Lenders’ ongoing concerns about the safety of buildings
For the first time since the Grenfell Tower tragedy in 2017, which exposed widespread fire and building safety defects problems across the UK, lenders have begun to offer mortgages on properties in buildings with significant fire safety defects. In the aftermath of Grenfell, lenders had continued to offer mortgages to potential purchasers for flats that did not require any work to rectify cladding. However, there were obstacles in place for those looking to mortgage or re-mortgage flats where cladding remediation work was required.
We are aware that a number of resident shared owners / leaseholders had encountered issues in purchasing, staircasing, re-selling or re-mortgaging their properties as a result of lenders’ ongoing concerns about the safety of buildings and their general requirement to be provided with an external wall system (“EWS1”) form of a B1 rating or above in buildings across a range of different heights.
We issued guidance in relation to EWS1 forms in August 2021, which we updated in June 2022 but remain acutely aware of the obstacles that relate to building safety our residents continue to face, some of whom have found themselves in difficult circumstances. These issues have to be considered in the context of a changing backdrop.
Mortgage lending to resume on properties requiring cladding remediation
Signs that the market for mortgages on blocks of flats with fire safety defects will ease appeared towards the end of 2022. The RICS published new valuation guidance before Christmas. This makes valuing some of the flats in these buildings possible and enables mortgage lending on affected properties.
The development represents a welcome step for owners who want to sell homes which have building safety concerns. Six major lenders have agreed to offer mortgages on the basis of the new guidance. The lenders are:
Not everyone benefits
It is important to note that the measures only cover properties in buildings of 11m and over. Not everyone affected will benefit. In addition, to be considered for mortgage applications, lenders will need to see evidence that
- there is an agreed and costed remediation plan in place;
- the building will be self-remediated by the developers; or
- the building is covered by one of the recognised Government funding schemes – the Developer Remediation Contracts, the Medium Rise Scheme or the Building Safety Fund; or
- the building is covered by leaseholder protections contained in the Building Safety Act (there is an online tool available).
The evidence required will vary from lender to lender and applicants will need to check with lenders directly to ascertain what documents their lenders are prepared to accept as evidence of government funding or remediation.
Since the RICS updated its advice, the Government has continued to develop its remediation funding schemes along with putting in place legal contracts with the builders and developers to help cover part of the remediation costs.
Will an EWS1 form still be required?
This will depend on the lender: the best starting place is the RICS webpage Cladding External Wall System (EWS) FAQs which provides detailed information on how the EWS1 process works and when the form is needed. At the date of this note, the RICS EWS FAQs were last updated on 18 April 2023.
In March 2021, RICS published its guidance note Valuation of properties in multi-storey, multi occupancy residential buildings with cladding. That guidance took effect in April 2021. It clarifies the types of property that will require additional inspections, as a result of concerns about fire safety. RICS’ 2021 guidance makes clear that, where a valuer or lender can establish that the building owner has satisfied certain criteria, an EWS1 form should not be required, nor would an EWS1 form be required for a building that is over 18 metres that has a valid building control certificate in place.
In July 2021, the Government issued a statement on proportionality in building safety, in response to an independent expert statement on building safety in medium and lower rise blocks of flats. Both statements advise that EWS1 forms should not be a requirement on buildings below 18 metres. It is important to read the RICS webpage Cladding External Wall System (EWS) FAQs carefully – including the FAQ ‘Are lenders asking for EWS1 forms below 18m’?
The Government’s focus is to build a robust but proportionate building safety regime. On the basis of Government and industry guidance issued, Hexagon’s position is that it will not provide EWS1 forms for any buildings below 18m, but will do so where the use of an ESW1 form is specifically required.
PAS 9980:2022 – Code of practice: Fire risk appraisal of external wall construction and cladding of existing blocks of flats
Where Hexagon is to provide an EWS1 form in accordance with government guidance on buildings above 18m and where a fire risk assessment of the external wall (“FRAEW”) is required in support of that EWS1 form, the FRAEW will now be undertaken by in accordance with British Standard
PAS 9980:2022 Standard – Fire Risk Appraisal | BSI (bsigroup.com) (“PAS 9980”) came into effect in January 2022. It is not an alternative to EWS1, but should be used where a detailed assessment of the external walls of existing multi-storey, multi-occupied residential buildings is required. The form was revised in 2022: it now says that investigations should be carried out in accordance with PAS 9980 guidance.
Our continuing approach
It is important to bear in mind that, even if an EWS1 form is not required, other paperwork that shows that remediation work is in place may be requested by lenders.
The welfare of our residents is one of our core values. Our approach is to comply with legal requirements as amplified in accompanying Government guidance. Our position remains that, where we are able to do so, we will be happy to provide information (e.g. latest Fire Risk Assessments) about any of our multi-storey buildings that are below 18m in height, in order to assist with any lender’s queries.
We continue to take a planned and managed approach to assessing the fire safety compliance of all our multi-storey buildings and we will prioritise those blocks and any remedial work required in accordance with government guidance and the level of risk.
We hope this updated note helps to provide context and clarity to the most up to date position in relation to the guidance on the use of EWS1 forms.