TSB updates cladding and estate fee criteria; NatWest blocks remortgages during payment holidays
On all properties built since January 2005, TSB has increased its previous cap of 0.1 per cent to the higher of 0.2 per cent of the market value or £500.
Estate management fees or rent charges are costs paid by homeowners on a private housing estate to maintain, renew and repair the shared amenities and spaces that their local council has not adopted.
Mortgage Solutions reported that TSB introduced its previous cap in February, after Santander, Barclays and Nationwide had all adopted a tough stance on costly freehold and leasehold fees.
The 2005 deadline is significant, said TSB at the time of reporting, because homes built after this year are more likely to have onerous clauses.
Buy-to-let applications for properties that do not meet the minimum Energy Performance Certificate (EPC) regulations will now be declined and will not proceed until the property has been improved to meet the minimum requirements.
The energy efficiency standards for a minimum EPC rating of E was introduced from 1 April for all residential privately rented homes in England and Wales.
Fire safety assessments
The bank said it cannot lend on properties with external walls and balconies consisting of potentially combustible materials, unless borrowers can provide an acceptable External Wall Fire Review report or EWS1 form to confirm the fire safety of the building with no remedial works being required.
TSB said it will accept the EWS1 form as an alternative to a full fire safety report for an individual property within a building. It must be accompanied by a letter from the fire safety expert who completed the report.
Any decision in principles for pipeline applications started before today, won’t be impacted by these changes.
Mortgage Solutions has reported on serious concerns and mounting delays for borrowers wishing to sell or buy properties requiring EWS1 forms and the government is pressuring lenders on the subject.
NatWest has confirmed it will not accept a remortgage application from a borrower who is on a payment holiday.
In an update to its criteria, the bank said borrowers must be able to show they are able to maintain their payments.
Borrowers must finish their payment holiday period with their existing lender and make at least one full monthly scheduled payment after the holiday has ended.
‘I’ve turned away 15 cases because of EWS1 issues’ – Star Letter 31/07/2020
Both were in response to the article: Fewer than 300 fire inspectors to conduct EWS1 inspections
Spinmeister said: “I’m no longer taking applications unless an EWS1 form is present.
“So far I’ve lost or turned away about 15 cases and I’m still waiting to see a single one with a completed certificate.”
“Anything leasehold except a maisonette, is being told not to waste their time. I’m sure the stamp duty suspension will be a great relief to those who are now effectively prisoners in their own flats.
“The Royal Institution of Chartered Surveyors (RICS) will singlehandedly be responsible for 20-30 per cent of the London housing stock becoming unsaleable,” Spinmeister added.
Lack of inspectors will cause five-year wait
Arron Bardoe commented on how a lack of qualified fire inspectors could cause a wait of five to eight years for those without the EWS1 form.
He said: “Now some surveyors are insisting on an EWS1 for all flats regardless of height and regardless of whether there is cladding – most of us will have been asked for an EWS1 with a tick in box A to confirm there is no cladding – the lack of inspectors will leave many people with unsaleable and unmortgageable properties until there is reform of the rules.”
Bardoe added: “To estimate the effect, I searched for the housing mix in the UK and focused on purpose-built flats which are most likely to be affected as opposed to houses converted flats. That said, ‘conversions’ would include offices and factories, so I may be underestimating.
“Apparently, there are around 25 million households in the UK and 12 per cent of these are purpose-built flats, so around three million households. If one assumed 10 units per block that gives 300,000 buildings that might require an EWS1.”
Bardoe continued: “With 300 inspectors, this requires each to inspect 1,000 buildings, test any cladding and prepare reports – say one to two days per property at best, especially when including travelling. Inspectors will also want to take weekends off and holidays and may need to attend CPD regularly.
“Added to this current workload will be all new developments; any property that has any changes to its exterior – which automatically requires a new EWS1 – and those with cladding that requires remedial.
“Let’s not forget that, even when the first run is completed, these reports need to be renewed every five years, even for properties without combustible materials.”
“My rough guess therefore is this whole process will take five years.
“People living in purpose-built flats will be able to move or remortgage sometime between now – if they are lucky enough to have an EWS1 – and 2028 if they are at the back of the queue,” he concluded.
Fewer than 300 fire inspectors to conduct EWS1 inspections
He also noted that government was working with the industry to try to increase this number and improve guidance on assessing cladding and other external wall coverings on tall blocks.
In response to a written question from Ruth Cadbury, Labour MP for Brentford and Isleworth, housing minister Christopher Pincher (pictured) revealed the sparse number of qualified inspectors.
“The EWS1 process was designed by the Royal Institution of Chartered Surveyors to support the valuation of flats in high-rise blocks,” he said.
“In some cases, this will require an assessment by a fire engineer. The Institution of Fire Engineers has informed the Ministry of Housing Communities and Local Government (MHCLG) that there are around 291 chartered fire engineers.”
Training and support
The EWS1 form was created at the end of last year to help mortgage lenders assess whether properties were safe to lend on.
However, the scheme has been plagued with delays as ministers claim lenders have been extending its use further than initially intended, while inspectors have finding difficulties in obtaining professional indemnity insurance (PII).
This has left some borrowers unable to sell their flats and fearing they may be stuck with their current homes for years until an assessment can be completed.
Cadbury subsequently asked what government was doing increase the number of qualified chartered fire engineers and what support and additional training was available for new recruits.
Pincher replied: “MHCLG and the Home Office are working with professional bodies and industry associations to assess the capacity of the fire engineering sector and support them to develop a robust pipeline strategy.
“We are also working closely with the fire safety sector to develop technical guidance to support the fire risk assessment of external wall systems which will support increased capability within the wider sector and are supporting industry-led approaches to understanding fire engineering resource requirements within the sector.”
Couple trapped in flat as lenders refuse mortgage without fire safety form that could take ‘years’ to come
Siobhan Frost and her partner have been warned by their housing association Peabody it could be “several years” before the EWS1 form is ready.
Under the terms of their lease, they are not allowed to rent out the property and are now left feeling frustrated over the issue which MPs say is a “huge problem”.
The couple bought the two-bedroom flat in a seven-storey block in Mint Street, Bethnal Green on a shared-ownership basis five years ago.
At the end of last year, they were in a position to ‘staircase’ up to buy the remaining share of the property from the housing association, meaning they would own the flat in full, and be able to sell it on the open market.
Frost and her partner paid Peabody around £250 for the valuation and were offered a mortgage on the proviso of producing an EWS1 form.
But then the problems began.
Fire safety forms introduced last year
EWS1 forms were brought in at the end of last year to give lenders more confidence in offering mortgages on multi-storey buildings following the Grenfell disaster.
A valuer could request the one-page-form from a building owner or representative, which would confirm the material on the walls posed a limited risk or was non-combustible.
If materials did pose a risk a description of fixing the problem is needed.
Frost said she found it difficult to get hold of anyone at the housing association who could provide any information on how to get hold of the form to give to the lender.
In the mean time the mortgage offer expired.
After weeks of chasing, the couple were told by Peabody that it had over 500 buildings to look at and it couldn’t provide a date of when the form would be available.
Frost told Mortgage Solutions: “We were told by Peabody they don’t know how long it’s going to take for the form, it may take a couple of years.
“We also can’t rent it out because of Peabody rules.
“We’re stuck and left in limbo – and about to have a baby. It’s a really frustrating situation.”
System ‘not working’
One of the main problems is that there are a lack of qualified insured Chartered Fire Engineers to carry out the surveys.
Furthermore, lenders are requesting the forms more than had been anticipated when they were introduced.
Housing minister Christopher Pincer recently admitted borrowers trying to get a mortgage on properties in multi-storey buildings may have suffered.
He said lenders had agreed “a nuanced approach to risk” was required and to review their policies and advice to valuers after a meeting with minister for building safety Lord Stephen Greenhalgh.
It comes after a report last month from MPs on the Housing, Communities and Local Government committee said the EWS1 process was not working and called for the government to urgently make changes.
It’s estimated around 2,000 buildings still remain unsafe three years after the Grenfell tragedy.
The building containing Frost and her partner’s flat has cladding on the top floor, which will likely need removing before the EWS1 form can give the building the green light.
The cladding itself is a safety concern for Frost, though the housing association has put in extra fire alarms since the Grenfell disaster.
‘Unacceptable to be left in limbo’
A ministry of housing communities and local government spokesperson said: “It is unacceptable that some residents have found themselves in limbo.
“The EWS1 process is designed to support valuations for high rises where cladding may be a concern – this is because of the exceptional risk fire can present at height.
“While not all lenders require an EWS1 form, owners of buildings 18m and over should be as transparent as possible about the construction of their building and fire safety measures in place”
A spokesman for Peabody said: “We understand the frustration and anxiety felt by leaseholders who are in this difficult position through no fault of their own. Regrettably it is an issue affecting thousands of people up and down the country.
“As you will be aware, the problem arose last year and is being driven by mortgage lenders and valuers wanting evidence that is complex and difficult to obtain.
“Many will not lend on a property unless they have evidence that a building is compliant with the latest government advice issued in January this year.
“This evidence is an EWS1 form and to get this we have to carry out a detailed, sometimes intrusive, survey which then has to be signed off by a chartered fire engineer.
“With many thousands of buildings affected there are a limited number of qualified fire experts in the UK who can assess buildings, carry out inspections, confirm whether remediation work is required, and issue EWS1 certification.
“At Mint Street, works will involve replacing the cladding on the upper floors, as well as investigating the external wall system to resolve any issues. These two things will happen at the same time, which means that the fire engineer can sign an EWS1 form based on their assessment of the building after the work is completed.
“We are aware that residents have been concerned about our communications on this. We’ve apologised and wrote to all residents at the development last week to update them on our plans.
“We’ll now be providing monthly updates to keep them up to date on our progress.”
‘EWS1 could create more mortgage prisoners than credit crunch’ – Star letter 17/07/2020
Two comments were made under the article: Lenders reviewing cladding form use after ‘negative effect on mortgage market’ – housing minister
The first was from Arron Bardoe, who said: “While I appreciate the gravity and seriousness of this process, it is currently being applied with great zeal by surveyors and the definition of when a certificate is needed is widening.
“Worse still, even once a building has a certificate of compliance, it then has to renew it every five years if there are no changes or earlier if there have been changes.”
Bardoe added: “I have a client who owns a flat in London that she is seeking to remortgage from the five per cent rate with her current lender who is not offering rate switches to a more reasonable rate, together with consolidating some debts.
“The City of London as the freeholder of the building has confirmed there is no cladding only a curtain wall that is not of combustible material.
“However, the lender’s surveyor will only accept this if the report is from someone with one of the designated qualifications, as they do not trust a director of the housing department of a local authority.”
Bardoe continued: “We checked the RICS website, which helpfully says: ‘Not every building in scope above 18m will require an EWS1 form – only those with some form of combustible cladding or combustible material on balconies.’ Great, we thought.
“However, this is contradicted later with: ‘The process results in a signed EWS1 form per building, with two options and outcomes. A – confirms that there are no combustible materials and B recommends that remedial works are carried out.
“If I understand Point A correctly, a building with no combustible materials needs an EWS1 to confirm it does not need one, which is not required as it does not have any?”
Overuse of rules
“The overzealous application of EWS1 rules has left many leaseholders with unmortgageable and unsaleable properties.
“Even where a certificate is required, the rules have been implemented at speed and with some freeholders struggling to obtain an available surveyor,” he added.
“Thereon, if works are required, these cannot be completed in days, but they immediately put every leaseholder in to limbo for remortgaging or selling their homes.
“It should be noted that desperate leaseholders are unable to commission the EWS1 themselves,” Bardoe said.
Creating more mortgage prisoners
Bardoe said: “What does not yet seem to have been realised is that the guidance applies to buildings of all heights that are multi-residential buildings, so even houses converted to two flats seem to fall under the new rules.
“As the enthusiasm for this new money-making venture continues, we could well see 20-30 per cent of UK housing stock requiring five yearly licensing and many of those to confirm they have no combustible materials, as lenders’ surveyors will not trust old certificates.”
“The EWS1 could lead to a larger number of mortgage prisoners than due to the credit crunch, so lenders, RICS and the government need to act now. If the current trend is not curbed, lenders could find they cannot agree new loans to up to 30 per cent of the UK market,” he added.
Holding developers accountable
Very deceptive also commented on the article with concerns around who the responsibility of paying for the certificate fell on.
They said: “The management company of the new buildings should list the materials and products with the relevant manufacturers for the building with the applicable certificates in the same way they hold building regulation certificates, build guarantees and certificates of insurance.
“If 300 buildings have the same cladding, why on earth would we demand each building’s tenants pays thousands of pounds to prove the fire safety of the same cladding? Instead the management company could hold the records to produce when needed.”
“New buildings could work to the new process, to prevent the system at present of a building passing all of the building regulations, only for surveyors to question the fire safety of the same structure in future years.
“This method would see the big company manufacturers prove their quality, as they should, absorbing any costs. No tenant should be paying years after the event for the suitability or quality of a building material.
“As with everything else, it should be manufacturers not the purchasers who should prove the fire quality,” they added.
Lenders reviewing cladding form use after ‘negative effect on mortgage market’ – housing minister
Housing minister Christopher Pincher (pictured) admitted that lenders had been using the forms more often than originally intended and that borrowers trying to access the mortgage market may have suffered as a result.
He revealed that following a meeting with minister for building safety Lord Stephen Greenhalgh, lenders had agreed “a nuanced approach to risk” was required and to review their policies and advice to valuers.
The External Wall Fire Review (EWS1) process was originally designed by Barclays Mortgages head of valuations Fiona Haggett with the intention of solving the problem of valuing properties with external cladding and allowing occupiers to move again.
However, there have been issues implementing the system.
Valuers have been limited with many unable to obtain professional indemnity insurance (PII), viewings have been backlogged by many months in some cases, while MPs branded it “slow and expensive”.
‘Wider scope of buildings than intended’
The issue has been part of the ongoing attempts by government to help address national concerns following the Grenfell Tower fire three years ago and was again raised in Parliament this week.
Pincher was responding to a written question from Shabana Mahmood Labour MP for Birmingham, Ladywood, asking what assessment he had made of the EWS1 form on allowing leaseholders to sell properties.
Pincher said: “The government is aware that some lenders are requesting valuers use the EWS1 form on a wider scope of buildings than was intended and this may be having a negative effect on the mortgage market for such buildings.
“The minister for building safety held a roundtable with mortgage lenders, who agreed a nuanced approach to risk is required.
“They are reviewing their policies and guidance to valuers on the use of the form.”
Mortgage Solutions asked lender trade body UK Finance what changes would be made and when they would be implemented.
UK Finance said it was unable to comment on private meetings.
Discussing the issue of PII cover during the Flammable Cladding Removal debate in Parliament yesterday, Pincher also noted that meetings had been conducted to help tackle that problem.
“Lord Greenhalgh has met members of the insurance industry and other fire and safety professionals,” Pincher said.
“He is investigating, at pace, ways in which this particular issue may be remedied.”