, a resident in Hackney and a landlord in Twickenham.
In late August, Which? revealed that leaseholders are ‘being duped into paying thousands’ to fraudsters using fake EWS1 forms, with the government notified, and the growing crisis has now seen mortgage brokers report ‘delays and scuppered plans’ for their clients. More recently, a survey of leaseholders found that ‘nearly nine in 10’ or 89% who have received EWS1 checks have been told their buildings require remediation work.
Again last month, it was discovered that the EWS1 form for Marseilles House at Century Wharf in Cardiff was fake, with a surveyor confirming that she ‘had not carried out the survey or signed the form’, and ‘was horrified that the survey took place with her signature’. The company hired to conduct the survey said it ‘only produces a report’ signed off by a third party chartered surveyor for £200, and ‘had also been the victim of fraud’.
That company – Specialist Facade Inspections (SFI) - withdrew every certificate containing the false signature, reviewed each case and reissued each certificate, but was reported yesterday to have provided ‘at least 15 more’ forged certificates – and its new certificates also have signatures ‘from someone apparently not currently registered to sign the forms’.
Most recently, the Fire Industry Association launched a portal that will ‘provide a central readily-accessible location for EWS1 forms’ and allow fire engineers to complete forms online. Now, Mortgage Solutions has reported on FCA chief executive Nikhil Rathi’s comments during a session of the treasury select committee of MPs, in which he said that the FCSA was willing to work ‘in a pragmatic way with lenders’ on the issue.
With RICS working on changes to the EWS1 form, Mr Rathi said that the FCA was ‘not central’ to the issue of trapped property owners, with the ‘core issue’ the new rules around external wall safety checks and the number of fire engineers properly trained to conduct them. He said the FCA expected firms to ‘treat customers fairly but also lend responsibly’.
Mr Rathi added: ‘Part of lending responsibly is that the building is safe and on the valuation that there’s not going to be a sudden impairment in the valuation of the flat or building because remediation work is going to be necessary. So I think the core of the issue is just unfortunately the lack of quality in construction standards on a number of buildings right across the country in a number of years and the work that’s going to have to be done through fire safety checks and remedial works to get that sorted out and that will take time.’
He was pressed by Labour MP Rushanara Ali on whether the FCA could create an ‘interim fix’ by working with the government and mortgage providers, with Ms Ali adding: ‘What I’m pushing you to think about is how we avoid a siloed approach. Institutions are passing the buck while our constituents are stuck in their flats which are flammable and not being able to sleep at night.’
In response, Mr Rathi said: ‘There’s work going on between government and the banks looking at more risk-based systems so that they are not having to do the full check and that is involving surveyors and others to understand what level of comfort is needed. The buyer needs some assurance of what the cost of the remedial work maybe, it’s landing on that cost that is the challenge because you need engineers who can assess that cost.
‘We are engaging on this and we will work in a pragmatic way with lenders. The core issue is getting the number of engineers out there.’