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Lenders, cladding and the EWS1 form – Pitch 4 Finance

by: Miranda Khadr, CEO and founder of Pitch 4 Finance
  • 31/01/2022
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Lenders, cladding and the EWS1 form – Pitch 4 Finance
The issue of cladding on buildings has been in the news recently with Michael Gove announcing that housing developers must pay for the replacement of dangerous cladding materials.

 

All well and good, but it is going to take some time to complete such a mammoth task. After all, it has been four years since the Grenfell Tower fire and billions of pounds worth of cladding is still waiting to be replaced. 

Homeowners living in such buildings are unable to sell their flats, or remortgage, as lenders view these properties as high risk. It also became difficult for people living in buildings with fire resistant cladding and even no cladding as they need to show lenders proof their building is safe. 

 

The EWS1 form  

To overcome this issue, the Royal Institution of Chartered Surveyors (RICS) introduced the EWS1 form in December 2019. This provides a framework for surveyors to assess and rate the safety of the external wall system (EWS) of residential buildings and whether remediation work is needed. 

The EWS1 form is valid for five years and is very important for the sale and purchase of flats with lenders relying on it to make their lending decisions. 

There are five ratings within an EWS assessment and two require work to be carried out because there are combustible materials present. This could be within the external walls, or on attachments such as balconies.  

The ratings can affect the ability to get a mortgage or to refinance as some lenders will only accept certain ratings. We had a recent case where the building had a B1 rating, which means the fire risk is low and no remedial work is required. However, the lender would not accept this, so we had to find another lender with a less restrictive view. 

If the building owner or management company cannot provide an EWS1 form then it may be difficult, or even impossible, to get finance for the purchase or remortgage. 

This can be a huge problem with auction finance. Buyers are committed to the purchase but if the lender will not lend because of the EWS1 form, they will lose money as well as the property if they cannot find a new lender quickly. 

 

Building owners and EWS1 

Homeowners cannot commission an EWS1 form, it is the responsibility of the building owners. So, if the building owners or their managing agents will not undertake the EWS1 assessment, the homeowner cannot sell their property.  

The only route for the homeowner is to inform the local council and/or the Fire and Rescue Service and hope they will insist to the managing agent that the EWS1 form is completed.  

Even if the managing agents have an EWS1 form which states remediation work is required, they sometime refuse to rectify issues identified. This means those homeowners become mortgage prisoners and are unable to sell their homes. 

There is no law to insist building owners carry out remedial work but the fact that some ignore their moral obligations is wrong. I think there should be an arbitration body to ensure that suggested remedial work is carried out for the safety of people living in the building. 

It should be noted that completing EWS1 forms is not a legal requirement, they are a condition being imposed on mortgage applicants by lenders. The legislative requirement is the completion of a suitable fire risk assessment (FRA) under the Regulatory Reform (Fire Safety) Order 2005.  

 

Low risk buildings 

Originally the EWS1 form was for buildings above 18m, or six storeys, but this was extended to buildings below that height as well as buildings with no cladding.  

However, an independent expert panel has advised the government there is no widespread or systemic risk of fires in blocks below 18m, and this should be reflected in lenders’ EWS1 policies. But RICS continues to say the EWS1 form is necessary.  

Last year a group of major high street lenders committed to review their practices around EWS1 forms including HSBC, Barclays and Lloyds but we have heard nothing since. If the big banks become more tolerant to low rise buildings, other lenders are likely to follow, which can only be good news for people wanting to sell and buy homes in apartment blocks.  

 

A safer environment  

Brokers advising on cases involving an EWS1 form may well experience the mortgage falling through where the lender is not satisfied with the rating. This is an area we deal with fairly regularly but we are able to access which lenders are likely to lend depending on the rating of the EWS1 form. 

EWS1 forms are part of the drive towards a safer environment and moving forwards you would hope that developers building residential apartments blocks will be addressing the fire safety concerns. Building regulations need to be fit for purpose and stringent in their fire safety requirements. 

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