What is the latest update in the ‘cladding crisis’?

When should form EWS1 be used?

As it stands, form EWS1 is used in respect of external wall construction of a residential apartment building where the highest floor is 18m (or six storeys) or more above ground level, or where there are specific concerns about combustible cladding. Building owners have the responsibility to obtain this however it may be necessary to refer to the local authority when this is not possible.

What changes are being proposed?

The Royal Institution of Chartered Surveyors (RICS) are consulting on proposed guidance. This is to be aimed at valuers carrying out mortgage valuations on residential properties with cladding and is hoped to help provide more clarity as to whether they should request an EWS1 form before proceeding. The consultation will be open from 8^th-25^th January 2021.

The following criteria has been proposed which would define the buildings which are less likely to require expensive remediation work affecting value:

1. Buildings over six storeys should not require the form unless:
2. There is no cladding or curtain wall glazing on the building and
3. If there are balconies where the balustrades and decking are constructed of combustible materials, they are not stacked vertically above each other
4. Buildings of five or six storeys should not require the form unless:
5. There is not a significant amount of cladding on the building (for the purpose of this guidance, approximately one quarter of the surface façade is a significant amount) and
6. There are no ACM or MCM panels on the building and
7. If there are balconies where the balustrades and decking are constructed with combustible materials, they are not stacked vertically above each other
8. Buildings of four storeys or less should not require the form unless:
9. There are no ACM or MCM panels on the building

How will these changes help?

The proposed criteria would reduce the scope of buildings subject to the assessments. Valuers will be able to make a reasonable assumption about the valuation of properties in these buildings without requesting an EWS1 form from building owners. This may help reduce the number of buildings which need to be inspected. Currently there are not enough qualified inspectors (the Housing Ministry estimates there are only 291 inspectors) to carry out cladding assessments. It is also a very time-consuming process to undertake the assessment itself. Reports suggest it can take between 2 weeks to 1 month to inspect one block of flats. The Association of Residential Managing Agents (ARMA) have suggested that a delay of 8 months in obtaining form EWS1 would not be unrealistic. As a seller, this could be problematic as it could cause long delays to the conveyancing transaction. As a buyer, this could impact your mortgage finance as there is a risk that your mortgage offer may expire in the time it takes to obtain the form.

There are also clear delays in remediation – of the 315 residential blocks/public buildings that had been identified at the end of 2019 as having aluminium composite material (ACM) cladding, only 135 had been subject to any form of remediation. The government announced in March last year that it would provide £1 billion in 2020/21 to support the remediation of unsafe non-ACM cladding system on residential buildings that were 18 metres and over (in both the private and social housing sectors). However, it is estimated the fund will only cover the costs of remediation for just one third of buildings that are eligible to claim from it.

Ben Elder, Head of Valuation Standards at RICS has said “There will clearly still be many cases where an EWS1 form is necessary but the guidance and insight resulting from this consultation will enable us to continue to work with stakeholders, including the government, to find solutions to help speed up the process for remediating these buildings”. In addition to time delays, an EWS1 is very expensive and can cost up to £10,000. The cost of undertaking the works falls on the freeholder/managing agent however building owners are finding it difficult to fund such works, causing even more delays.

When will we know the outcome of the consultation?

The proposed guidance note will require final approval by RICS independent standards and regulation board. It is due to be published in February 2021. It is hoped that new consistent guidance will help provide clarity for building inspectors, provide more certainty for sellers/buyers and ultimately reduce the severe time delays we are seeing currently in the “cladding crisis”.

Overall, purchasers should be aware that if they are looking to buy a property with cladding, an EWS1 may be required which could delay their purchase transaction, and currently, qualified inspectors who carry out the surveys for the issuing of these certificates are few and far between. Sellers also need to be mindful of the EWS1 process if they are looking to sell their cladded property. Hopefully, if passed, the new RICS guidance will reduce the scope of buildings that need remedial work and assessments can take place in a much more structured way going forwards. This in turn will reduce the need for the EWS1 and allow for properties with cladding to be sold and purchased with less delay.

If you would like to discuss any of the issues raised in our article further or if you are concerned about the impact cladding may have on your property transaction, please do not hesitate to contact our residential property team who will be happy to assist you. The information contained in this article is correct at the time of publication – February 2021.