Cladding crisis stalls again as lenders and RICS await guidance update
The Government’s plan to unlock at least some of the property market paralysed by the cladding crisis has faced yet another setback.
New hope for leaseholders of properties in low rise buildings was offered last month when Housing Secretary Robert Jenrick announced that buildings under 18 metres in height would no longer need an EWS1 fire safety form and should be presumed safe by lenders
Following this, an agreement between the banks and the Ministry of Housing was expected to rejuvenate the lending market with mortgages being offered again on more than 800,000 flats in low and medium rise buildings that are currently valued at zero.
But these hopes have now been dashed following reports that banks are unlikely to change their policies until the Royal Institution of Chartered Surveyors (RICS) updates its specialist guidance.
UK Finance, which represents the banking industry, commented that until RICS guidance and the Government’s official advice is updated “lenders will continue to be guided by surveyors’ expert opinions when a EWS1 form is required for medium and low-rise blocks of flats”.
Commenting on HSBC’s stance, a spokesperson told Today’s Conveyancer,
“Robert Jenrick’s statement paves the way for the work to start across the mortgage market, which includes removal of the consolidated advice note and RICS guidance being updated”.
But RICS has said it can’t alter its position on the issue until the Government changes its official fire safety advice which could take until November according to some reports.
Asked when the guidance might be updated RICS responded,
“the RICS guidance already allows lenders to provide instructions to valuers that enable them to follow the statement made by the Secretary of State in Parliament on 21 July immediately”.
“In Section 2.1 of the guidance note it states:
2.1 Criteria where an EWS1 should be required
A valuer should also follow any guidance issued by their lender client, who may give specific instructions about when they agree to a valuer making an assumption of this nature without an EWS1 form being required. Any such specific instructions should be clearly referenced in the valuer’s terms of engagement and valuation response.”
“[RICS] are talking urgently to lenders, valuers, insurers and fire safety assessors to review the impact of the expert statement on our guidance and also consider the effect of the forthcoming risk-proportionate guidelines for fire risk assessors. We will undertake this work as quickly as we can”.
“we look forward to receiving confirmation of progress from our partners which should effect an update on our lending policy, but I’m afraid timings and further details are still to be confirmed and not in our gift”,
affirming the position that guidance will need to be updated prior to the amendment of lending policies.
Many campaigners feel that this stalemate situation is a problem of the Government’s own making and could have been avoided had Ministers not expanded the scope of buildings requiring an EWS1 form beyond high rise tower blocks.
Previously, EWS1 survey forms were only required on the tallest tower blocks but the guidance was changed in January 2020 to residential blocks of any height, which prompted mortgage lenders to demand EWS1 forms from a much wider range of sellers, despite expert studies concluding that there is no systemic fire risk in buildings below 18 metres. The expert panel said that in most mid and low-rise blocks expensive repair work was unnecessary and that fire risks could be managed by installing alarm systems or sprinklers.
The Ministry for Housing, Communities and Local Government said in a statement:
“We are committed to correcting the present market failure and supporting leaseholders to sell their properties should they wish to do so.”
“The view from the independent experts is that there is no evidence of a systemic risk of fire in blocks of flats, but excessive industry caution is leaving many leaseholders in lower risk buildings unable to sell, or facing bills for work which is often not necessary.”
“This must stop and, in line with the expert advice, we’ve set out that EWS1 forms should not be requested for buildings below 18 metres.”
Summarising, HSBC said,
“we welcome the statement from experts on building safety and note the assessment from the parties to the statement that there is no systemic risk from fire in medium and lower rise blocks of flats. Our expectation is that the existing consolidated advice note will be removed and, with the endorsement from IFE, this means we will no longer require EWS1 forms for buildings below 18m, and consequently RICS guidance will be updated in line with this advice.”
“We look forward to these changes being reflected in valuations from our RICS qualified partners and remain committed to supporting affected homeowners”.