Cladding: RICS Updates Mortgage Valuation Guidance

 

Following its recent consultation with the fire safety industry, insurers and lenders, the RICS has updated its mortgage valuation guidance for multi-storey, multi-occupancy buildings with cladding.

The guidance is aimed at valuers carrying out mortgage valuations on such buildings and specifically to clarify whether they should request an EWS1 form before proceeding.

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.

As explained in an earlier post, problems arose when EWS1 came to be applied to buildings without cladding, until it was agreed in November 2020 that in those circumstances the form was no longer required.

There was still a concern however that mortgage lenders and insurers were requiring EWS1 on too wide a range of buildings, and that was what prompted the consultation earlier this year.

The new guidance states the following:

·       If a building is over 6 storeys, an EWS1 form should be required where there is cladding or curtain wall glazing on the building, or there are balconies that stack vertically above each other (of which certain elements contain combustible material).

·       If a building is of 5 or 6 storeys, an EWS1 form should be required where there is a "significant amount" of cladding on the building; there are aluminium composite material (ACM), metal composite material (MCM) or high-pressure laminate (HPL) panels on the building; or there are balconies that stack vertically above each other (of which certain elements contain combustible material).

·       If a building is 4 storeys or fewer, an EWS1 form should be required only if there are ACM, MCM or HPL panels on the building.

The EWS1 form itself has been updated.

There is a helpful interactive decision tree on the RICS website that takes you through the criteria covered in the guidance note to help valuers arrive at a decision on whether EWS1 is required.

The RICS emphasize that EWS1 is not intended to be, nor should it ever be used as, a substitute for or part of a professional life safety fire risk assessment of any building. 

It is not a safety certificate and the fact that an EWS1 form is not required for a particular building does not mean that the building may not require some form of remediation in the future.

The guidance takes effect from 5 April 2021, but the RICS encourages earlier adoption.

Whether lenders change their practices because of this guidance remains to be seen. 

The guidance is only aimed at valuers, who will still need to follow whatever instructions they are given by their lender clients, a point acknowledged by the RICS.