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Challenges with fire risk and mortgages on flats to rumble on for years

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  • 02/06/2021
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Challenges with fire risk and mortgages on flats to rumble on for years
Brokers with clients looking to purchase, remortgage or sell flats in multi-unit blocks are likely to see challenges around fire safety rumble on for at least five years, and possibly a lot longer, an online debate hosted by Countrywide has heard.

 

The supplier of valuation panel services brought together lenders, brokers, surveyors and other property professionals in a session that revealed a litany of unresolved issues related to fire safety and lending on flats.

There were calls on government to de-risk the situation by underwriting cases until a reasonable level of clarity was restored to the market.

Hiten Ganatra, managing director at Visionary Finance, said: “It’s causing an issue, because in the absence of having the EWS1 form lenders are effectively saying we are unable to lend and it’s putting our clients on standard variable rates (SVRs), until some level of comfort can be provided to evidence that the building is fire safe.

“We have clients on SVRs waiting for management companies to provide documents, to give the new lender certainty that there are no issues with the cladding.”

An audience poll revealed that 55 per cent of property professionals believed that the EWS1 form “is working,” however this left 45 per cent who thought it was not.

Lenders on the panel pointed to differences in quality of building management companies, with documentation often scrappy or non-existent.

They urged brokers to engage with clients about fire risk early in the mortgage application process and to have customers seek documentation, rather than let the issue emerge as an unwelcome surprise when the application is declined.

They added that shopping around cases where an EWS1 form was needed was unhelpful.

One potential bright spot in the situation was the Cladding Portal, which is in development and will let professionals search on properties to discover more on their fire risk status.

 

Minefield for lenders and leaseholders

However, the wider lack of clarity on fire risk had turned the mortgage market into a minefield, where leaseholders and lenders had no way of knowing if the decisions they made today will in future turn out to have been sound, the lenders said.

The myriad of confusions and challenges in the marketplace included insufficient details from government on policies like funding for remediation works on buildings higher than 18 meters and the £50-a-month repayment loan scheme.

The panel anticipated a possible lack of consistency between the existing RICs EWS1 form and PAS 9980, a new code of practice on fire risk appraisal and assessment coming from the Building Standards Institute in September.

They noted an absence of fire risk assessors and contractors qualified to do remedial works, and building materials.

Meanwhile, valuers faced challenges in the form of possible exclusions coming in future on Professional Indemnity insurance policies, for buildings higher than four storeys.

There were complications on consent to let, because lenders would then be in a position of allowing new tenants to move into buildings where the fire risk status was unresolved.

While flat leaseholders were able to switch products, increased lending to fund remedial works might also be challenging based on affordability.

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