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Surveyors risk creating next wave of mortgage prisoners through ‘black and white’ approach to high-rise cladding

  • 28/08/2019
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Surveyors risk creating next wave of mortgage prisoners through ‘black and white’ approach to high-rise cladding
Brokers have accused property surveyors of taking a “troubling” attitude towards valuing flats and apartments in high rise buildings which may have cladding.


A host of brokers have informed Mortgage Solutions that clients interested in purchasing a property in a high rise building have been told that the surveyor has valued the property at zero pounds.

This has been down to questions over whether the property meets the standards set out by the Ministry for Housing, Communities and Local Government in Advice Note 14, issued at the end of last year, which covers the fire safety of external wall systems in the wake of the Grenfell Tower disaster. 

If the vendor cannot confirm that the property meets these standards at the valuation, then some surveyors have opted to value the property at zero pounds until they can prove otherwise.

Checking regulations should be a job for the conveyancer


One broker to have seen this first hand is David Sheppard, managing director of Perception Finance. One of his clients had seen a property they wished to purchase in the Battersea Power Station development come back with a zero valuation.

He acknowledged lenders want to protect themselves by only lending against properties that comply with the requirements, but argued that surveyors should be tasked with providing a valuation subject to legal work confirming the requirements are met, rather than “this back and forth through the applicants”.

He continued: “Solicitors are in a better position to establish the facts through the seller or developer’s legal firm as they do with other property-related questions. The surveyor can then provide a figure to look to go to offer and then add a note that cladding and fire regulations have not been checked and this should be carried out via the conveyancer.”

Refusing to value until documents provided


Jane King, mortgage adviser at Ash Ridge Private Finance, said that she had two cases being held up due to cladding concerns, both on new build apartments but with different lenders, suggesting the issue is not confined to just the odd cautious provider.

In one case the development has a narrow stripe of cladding on the outside walls which King argued looked more decorative than anything else, but the lender had valued the property at £0 until it had received the relevant paperwork. On the second property, the lender had said the surveyor was refusing to value it until the paperwork covering the technical specification for the cladding was provided.

King said: “I think developers are going to have to have this information front and centre and I can foresee us having to provide this information at application stage in the future. 

“Lenders rely on valuer comment for all mortgage lending so it will be down to the valuers ensuring that the cladding meets with current regulations. Of course, this also protects the purchaser who does not want to be left with a property they cannot sell because the cladding makes the property unmortgageable.”

Surveyors and lenders overreacting


Jeremy Leaf, a former chairman of the Royal Institution of Chartered Surveyors and now an estate agent, said that some surveyors and lenders were overreacting, but it meant that owners or managing agents would have to be absolutely clear about what they have and need to be as up front as possible when selling.

“If in doubt, the surveyor may take a cautious line and not be prepared to give a value,” he said.

Leaf added that this can blight a building, as it will spread around the valuer community that a property has been given a £0 valuation, which could lead to further issues down the line and “stop people selling”.


Clearer communication crucial


Greg Cunnington, director of lender relationships and new build at Alexander Hall, said the firm had seen a “notable rise” of £0 valuations where the vendor was unable to confirm the details at the valuation.

He continued: “The main issue is there has not been a lot of communication or clarity on this issue or the requirements historically, and so vendors have not known to obtain this information when looking to sell. As you can imagine getting this information from a freeholder or managing agent can take time, so it is important all parties help to communicate this more.”

James Mole, managing director of London Belgravia Wealth Management, said that it was “very troubling” and that surveyors were “unaware or just indifferent” to the damage they can do by making decisions like these, noting that vendors could effectively become prisoners, unable to sell their homes.

He added: I think it’s down to surveyors being too black and white without considering the consequences. The surveyor market is horrid. There are far too many big players that have too much power in the market.”

Surveyors have no choice


Joe Arnold, managing director at chartered surveyor Arnold & Baldwin, said that surveyors must value a property on the basis it would be “readily resaleable” with a prudent purchaser, and that any such buyer would want to know if the property does have potentially flammable cladding and whether there is an “active management plan in place”.

He added: “No prudent purchaser would buy a property that could leave them with an unquantifiable liability. Consequently, a surveyor would have no choice but to apply a nil value. Most high street lenders insist that, if a property does not meet its lending criteria, the valuer must place a £0 valuation on the property.”

He also noted that there are lenders who are already financially committed to these buildings with existing mortgages in place, and who are “actively seeking solutions behind the scenes”.


The lender perspective


A spokesperson for Nationwide Building Society pointed to government guidance for high rise properties, which outlines that valuers are expected to identify properties that may have combustible materials, or potential failings in fire safety.

The spokesperson added: “As a result, valuers will be unable to provide a valuation for the property, and therefore will return a zero valuation in the interim, until they receive a written report from the building owner, prepared by a suitably qualified independent professional, confirming that a suitable review of the building has taken place and that it complies with the requirements of government safety regulations.”

Barclays said that if a valuer identifies that the external wall may contain potentially combustible materials, it requires the building owner or its agent to produce a written report to confirm it meets the current guidance requirements.

However, for new build properties that have received building regulation approval after 31 March this year, the valuer can assume that any cladding systems meet current fire and safety requirements.


The scale of the problem


Back in May the government announced it was to make around £200m available to cover the cost of replacing unsafe cladding on around 170 privately-owned buildings.

However, building owners were only given three months in which to access the fund. The Ministry for Housing, Communities and Local Government has not replied to our requests for an update on how much of that funding has been used to date, and how many buildings have replaced dangerous cladding.

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