New guidance issued for valuation of flats and investigating fire safety

07 Apr 2021

Nearly four years on from the Grenfell fire, the issue of fire safety is still causing real concerns for developers, lenders, leaseholders and banks alike.  The fire safety issues are not just limited to cladding, but include the external wall system - which is made up of the outside wall of a residential building, including cladding, insulation, balconies and fire break systems.
 
The Government introduced the Fire Safety Bill in March 2020 to improve fire safety in buildings in England and Wales in order to prevent another Grenfell, but the legislation is not yet in force.   In the meantime, many leaseholders find themselves in a state of limbo, facing difficulties in selling or re-financing their flats, concerned about the potential costs of remediation, and unable to benefit from the Stamp Duty holiday.
 
Currently, for anyone who wishes to sell or re-mortgage their flat to a new lender, the bank will undertake a valuation and their surveyor will decide whether or not an EWS1 (External Wall Fire Review) form is required.  The EWS process and form is fairly new and designed to be used for residential properties including blocks of flats, student accommodation, dormitories, assisted living facilities, care homes and houses in multiple accommodation to confirm that an external wall system has been assessed for safety by a suitable expert; the form is there to provide comfort that the building is safe from a fire safety aspect.  Once a qualified professional conducting a fire-risk assessment signs off on the EWS1 form, it is valid for the entire building for five years.
 
EWS1 was originally designed for buildings over 18m tall but Government advice changed in January 2020, bringing all residential buildings containing flats potentially into scope.  Since then, surveyors have been understandably cautious on a number of properties and recommended an ESW1 even when it might not be required; without the form, banks will not lend. 
 
EWS1 is not a simple form.  There are several issues at play, including who will fund the investigations and preparation of the form and how long it will take to prepare, all of which creates difficulties for leaseholders wanting to sell of re-mortgage.  The leases will therefore need to be checked, but even then it’s unlikely there is any specific provision ordering the freeholder to undertake the investigations and to complete the EWS1.  The freeholder should be reminded that the building should be made safe, but this may not be sufficient to force their hand to get on with it.  Even if the freeholder is prepared to instruct the relevant professionals (with the costs possibly being passed to the leaseholders), there are only a limited number of individuals with the expertise to prepare the form which has also caused delays.
 
To assist, new guidance was issued by the Royal Institute of Chartered Surveyors (RICS) in March which should be in place this month (April 2021). The guidance is essentially there to ensure that an EWS1 is only requested by a surveyor where necessary, and includes criteria to determine whether or not a building requires it.  Surveyors should, therefore, be requesting fewer EWS1 forms which will hopefully ease any backlog. This is good news for leaseholders wishing to sell or re-mortgage, but it’s not clear yet whether the new guidance will change lenders’ behaviour, and valuers will need to follow the instructions of the lender.
 
If you are a leaseholder and have previously been unable to sell because of the need for an EWS1 that has not yet been prepared, you may want to ask your surveyor (often appointed on behalf of the bank too) to revisit the RICS guidance and see if his/her opinion has changed.  The surveyor will still need to follow the instruction of their lender, but its certainly worthwhile raising it.
 
 
The information and guidance issued by RICS can be found here:
https://www.rics.org/uk/news-insight/latest-news/fire-safety/
https://www.rics.org/uk/upholding-professional-standards/sector-standards/valuation/valuation-of-properties-in-multi-storey-multi-occupancy-residential-buildings-with-cladding/

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