THE ROYAL Institution of Chartered Surveyors (RICS) has launched a consultation on new guidance that aims to ‘clarify’ buildings that are required to undertake the external wall review (EWS1) process.
The form, introduced in December 2019, 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 last year, 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. 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.
After this, 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’.
In late November, Mr Johnson ‘slammed’ mortgage lenders for use of the form, but ‘failed to promise that leaseholders would not have to pay for cladding removal’, and in December the director of delivery at the Conveyancing Association (CA) revealed that the results of EWS1 surveys can be hidden if administrators want them to be.
Also in November, the government announced it would help homeowners by ensuring that owners of flats in buildings without cladding ‘will no longer need an EWS1 form to sell or remortgage’, as part of an agreement the government claimed it had reached with RICS, UK Finance and the Building Societies Association (BSA).
However, UK Finance and the BSA ‘did not consent’ to being part of the announcement, which said EWS1 forms ‘are not and have never been required’ for buildings without cladding. A finance industry source also said the proposal ‘did not mean properties with issues other than cladding would automatically be exempt’ from an EWS1 survey.
Buildings with wooden balconies and other issues ‘should have been included among those which still required’ external fire safety checks, and it would depend on the decision of a ‘suitably qualified, independent and properly insured surveyor’. The UK Cladding Action Group also pointed out that only a ‘small subset’ of buildings would benefit.
The UK mortgage industry added that this ‘does not solve the problem’ and that it ‘it changed nothing’ for buyers or sellers. In October, Mr Johnson had revealed that a reassessment of the form was being undertaken by RICS, after the housing, communities and local government committee (HCLGC) had, last year, branded the form ‘slow and expensive’.
Most recently, earlier this month, a report from consultants Capital Economics found that around 1.27m flats in England ‘could be unmortgageable’ due to combustible cladding concerns. The consultants added that ‘if it was to be assumed’ that the government’s November statement in relation to EWS1 not applying to certain buildings ‘made no difference to the behaviour of lenders’, complications ‘could affect’ all buildings taller than 11m or three storeys.
Inside Housing and The Guardian have now reported on RICS’ proposed new guidance and the consultation launched for it, with the proposals ‘aimed at significantly reducing’ the number of properties requiring an EWS1 form. The guidance ‘looks to clarify’ building types that surveyors and mortgage lenders ‘should demand’ an EWS1 form for before the sale or purchase of apartments.
This includes removing the need for one on a building taller than 18m without cladding or curtain wall glazing, as well as those below six storeys with ‘less thana quarter’ of the building façade covered in non metal composite cladding, and RICS hopes that the new guidance ‘could be in place as early as the spring’.
The new guidance is also ‘aimed at providing consistent advice on when’ EWS1 forms should be requested, and Inside Housing noted that if this is ‘adhered to by the lending market’, it ‘could bring potentially hundreds of buildings out of scope’. There is a move away from using metres to measure height and instead the ‘more easily measurable number of storeys’.
In more detail, buildings above six storeys do not require an EWS1 if ‘there is no cladding or curtain wall glazing on the building and if there are balconies where the balustrades and decking are constructed of combustible materials (eg timber) and they are not stacked vertically above each other’.
For buildings of five or six storeys, a form is not required if ‘there is not a significant amount of cladding on the building (for the purpose of this guidance, approximately one quarter of the surface facade is a significant amount) and there are no aluminium composite material (ACM) or metal composite material (MCM) panels on the building’; nor if ‘there are balconies where the balustrades and decking are constructed with combustible materials (eg timber) and they are not stacked vertically above each other’.
Finally, for buildings four storeys or below, a form is not required if there ‘are no ACM or MCM panels on the building’, though for all three categories RICS noted that ‘metal cladding and ACM or MCM are visually very similar, so if metal cladding is present, the valuer should either confirm with the building owner or managing agent in writing that they are not ACM or MCM, or an EWS inspection should be requested’.
RICS stressed that the guidance was based on ‘specific risk-based criteria, where a reasonable assumption is being made that a building does not require remediation’, though it admitted that ‘in some cases this may later be proved wrong by a fire risk assessment’. Despite this, RICS believes ‘this is necessary to balance that with the ongoing risk that low-risk properties are unable to be resold or remortgaged’.
The guidance was developed after discussions with fire safety experts, mortgage lenders and other stakeholders, and ‘matches’ consolidated advice on external walls published by the government in January 2020. RICS is now calling on groups and individuals – namely leaseholders and landlords – to respond by 25 January to the consultation’s proposals.
Ben Elder, RICS’ global director of valuation standards, stated: ‘Following the Grenfell Tower tragedy in 2017, fire safety in our built environment has rightly been under significant scrutiny both in the UK and globally. RICS worked with industry to ensure properties were safe from fire risk and to produce the EWS1 form to get the market moving.
‘Since its introduction, government advice has changed, and COVID-19 has seen lending criteria reviewed. EWS1 was never intended to hold up the market, indeed without it no one would be moving. However, this proposed guidance intends to help by providing valuers with clear criteria to help them decide on whether an EWS1 form may be required or not.
‘There will clearly still be many cases where an EWS1 form is necessary, but the guidance and insight resulting from this consultation will enable us to continue to work with stakeholders, including government, to find solutions to help speed up the process for remediating these buildings.’
Victoria Moffett, head of building and fire safety programmes at the National Housing Federation, said: ‘It’s encouraging to see this action from RICS to alleviate the crisis facing leaseholders. This situation is now critical, with many leaseholders, also affected by the pandemic, at serious risk of losing their homes or becoming bankrupt because they cannot remortgage or sell.
‘We hope that through this consultation, an agreement can be reached to give lenders the certainty needed to lend on multi-storey buildings. That said we are still far off a complete solution. It is essential that government provides upfront funding to pay for the cost of building safety works. This is the only way to satisfy lenders that leaseholders will not face large bills for potential safety work in the future and, ultimately, allow people to sell and remortgage.
‘Crucially, government funding would also ensure safety works can be carried out as quickly as possible so that people can feel safe in their homes.’
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