Last month, the housing, communities and local government committee (HCLGC) published its report Cladding: Progress of Remediation, which found that ‘fixing fire safety defects’ in high risk residential buildings could cost up to £15bn. It also branded the mortgage industry’s cladding form ‘slow and expensive’, specifically the external wall fire review (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 the government 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 believes that ministers should have ‘issued clearer guidance’ to mortgage lenders before advising on fire risk buildings.
HCLGC recommended that 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 RICS. It was intended to help ‘create a standardised process that would make it easier for brokers and homeowners to find suitable mortgages’.
The form would allow a valuer to 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, a Barclays spokesperson said 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’, which meant 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’, with the report adding that ‘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 to the report, 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 added that 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’.
Specifically, it noted that 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’.
It concluded by stating that industry and government collaboration ‘was important and had been on going’, 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’.
Housing Today has now reported that Lord Greenhalgh has held talks with RICS to ‘attempt to resolve confusion’ over the form, stating that it has ‘caused confusion […] with many banks unwilling to sign mortgages until the form has been signed’, and that it has ‘been blamed for a hiatus in second-hand flat sales with nervous fire safety experts unwilling to sign off buildings as safe’ and ‘in case they are held responsible in the event of a fire’.
In turn, insurers are advising fire engineers that ‘they won’t insure them for signing the forms’, and that ‘they shouldn’t sign off buildings that they haven’t been involved in the design of’. Lord Greenhalgh and RICS discussed how engineers ‘can be encouraged to sign the forms’,
Last month, the minister for fire and building safety, Stephen Greenhalgh, held talks with RICS to discuss how fire safety experts can be encouraged to sign the forms, and in a reply to a written question from Labour MP Gareth Thomas, Housing Minister Christopher Pincher stated: ‘The minister for fire and building safety met with [RICS] to discuss the use of the EWS1 form in valuations of high-rise blocks.
‘RICS are engaging with insurers to unblock concerns around risk which are impacting on professional capacity.’