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Major intervention from Government and lenders to support leaseholders

On July 21 Housing Secretary, Robert Jenrick, following expert advice, stated that EWS1 forms should no longer be requested for buildings that are below 18 metres. That is, people who own flats in medium and lower-rise buildings should be able to sell or re-mortgage their homes without having to provide information regarding the external wall system of the block.

This intervention, which has been received positively by some big lenders such as Barclays, Lloyds and HSBC, aims to minimise needless and costly survey and potential remediation costs that leaseholders of medium and lower-rise blocks are charged with as well as to unlock the property market which has been significantly down due to the cladding crisis. The Government also encourages more lenders to pave the way and update their policies in line with expert advice.

After the Grenfell Tragedy, in which 72 people died, lenders started requiring more information before they were willing to provide mortgages on individual flats. The EWS1 form was introduced in order to assess the fire safety in high-rise residential buildings with an external wall system.  Therefore, the EWS1 form has been widely requested by mortgage lenders as a confirmation that the properties they invest in are fire safe. The requests were also extended to lower-rise buildings as well as buildings with no cladding. As a result, long delays occurred due to the limited amount of qualified fire engineers to carry out the assessments and about 3 million flats have been left unsellable because they could not obtain the paperwork required.

The new Governmental advice

A recent investigation by independent expert group, however, suggests that there is no systemic risk of fire in blocks of flats under 18 metres. Therefore, fire risk assessors and lenders should assume that there is no significant risk to life unless there is evidence to support this. Moreover, in case there are any fire safety concerns in medium and lower rise buildings, they should be primarily addressed through risk management and mitigation. The below statement is also supported by the fact that the number of home fires reached an all-time low last year while 91% of those occurred in houses, bungalows or converted flats and only 9% were in blocks of flats of four stories or more. The Responsible Person will be obliged to have up-to-date fire risk assessments to determine if any actions are required that can be either measures such as alarm systems or sprinklers or in extreme cases remediation.

Next steps moving forward

The Government, who have already invested £5 billion to cover the cost of the removal of unsafe cladding in high rise buildings, state that a more proportionate approach should be adopted towards fire safety by homeowners, developers and lenders. In order for this to be achieved, a new guidance is going to be introduced regarding risk assessments of external wall system as well as a financing scheme that will support leaseholders in buildings under 18 metres so that they do not have to pay more than £50 a month for the cost of replacing unsafe cladding, of which further information is anticipated withing the coming months. Additionally, the Government is also planning to introduce a levy on developers of high-rise buildings. The income coming from the levy will help fix fire safety defects such as unsafe cladding and protect leaseholders and taxpayers from paying remediation fees.

Although this intervention seems to be a step toward the right direction, it is up to mortgage lenders to change their policies and bring an actual change in the market.