The Royal Institution of Chartered Surveyors (RICS) has issued new guidance on wall safety surveys for mortgage lenders.
This is all related to the flammable cladding that caused the Grenfell Tower tragedy, and which remains in place on many high-rise buildings. Aside from the significant safety concerns, the presence of the dangerous cladding renders flats in any affected buildings practically unsaleable until it’s removed – a process which is going to cost horrifyingly vast sums of money nationwide.
One tool that’s used in trying to assess the impact of cladding on a property’s value is an assessment called an EWS1 form. Unfortunately, the increasingly widespread use of these has thrown up a few problems.
What’s the purpose of an EWS1 form?
The EWS1 form is used to assess the fire risk of the external wall system (EWS) on residential properties like blocks of flats. It lasts for five years, applies to the whole building and must be completed by a qualified expert. The EWS1 form was originally designed for buildings taller than 18 metres, but in January 2020, revised government guidance brought all residential properties potentially within scope, and it’s this that has caused the problems.
It’s important to note that the EWS1 form is designed for valuation purposes. It’s not a safety guarantee, but rather it’s meant to help mortgage lenders get a better idea of how the building’s fire risk might affect the potential value of a property.
Why has the EWS1 form been stopping people selling their homes?
Since the government brought smaller residential properties into scope, mortgage lenders have been insisting on EWS1 forms for all kinds of properties that really have no need for one, including buildings that have no cladding at all. While annoying, this is perfectly understandable – lenders such as banks and building societies are naturally risk-averse, and since it doesn’t cost them anything to demand an EWS1 form, it’s a no-brainer to protect themselves by asking for one.
Unfortunately, this means hundreds of thousands of EWS1s have been requested, and there simply aren’t enough specialist surveyors to carry them all out, leading to long backlogs. Also, it’s the building owner who needs to arrange the EWS1 form, and while many freeholders and management agencies will be happy to sort this out, it’s the leaseholder wanting to sell/re-mortgage their property who is on a timescale. This problem can be even more acute in the case of shared freehold, where other flat owners in the building may baulk at paying towards a blatantly unnecessary survey just so their neighbour can sell up. No-one’s really in the wrong here, but it can put people trying to sell their flats in an impossible situation.
Will the new guidance help improve this?
Really, the answer is for lenders to only request an EWS1 form when the property actually needs one. The government tried to solve this last year by saying that flats in buildings without cladding didn’t need an EWS1 survey, but the lenders ignored this – as they had every right to do.
In an effort to find a way out, the RICS has had another go, and this time it’s made a big deal of consulting with just about everyone possible including fire safety professionals, expert surveyors, leaseholders, lenders etc. The result is a new set of guidance notes explaining which properties genuinely need an EWS1 survey, plus a decision-making tree and a range of case studies. Previous areas of confusion (such as balconies) are clarified and explained, and there’s a powerful appeal to lenders in the following paragraph:
‘Requesting an EWS1 for buildings where there is no visible cladding or a low risk of remediation work creates long and unnecessary delays to the buying, selling and re-mortgaging of such properties. It also prevents the limited pool of competent experts from focussing their assessments on properties where there is a significant risk to the safety of occupants. A valuer should always have a rationale to justify a request for an ESW1 form.’
While there’s no requirement for lenders to follow any of this, the hope is that such extensively researched guidelines from a key industry body ought to be more appealing to banks and building societies, and this may just help thousands of frustrated leaseholders get their homes on the market.
The guidance is effective from 5 April 2021, and can be found here.