Wednesday, 27 January 2021

Cladding after Grenfell – Where are we now?

 Many flat owners have been unable to sell or re-mortgage their flats following the Grenfell Tower tragedy and the subsequent external fire review process.

One issue is whether an owner must provide an EWS1 form, a key part of that process.

EWS1 was introduced in 2019 by the RICS, UK Finance and the BSA to address concerns over fire safety and cladding.

The intention behind the scheme was to enable owners to demonstrate that the cladding on their building had been assessed for fire safety by a qualified expert, and to confirm whether remedial work would be needed to resist the spread of fire over the facade.

It is not a legal requirement, but compliance with EWS1 has become a condition relied upon by mortgage lenders and valuers, and so it will be practically impossible to sell without one.

However, EWS1 was also being applied to buildings without cladding.

To address this problem, on 21 November 2020 the government, RICS, UK Finance and the Building Societies Association agreed that owners of flats in any buildings without cladding will no longer need an EWS1 form to sell or re-mortgage their property.

But what about owners of flats in residential buildings with cladding?

Many such owners are still struggling to sell or re-mortgage their homes.

In some cases, this is because no agreement is reached on whether an EWS1 form is required, or there may be delays in processing the form because of a shortage of qualified assessors.

EWS1 was originally only required for residential buildings above 18 metres, but this was subsequently widened in line with fire safety advice to include residential buildings below 18 metres “where specific concerns exist”.

This has caused great uncertainty for owners of many flats as there’s a lack of clarity over what those concerns must entail.

Unfortunately, this doesn’t look like it will be resolved speedily.

In November 2020 government announced “nearly £700,000” to train more assessors, which it claimed would lead to 2,000 more assessors within 6 months.

On 8 January 2021 the RICS published a consultation on proposed guidance for surveyors on the valuation of multi-storey, multi-occupancy buildings with cladding, aimed at valuers carrying out mortgage valuations to provide consistency on whether they should request an EWS1 form before proceeding.

The draft guidance is based on the more practical measure of the number of storeys in a building rather than its height, given that it’s not likely that a valuer will be able to measure the height of a building.

It suggests an EWS1 should not be required in:

·       Buildings over 6 stories without cladding or curtain wall glazing, and if there are balconies where the balustrades and decking are constructed of combustible materials (eg timber) they are not stacked vertically above each other.

·       Buildings between 5 to 6 storeys where there is not a significant amount of cladding (ie approximately a quarter or more of the surface façade); there are no ACM (aluminium composite material) or MCM (metal composite material) panels on the building; and if there are balconies where the balustrades and decking are constructed of combustible materials (eg timber) they are not stacked vertically above each other.

·       Buildings of 4 storeys or fewer provided there are no ACM or MCM panels on the building. 

This would reduce the number of buildings requiring EWS1. The consultation closed on 25 January, but we’ll have to wait for the final guidance to come at the end of February.

The costs of any remedial work can be immense. Generally, as the RICS consultation notes, the higher the building the more expensive any remediation work will be.

However, even on lower rise buildings the costs may still be significant as they will generally be shared between fewer units.

There’s been a lot in the media recently about tenants struggling with cripplingly high service charge demands imposed on them by their landlords for carrying out works to remove and replace dangerous cladding.

For long leaseholders, liability will depend on the provisions in the lease and the works being carried out.

Most leases include a service charge that obliges tenants to contribute to the costs of any works the landlord carries out to the retained exterior, structure and common parts.

Many landlords are also including in the service charge a sum for a “waking watch”; 24-hour fire marshal patrols in case there is a fire before dangerous cladding is replaced.

Service charges were already a common source of conflict between landlords and tenants before cladding became an issue.

I won’t go into detail in this blog post, as you could write a book on it.

Suffice to say that, under the Landlord and Tenant Act 1985, service charges are only recoverable to the extent they are reasonable and only if the works are carried out to a reasonable standard.

If challenged by a tenant, this is something that may be determined by a tribunal. Landlords are also required to consult with tenants before carrying out works above a certain value.

There is no definition in the 1985 Act of what is reasonable.

Two tribunal cases since Grenfell have determined that service charge costs for replacement of cladding were recoverable under the leases in question in those cases.

Nevertheless, the terms of every lease should be read carefully to determine the extent to which the landlord can recover the cost of repairs and improvements, and whether there is anything that can prevent a leaseholder being held liable.

Tenants should also find out whether they have new home warranty cover. If so, they should check when the policy was issued; that it is still valid; when it expires and whether it covers structural defects, including cladding defects. These policies typically run for 8 to 10 years and if valid can be claimed against to meet service charge demands.

Another possibility, albeit not an easy path or one without risk, would be to claim damages against any third parties who have not complied with building regulations, for example architects, builders, and developers.

However, even if there is a potential cause of action, many third parties would escape liability under the Limitation Act 1980. There is also the risk of incurring a significant costs liability if the case is lost, to add to the cost of remediation works.

Three and a half years after the Grenfell tragedy, many leaseholders are still having to live with the stress of facing financial ruin.

The funds made available by the government have proved inadequate to compensate tenants who, through no fault of their own, find themselves in such a dire situation financially, and one that for many tenants even remains potentially life-threatening.

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