Developers warned of further action as just third of high rises remove cladding
This accounts for 4,900 to 5,900 dwellings and leaves 150 properties over 18 metres yet to complete construction.
Of these, 112 buildings have begun the process while 38 have not started.
Lord Greenhalgh, building safety minister, said the few that had not started works were “unacceptable” and cautioned further action if plans to do so did not begin soon.
Five of the buildings which have not begun remediation are known to be unoccupied, while the remaining 145 account for 12,200 to 14,600 occupied dwellings.
The social sector has been quicker to make properties safer with all 156 high rise buildings having started or completed the removal of ACM cladding.
In total, 462 high rise buildings in England have been identified as having ACM cladding and 11 more are awaiting further tests.
Although a Private Sector Remediation Fund of £200m was made available to developers and freeholders to assist with the removal of unsafe materials from high rise buildings over 18 metres, half of the works are being paid for by building owners or other funding solutions.
Developers or freeholders have committed to paying for 87 buildings while 21 have been accepted under a warranty claim.
Some 100 buildings were in scope for the fund with 94 submitting an application and 64 approved for the funding of full costs. So far, £151m has been provided through the Private Sector Remediation Fund.
As at 31 December 2020, 240 buildings had their remediation funded by government, with the social sector receiving money to correct 140 of the 156 buildings identified.
Robert Jenrick, housing secretary, said: “Today’s stats show that – despite the pandemic – significant progress has continued to have been made with remediation work either complete or on site on around 95 per cent of buildings, rising to 100 per cent in all social or student high rise buildings.
“This is a big step forwards. While there is still more to do, we are helping make the highest risk buildings with dangerous cladding safer, more quickly.”
Lord Greenhalgh, building safety minister, added: “Building owners are responsible for making sure that their buildings, and the people who live in them, are safe. However, some need to do more and it’s unacceptable a minority are yet to start work.
“We are in contact with the remaining buildings where remediation has not started and we are clear if work does not take place urgently we will take further enforcement action.”
Construction industry regulator unveiled
The regulator will have the power to remove any product from the market that presents a significant safety risk and prosecute any companies who flout the rules on product safety.
It will have enforcement powers including the ability to conduct its own product-testing when investigating concerns.
“Businesses must ensure that their products are safe before being sold in addition to testing products against safety standards,” MHCLG said.
MHCLG confirmed the move after evidence was revealed during the Grenfell Tower inquiry which found “deliberate attempts to game the system and rig the results of safety tests”.
The government has been heavily criticised for many facets of its response to the Grenfell Tower disaster which took place more than three years.
Complaints often centre on its slow response times and the government is still finalising its remedy for high rise buildings with cladding on them, which is likely to include residents being stuck with footing the bill for making the buildings fire safe.
Work with trading standards
The new regulator will operate within the Office for Product Safety and Standards which will be expanded and given up to £10m in funding to establish the new function.
It will work with the Building Safety Regulator and Trading Standards to encourage and enforce compliance.
The government has also commissioned an independent review to examine weaknesses in previous testing regimes for construction products, and to recommend how abuse of the testing system can be prevented.
MHCLG said it will be led by a panel of experts with regulatory, technical and construction industry experience and will report later in the year with recommendations.
Construction industry malpractice
Housing secretary Robert Jenrick MP said: “The Grenfell Inquiry has heard deeply disturbing allegations of malpractice by some construction product manufacturers and their employees, and of the weaknesses of the present product testing regime.
“We are establishing a national regulator to address these concerns and a review into testing to ensure our national approach is fit for purpose.
“We will continue to listen to the evidence emerging in the inquiry, and await the judge’s ultimate recommendation – but it is already clear that action is required now and that is what we are doing.”
Chairwoman of the Independent Review of Building Regulations and Fire Safety Dame Judith Hackitt said: “This is another really important step in delivering the new regulatory system for building safety. The evidence of poor practice and lack of enforcement in the past has been laid bare.
“As the industry itself starts to address its shortcomings I see a real opportunity to make great progress in conjunction with the national regulator.”
Waking watch fund not retrospective and limited to high rise blocks
This means leaseholders who are not responsible for the poor building quality and have already paid significant sums of money to help remedy the situation will not be able to claim the costs back.
The £30m fund was announced in December to help end the need for buildings with dangerous cladding to maintain waking watch wardens to look out for fires.
It will pay for the installation of fire alarm systems to replace these wardens which have proved highly expensive in many circumstances with leaseholders often stuck having to bear the costs.
In the fallout from the Grenfell Tower disaster three years ago, it was revealed that many buildings around the country were not fire safe and so would need to employ round-the-clock wardens to ensure residents could be warned of and evacuated in the event of a fire.
Housing minister Christopher Pincher confirmed the conditions of the fund in a series of answers to questions posed by Labour MP for Vauxhall Florence Eshalomi.
Pincher said the criteria for eligible claims would be high-rise buildings in the private and social sector of over 18 metres in height with unsafe cladding systems where there is a waking watch in place with costs being passed on to leaseholders.
“We will work with local authorities and fire and rescue services on the delivery of the fund and expect to publish a prospectus with further information on eligibility criteria and evidence requirements in January,” he said.
In another answer, Pincher added the fund will not cover retrospective costs where waking watch services are no longer in place because alarms had been installed prior to the 17 December fund announcement.
“The purpose of the fund is to incentivise the purchase of alarm systems in buildings where there is currently a waking watch in place and there is no common alarm system,” he said.
RICS cladding guidance changes could remove thousands of buildings from EWS1 surveys
The changes could mean an end to months or even years of distress and stagnation for potentially tens of thousands of flat owners who have been unable to sell or remortgage their properties since the scale of building defects similar to those that caused the Grenfell disaster had been realised.
The guidance is aimed at valuers carrying out mortgage valuations on residential properties with cladding to provide consistency on whether they should request an EWS1 form before proceeding, the body said.
It proposes excluding all buildings of four storeys or fewer without aluminium composite material (ACM) or metal composite material (MCM) from requiring the EWS1 form assessment.
Buildings of five or six storeys in height will not require an EWS1 providing no more than a quarter of the surface area is clad, with none of it being ACM or MCM, and there are restrictions on balcony layout.
For buildings above six storeys, where there is no cladding or curtain wall glazing on the building and balcony restrictions are met, no EWS1 survey will be required.
“We are mindful that these changes will significantly impact home buyers and sellers in affected properties,” RICS said.
“When developing this guidance, we have tried to balance the interests of buyers and lenders with the needs of ensuring an effective home buying and selling process.
“We have also been mindful of the need to ensure EWS1 forms are targeted at the most at-risk buildings to speed up the process of identifying and remediating unsafe homes.”
Thousands of homeowners helped
There is no official estimate of how many buildings have been drawn into the scope of EWS1 since the government issued its extended guidance paper in January last year.
However, the government note which prompted the RICS consultation suggested it would clear the way for up to 450,000 flat owners to sell, move or remortgage their homes.
A report by Capital Economics published earlier this week suggested as many as one million flats could be affected by the cladding.
The guidance targets buildings in which it is less likely that expensive remediation work affecting value will be required.
This, RICS said, would allow valuers to make a reasonable assumption about valuing properties in these buildings without requesting an EWS1 form from building owners.
The consultation is open from 8 to 25 January with finalised guidance expected to be published in February.
“We will use the evidence and views we receive during the consultation to ensure that the criteria are robust and properly reflect current practice, as well as balancing the risks to lenders, buyers and sellers,” RICS added.
UK Finance and the Building Societies Association issued a joint statement on the consultation.
“Homeowners in flats and apartments should be able to have confidence that their property is safe to live in, and buyers should expect no less,” the trade bodies said.
“Today’s launch of the RICS consultation about valuer guidance relating to the EWS1 process is a welcome step forward in supporting a safe and smoothly functioning housing market.
“While it’s too early in this process to pre-judge the outcome of the consultation given the multiple stakeholders involved, lenders will be actively involved, positively contributing to the development of solutions for those affected.”
‘Very disappointed with government’
Joe Arnold, managing director of Arnold & Baldwin Chartered Surveyors, said: “The consultation is open to everyone and it’s so important that people contribute to the guidance to help arrive at a solution that truly tackles the issue.
“I’ve been very disappointed with government announcements so far, as they appear to pay lip service to the problem without presenting an effective solution.
“As always, the devil is in the detail, and that requires close collaboration and genuine consultation.
“Now is an opportunity to do just that and give the cladding issue the proper attention it deserves. It’s a tight deadline, so please take a look as soon as you can.”
Aims to provide clear guidance
RICS head of valuation standards Ben Elder noted that since the EWS1 form was introduced, government advice had changed and Covid-19 had seen lending criteria reviewed.
“EWS1 was never intended to hold up the market, indeed without it, no one would be moving. However, this proposed guidance intends to help by providing valuers with clear criteria to help them decide on whether an EWS1 form may be required or not,” he said.
“There will clearly still be many cases where an EWS1 form is necessary, but the guidance and insight resulting from this consultation will enable us to continue to work with stakeholders, including government, to find solutions to help speed up the process for remediating these buildings.”
The guidance note is subject to final approval by RICS’s independent standards and regulation board, which is chaired by Dame Janet Paraskeva, following the consultation.
Dame Janet Paraskeva added that public confidence in the safety of buildings with external cladding systems was at an all-time low.
“Concern over safety and potential remediation costs presents a significant challenge for those advising potential purchasers and lenders,” she said.
“The purpose of the guidance is to create consistency, and to support best practice, in order to ensure that properties affected are properly identified and those unaffected by unsafe cladding are not unnecessarily impacted.”
Over one million flats in England could be unmortgageable due to cladding – report
The consultancy firm said if it was to be assumed that the statement made by the Ministry of Housing, Communities and Local Governments (MHCLG) in November made no difference to the behaviour of lenders, complications could affect all buildings either taller than 11 metres or more than three storeys.
Although the MHCLG said buildings shorter than 11 metres or three storeys would not require an EWS1 form to gain mortgage finance, housing minister Christopher Pincher said lenders had the right to demand one from leaseholders of shorter buildings as it was not a government or regulatory requirement not to do so.
Capital Economics said if the EWS1 form was in place in 2019, 40 per cent of the 137,000 flats sold would have faced difficulties completing as they were either three storeys or 11 metres tall.
In the event the leaseholders failed to obtain a form, Capital Economics predicted overall property transactions for the year would have dropped by seven per cent.
Furthermore, if those sellers were assumed to have otherwise gone on to purchase a new home, the firm said the obstacles would have resulted in a steeper decline of 14 per cent in property transactions for the year.
The firm said it was unclear whether the EWS1 form had impacted sales in 2020 due to the overall effect of the pandemic on the housing market and a recent demand for larger properties.
However, it found HMRC transaction data in the 12 months to June 2020 showed 17 per cent of residential sales were made up by flats compared to 20 per cent of sales in 2017 – before the Grenfell tragedy highlighted the dangers of cladding.
The report said: “Affected flats may directly see delays in transactions, and disrupted property chains could delay other sales. But putting a hard number on the potential effect is difficult. For one, what happens will depend on policy – if the government or lenders were to relax the rules, then any disruption could quickly disappear.
“Furthermore, a lack of reliable information on the duration and extent of testing delays makes it hard to know how many homes are really being affected.”
It continued: “As a result, our base case is that a policy fix will come sooner rather than later.
“After all, while the cost of inaction now may be reasonably low, with as many as 4.5 per cent of private properties affected by delays, lenders’ incentive to fix any problems will rise sharply once wider housing demand starts to weaken this year.”
Second home stamp duty surcharge refunds may get cladding-related extension
At present homeowners who pay the higher rate of Stamp Duty Land Tax (SDLT) on purchases of additional property can receive a refund of the three per cent surcharge if they sell their old main residence within three years of the purchase.
However, any such decision would still be at the discretion of HM Revenue and Customs to decide if the circumstances were exceptional.
Financial secretary to the Treasury Jesse Norman MP noted for most people three years was enough time to sell a property.
“However, the government recognises that there will sometimes be exceptional circumstances not in the control of the buyer or seller which mean that a previous main residence cannot be sold within three years,” Norman said.
“If someone purchased a new main residence on or after 1 January 2017, they may be eligible to apply for a refund if they were prevented from selling their previous main residence before the expiry of the three-year time limit owing to exceptional circumstances beyond their control.
“The previous main residence must be sold before HMRC will consider whether the circumstances are exceptional.”
Norman was responding to a written question from Labour MP for Liverpool, Riverside Kim Johnson, who asked whether government had considered suspending the time limit for the repayment of the stamp duty surcharge on second properties where the property sale has been delayed due to cladding and External Wall Survey (EWS1) issues.
Minister contradicts PM by admitting EWS1 cladding forms can be used for low buildings
The admission comes after prime minister Boris Johnson attacked lenders during Prime Minister’s Questions last month for using the EWS1 forms on smaller buildings.
Lenders began using the forms for buildings less than 18m in height following a January update from the Ministry of Housing Communities and Local Government (MHCLG) which brought properties under 18m into scope.
Ministers have regularly protested this approach by lenders but now appear to accept that they are following necessary processes when doing so where cladding concerns arise.
Pincher’s statement came in response to a written question from Labour MP for Denton and Reddish Andrew Gwynne, who asked about lenders requesting EWS1 forms in blocks of three storeys or less.
In his answer, Pincher said: “The EWS1 process is not a government or regulatory requirement.”
He noted that whether an EWS1 is needed is determined by lenders and the professionals valuing a building.
“The department has come to an agreement with the Royal Institution of Chartered Surveyors (RICS) that flats in blocks without cladding do not need an EWS1 form,” he said.
“Buildings under 18m should not fall into the EWS1 process, unless in justifiable circumstances – usually relating to the proportion of cladding on the building.
“RICS is working with wider industry, including lenders, on new guidance for surveyors which will make clearer the circumstances when EWS1 valuation forms are, and are not, to be requested.”
In his outburst during Prime Minister’s Questions, Johnson said: “Mortgage companies should realise they [EWS1 forms] are not necessary for buildings under 18m and it’s absolutely vital they understand that while we get on with the work of removing cladding from all the buildings we can, and that’s what this government is continuing to do.”
Lenders responded with a statement on their own, saying: “In January, MHCLG’s advice note for owners of multi-storey, multi-occupied buildings was updated making it clear that all buildings should include an assessment of cladding as part of their Fire Risk Assessment.”
Cladding removal fund extended as £30m pledged for fire alarm systems
However, the latest data shows fewer than one in five of the 2,820 registrations received by the end of September had been assessed with barely one in ten registrations progressing to an application for funding.
Just 294 buildings are in line for support at present with 261 being deemed ineligible.
Of the remaining registrations submitted to the Ministry of Housing, Communities and Local Government (MHCLG), only 519 provided all the information required and are having their eligibility checked.
A further 402 gave some, but not all evidence needed to allow verification and as a result not all of these will be accepted.
More than 1,100 applications provided no basic information to assess whether their eligibility while a further 241 withdrew the application.
Open until June
The government launched the £1bn fund in March in the wake of the Grenfell Tower disaster three years ago.
It aims to support the remediation of unsafe non-aluminium composite material (ACM) cladding on residential buildings over 18 metres high in the private and social housing sectors.
Progress has been slow however, and MHCLG has now confirmed the deadline for applications, which was due to close on 31 December, will remain open until 31 June.
A statement from MHCLG said: “This means hundreds more buildings will be remediated and thousands of leasehold residents will be protected from costs.
“Progress is being made on current applications with many more expected to be agreed before Christmas.”
£30m for waking watch alternatives
MHCLG has also setup a £30m fund to help end the need for buildings with dangerous ACM and non-ACM cladding to maintain waking watch wardens to look out for fires.
These measures have proved highly expensive in many circumstances with leaseholders often stuck having to bear the costs.
“The Waking Watch Relief Fund will pay for the installation of fire alarm systems in high-rise buildings with cladding, removing or reducing the need for costly interim safety measures,” MHCLG said.
“The National Fire Chiefs Council have been clear in recent guidance that building owners should move to install common fire alarm systems as quickly as possible to reduce or remove dependence on waking watches.
“The steps today will help worried leaseholders who may have faced high costs for interim safety measures by providing financial support and delivering a better, long term fire safety system in their buildings,” it added.
The department also said it believes around 95 per cent of remediation work on ACM cladding, which was the type involved at Grenfell Tower, will have been completed or be underway by the end of this year.
Freeholders ‘shockingly’ able to hide results of EWS1 form if building not fire safe – Rudolf
Unfortunately getting to a point, where every single building which has potentially dangerous cladding on it, or any other potentially flammable external wall system, is made safe has been much more difficult than perhaps any of us would have thought or liked.
Complications around who is responsible for the cladding and who should pay for its removal are numerous across a large number of buildings and I have nothing but sympathy for those leaseholders who feel completely powerless and in limbo because of this situation.
High stress situation
The stress this is causing is obvious, not just in terms of the money required to sort out high-risk buildings but also in terms of the requirements for an External Wall System (EWS1) form.
Who can provide this, lender acceptance, and what this means for mortgage availability, pricing, not to mention service charge rates, are all critical hurdles.
We’re acutely aware of the frustration that advisers and their clients are experiencing when it comes to securing an EWS1 form, getting the freeholder to agree to one being carried out, and lender requirements to have this upfront before any lending decision can be made.
In certain areas we have already secured some common sense amendments to former rules.
For instance, owners of flats or apartments in buildings which don’t have an external wall system and the external wall is brick now don’t need an EWS1 form in order to sell or remortgage.
Given organisational and resource issues around securing an EWS1 form for those who have flats with cladding, it made no sense to require one for those that don’t and was simply another obstacle in the way for those trying to sell or remortgage.
Agreement between the Royal Institution of Chartered Surveyors (RICS), UK Finance and the Building Societies Association (BSA) should, we are led to believe, benefit over 450,000 owners who might have been impacted otherwise.
But we also know that there are hundreds of thousands of others who will not be as fortunate, and their ability to remortgage or sell their existing property is being severely compromised by the current rules and situation.
Shockingly there are only approximately 300 fire safety inspectors qualified to issue an ESW1 and perhaps.
Even more shockingly, the lease administrators can ask them not to publish the EWS1 if it realises that the system requires work, for example not being fire safe.
What the CA has tried to do is provide our member firms with practical guidance on cladding to help steer them and their clients through what they should be looking for in these cases and how they should be advising clients and their lenders.
It is not a simple task, however, and with different lenders having differing rules about what is acceptable to them, there is clearly a role for advisers in helping hold the client’s hand if they are in this unenviable position.
The CA Guidance has now been issued to all our member firms but with a new building safety regulator being set up next year, there will undoubtedly be changes to the rules that will need to be reflected in updated guidance.
We would advise all stakeholders involved in these cases to take extra care – there have been changes and a degree of misinformation which often results in extreme stress and frustration being heaped upon a client who is often already feeling damaged by their situation.
For the home mover?
We would advise before listing the property that anyone thinking of selling should ask their lease administrator whether there is an external wall system and if so ask to see the ESW1 form.
If it is not available ask them to get one done.
For buyers, they will want to ask whether the EWS1 has been prepared and to see it to understand whether remedial works are required and the potential cost to them if they buy the property.
By working together we can help, but we’ll need to set out realistic goals about what might be achievable in the current environment, otherwise we may all end up disappointed.
‘Positive discussions’ but no timetable on expanding PII for high rise cladding surveyors
Pincher (pictured) added that a number of options were being investigated to help the situation, but did not give any idea of when a solution would be put in place.
The housing minister also admitted the government did not know how many buildings still required surveys, although its own figures suggest this could be as many as 58,000.
PII coverage has been one of the main problems holding back the risk assessment of high rise buildings, especially those with potentially flammable cladding attached.
As Mortgage Solutions reported in July, there were fewer than 300 qualified chartered fire engineers available to carry out an external wall survey (EWS1) to assess the suitability of cladding on high rise buildings.
Government has since agreed £700,000 in funding to train more surveyors to the required standard but a lack of PI insurers is also holding back availability.
Pincher was responding to a written question from Labour shadow cabinet office minister Helen Hayes who asked what the timeframe was for issuing additional guidance on indemnity insurance.
He replied: “My department has been engaging with the insurance industry to investigate commercial and government solutions that improve the availability of professional indemnity insurance solutions for key building safety professionals, including those working on the EWS1 process.
“This is a highly technical area with complex market dynamics, however, discussions have been positive and a number of options are being investigated.”
Around 58,000 buildings require EWS1
Hayes also asked what recent estimate has been made of the number of buildings awaiting a survey and what the timeframe was for resolving that backlog.
Pincher responded: “The EWS1 process is not a government form or regulatory requirement, and the department does not hold data on its use.
“Government has announced the provision of £700,000 funding to train more assessors. This will help speed up valuations where EWS1 forms are justified.”
However, according to the latest data from the Ministry of Housing Communities and Local Government, there are 88,000 buildings in the UK above 11m in height.
Of these, following the agreement last month, the department estimates that only 30,000 do not require an EWS1 form, meaning around 58,000 still do.