Recently, the housing, communities and local government committee (HCLGC) found that ‘fixing fire safety defects’ in high risk residential buildings could cost up to £15bn, and branded the mortgage industry’s cladding form ‘slow and expensive’, specifically the EWS1 process to help banks ‘make lending decisions on high rise properties with a potential fire risk’.
It asked for the government to step in, stating that not only was the process ‘not working’ but that it should ‘take control’ by putting a ‘faster and fairer’ system in place, as the ‘industry-designed’ process was ‘a slow and expensive process and we are concerned that it is being applied to an unnecessarily wide range of buildings’. It also believed ministers should have ‘issued clearer guidance’ to mortgage lenders before advising on fire risk buildings.
HCLGC recommended the government ‘urgently work with mortgage providers to give residents the right to remain on their existing mortgage deals and not be forced to move onto expensive standard variable rate (SVR) mortgages. Where residents have already been forced to move onto standard variable rate mortgages, lenders should immediately offer them the right to move to one of their cheaper products’.
The form, introduced last December, came from collaborations between mortgage and housing market trade bodies and industry experts, including UK Finance, the Building Societies Association and the Royal Insitution of Chartered Surveyors (RICS). It was intended to help ‘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 to ‘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 within a month brokers began reporting that lenders were 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 – made to management and maintenance companies of high rises affected – being delayed. At the time, this related to ‘those qualified to issue the EWS1 certificate, the number of buildings that need to be inspected and the time needed to complete this review’.
HCLGC said that there was a ‘lack of qualified, insured chartered fire engineers to undertake the required surveys’, so a ‘large number of buildings would not be inspected for many years’. The EWS1 surveys have also been expensive, with costs ‘typically passed to residents through their service charges even where no fire safety defects were found’.
As a result of fire safety advice from the Ministry of Housing, Communities and Local Government (MHCLG), ‘a much larger number of buildings’ fell into the scope of the EWS1 process ‘than had been envisaged’, and ‘it is clear that the process has lacked sufficient input from leaseholder representatives, but also other important stakeholders, including the insurance industry.
‘Reforms could include a relaxation of the rules on who is able to undertake these surveys, clarification of which buildings should fall within scope and more guidance to ensure the correct prioritisation of buildings. The government should provide necessary funding to ensure that all affected buildings are surveyed within the next 12 months, so residents are not forced to wait years before they are able to sell their properties or obtain new mortgages’.
In response, RICS said it agreed with some of the issues raised, and urged the government ‘to take greater ownership of the situation’, whilst also noting that ‘at least’ 860 EWS forms ‘have already been completed’, meaning homeowners in at least 800 blocks ‘have been able to buy, sell and remortgage or plan remediation works’.
It has ‘always called for a properly funded, centrally managed approach to the resolution of the issues which have come to light since the tragedy of Grenfell’, and stated that ‘EWS1 was created to find a solution to the problems caused in 18m+ tower blocks by MHCLG advice, which the report acknowledges. EWS has allowed homeowners to know whether safety critical works are needed and also obtain finance to buy, sell and remortgage.
‘Its development was cross industry which included lenders, valuers, insurance, legal representation, developers and a number of other interested parties and trade bodies’. It did however acknowledge that since launch, a ‘lack of fire experts with the knowledge and skills to assess wall systems had caused problems’, alongside the lack of professional indemnity support from insurers, and it also ‘laid some of the blame with the government’.
MHCLG’s consolidated advice note in January 2020 ‘caused further significant confusion when it brought all buildings regardless of height into scope and added to the already known capacity issues with fire experts. RICS continues to call on government to take ownership and properly fund remediation works to all affected buildings. Only with a well thought out, government funded strategy, will leaseholders be able to live in safe buildings’.
Industry and government collaboration ‘was important and had been ongoing’, but there was ‘need for further government funding for buildings of all heights […] RICS will continue to work on the EWS process, to ensure it is the best it can be, until such time as government creates an alternative way of assessing and remediating buildings with flammable cladding’.
Most recently, Minister for Fire and Building Safety Lord Greenhalgh held talks with RICS to ‘attempt to resolve confusion’, and Mortgage Solutions has reported that lenders are reviewing how the form is used after meeting with the government, Housing Minister Christopher Pincher admitting lenders were using forms ‘more often than originally intended’.
As a result, those trying to access the mortgage market ‘may have suffered as a result’, and after meeting with Lord Greenhalgh lenders had agreed a ‘nuanced approach to risk’ was required, as well as reviewing policies and advice to valuers. With many unable to obtain professional indemnity insurance, viewings have been ‘backlogged’ by months, and MPs branded the process ‘slow and expensive’, with Mr Pincher asked in parliament about his assessment of the form.
Responding to Birmingham MP Shabana Mahmood, Mr Pincher said: ‘The government is aware that some lenders are requesting valuers use the EWS1 form on a wider scope of buildings than was intended and this may be having a negative effect on the mortgage market for such buildings. The minister for building safety held a roundtable with mortgage lenders, who agreed a nuanced approach to risk is required. They are reviewing their policies and guidance to valuers on the use of the form.’
On the insurance issues, Mr Pincher noted that ‘meetings had been conducted to help tackle’ the issue, with Lord Greenhalgh having ‘met members of the insurance industry and other fire and safety professionals’, and ‘investigating, at pace, ways in which this particular issue may be remedied’.