As explained in a previous blog, the External Wall System (EWS) process was launched to provide more clarity to lenders and buyers on the safety of residential buildings with cladding. However, after the Government extended its advice to include all buildings with some form of combustible cladding, lenders have been demanding an EWS1 form on almost any residential building, regardless of whether an EWS1 is required or not (such as buildings less than 18 metres or those that have no cladding at all).
This has rendered hundreds of thousands of homes unmortgageable and effectively worthless until an EWS1 is available. It has been over one year since the EWS survey process was introduced and the subsequent havoc it has wreaked still rages on. The Times estimated up to 1.5 million flats are currently affected.
In our experience EWS1 reports that have been obtained have shown other defects in buildings which mostly relate to the quality of works. Many owners have been left with very large repair bills for remedial works other than in relation to cladding.
In an effort to address these concerns, the Royal Institution of Chartered Surveyors (RICS) is consulting on draft guidance for the valuation of multi-storey apartment blocks with cladding. The guidance has been drafted to provide consistency to valuers on when an ESW1 is needed before proceeding and to help balance the risks to buyers, sellers and lenders where a building may have combustible cladding.
The consultation comes after the Government, RICS, UK Finance and the Building Societies Association reached an agreement in November 2020 that flats in buildings without cladding would no longer need an EWS1 to be sold or re-mortgaged.
The RICS guidance sets out criteria (based on government advice) to assist valuers in deciding when an EWS1 form is not required. The criteria are intended to help valuers identify which buildings are less likely to require expensive remediation work that would affect the value of the property. If the property meets the criteria, an EWS1 form will not be required. The draft guidance also includes case studies to demonstrate when an ESW1 may or may not be required.
The “reasonable circumstances” where it can be assumed that an ESW1 form is not required depend on (but are not limited to):
- the height of the building;
- whether or not there is a significant amount of cladding (the guidance considers an amount above one quarter of the surface façade to be significant);
- whether combustible balustrades and decking on balconies are stacked vertically above each other; and
- whether any aluminium composite material or metal composite material are present on the building.
Although the consultation is aimed primarily at valuers and lenders, RICS has stated that it is “particularly keen to engage leaseholders, homebuyers and those that advise them”, recognising the vast amount of individuals affected by these regulations. It is hoped that the guidance will reduce EWS1 requests and limit the number of properties affected. Whether it will or not remains to be seen.
The proposed guidance is expected to be published in February 2021 and we will continue to monitor the situation. If you have any queries about this subject, please contact Nada Al Ansari or any member of the Property team.
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