THE UK mortgage industry said the announcement that blocks of flats without cladding would not have to produce an external wall system (EWS1) certificate ‘does not solve the problem’.
Last weekend, the government announced it would help homeowners ‘caught up’ in the crisis by ensuring that owners of flats in buildings without cladding ‘will no longer need an EWS1 form to sell or remortgage their property’, a move ‘set to benefit’ around 450,000 homeowners.
This came as part of an agreement the government claimed it had reached with the Royal Institution of Chartered Surveyors (RICS), UK Finance and the Building Societies Association (BSA), and ‘part of a wider government-led solution to support those homeowners who have unsafe cladding on their buildings and where there is still more to do’, as the EWS1 process had been applied to buildings without cladding, ‘stopping some people from selling or moving home and causing unnecessary anxiety for homeowners’.
Housing Secretary Robert Jenrick and RICS agreed that those without cladding do not need an EWS1 form, and while building owners are ‘legally required to undertake fire risk assessments on all blocks of flats’, new guidance from the government will see RICS working with lenders, valuers and fire safety bodies to develop new advice for surveyors, enabling them to ‘take a more proportionate approach and reduce the number of buildings where an EWS1 assessment is needed’.
It also announced it would provide funding for and work alongside RICS to provide training of more assessors, ‘speeding up the valuation process’ where an EWS1 form is required. The government is also exploring ways to address ‘ongoing concerns’ around availability of professional indemnity insurance, and welcomed the FIA’s progress in creating its portal.
However, UK Finance and the BSA said that they ‘did not consent’ to being part of an announcement by Lord Greenhalgh, which said that their chairman and chief executive had confirmed EWS1 forms ‘are not and have never been required’ for buildings without cladding. A finance industry source also said that the proposal ‘did not mean properties with issues other than cladding would automatically be exempt’ from an EWS1 survey.
The source added that buildings with wooden balconies and other issue ‘should have been included among those which still required’ external fire safety checks, and it would still depend on the decision of a ‘suitably qualified, independent and properly insured surveyor’, while they ‘did not recognise’ the 450,000 figure. The UK Cladding Action Group also pointed out that only a ‘small subset’ of buildings would benefit.
The Guardian has now reported on views from the UK mortgage industry that the announcement ‘does not solve the problem’, citing UK Finance and the BSA’s later note that they ‘had not agreed’ to the announcement, and that ‘it changed nothing’ for buyers or sellers. A joint statement from the two bodies ‘poured cold water’ on Mr Jenrick’s statement, adding that ‘lenders sympathise with the impact that the safety issues related to cladding are causing some homeowners.
‘Borrowers and lenders have a common interest in ensuring that their flat is a safe place to live. Lenders will rightly support surveyors carrying out whatever steps are needed to provide that assurance where there is doubt or concern about a block’s construction’. Both added that an EWS1 form ‘had never been required’ for a building ‘without any form of cladding or a combustible wooden balcony’.
They went on to note however that ‘there are buildings which may look as though they are solid brick-built but are, in fact, clad with unknown materials behind the brick. We will continue to work with government and RICS in pursuit of the best solution for customers in relation to these’. Lucy Barber, head of residential property at law firm Forsters, added that the announcement ‘will not actually help in practice’ unless lenders and surveyors ‘relax’ requirements.
She stated that ‘it would seem a survey is still going to be required to check for the presence of cladding in a building. This would suggest the issues with delays and long wait times for leaseholders to gain certainty are set to continue in some cases’.
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 form ‘slow and expensive’, and asked for the government to step in. The process was ‘not working’, and it should create a ‘faster and fairer’ system, because it ‘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 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 government advice ‘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’. RICS urged the government ‘to take greater ownership of the situation’, and Minister for Fire and Building Safety Lord Greenhalgh held talks with RICS to ‘attempt to resolve confusion’.
Then, 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’. He later admitted that there are ‘fewer than 300’ qualified chartered fire engineers to undertake the surveys.
In late August, Which? revealed leaseholders are ‘being duped into paying thousands’ to fraudsters using fake forms, and the crisis saw mortgage brokers report ‘delays and scuppered plans’ for clients. Last month, the EWS1 for Marseilles House at Century Wharf in Cardiff was found to be fake, with a surveyor confirming 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 certificates with the false signature, reviewed each case and reissued them, but was reported later to have provided ‘at least 15 more’ forged certificates – and new certificates are signed by ‘someone apparently not currently registered to sign the forms’.
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, and the Financial Conduct Authority (FCA) reported that the government and banks are working on a more ‘risk-based’ approach to assessing properties with cladding.
More recently, Mr Pincher ‘refused to acknowledge’ any role in the issues stemming from government guidance, stating that the Advice for Building Owners of Multi-storey, Multi-occupied Residential Buildings guidance – released in January – ‘was written for building owners to ensure the safety of their buildings. It was not designed to be used for valuation purposes’.
Finally, last week Mr Johnson ‘slammed’ mortgage lenders for use of the form, but ‘failed to promise that leaseholders would not have to pay for cladding removal’.