Cladding problems for flat owners goes on

The cladding pain for flat owners goes on.

Cladding Problems for Flats

It may take years before flat owners find their problems with dangerous cladding are resolved.

The problem is thought to effect as many as 40,000 flat owners. They cannot sell their properties because they are still waiting for EWS1 certificates. EWS1 refers to the External Walls Fire Review, a scheme put in place by UK Finance representing lenders and Chartered Surveyors. This is the document they need to prove their flats are now safe. Some are still waiting even though the works to fix the problems have been done.

With no certification, mortgage lenders are not able to offer mortgages, so buyers dependent on mortgage financing cannot proceed. Others are stuck on expensive standard variable rates, unable to switch to cheaper mortgage deals or move to cheaper lenders.

Many people wish to sell as they don’t consider the flats safe to live in any more, despite fire watches – which are required to be in place (see below). And many people do not wish to rent these properties either, so landlords are often stuck in the middle with unlettable flats.

But, as always with property, someone’s pain can be someone else’s gain.

The cladding nightmare does offer a possibility for very brave cash buyers to get big discounts from those who have to move. Some buyers seek to get a discount (to cover anticipated costs) at exchange of contracts and then also include within the contract a clause to allow the price to be reduced further if problems with cladding are discovered later.

There are currently long waits for the checks to take place – this is due to excess the demand for the Fire Consultant Surveyors to do the work – and if problems are discovered, there are longer waits to follow until the repair works are actually completed and signed off.

Cladding Building Safety Fund

The government has made a £1bn Building Safety Fund available, (topped up with another £3.5bn in February), but figures released by the government in early December showed that whilst 2,800 blocks had applied for funding to fix their cladding problems, only 300 were scheduled to proceed, whilst about one thousand had failed to provide enough information for a decision to go ahead to be made. Another 500 applications failed outright or had been withdrawn.

But I hear that even getting on the portal to log information is actually very difficult – the site keeps crashing and there are other issues with getting information loaded.

Those campaigning on this issue say that the figure needed to fix the cladding problem is more of the order of £40bn, not £1bn. (Applications for the fund must be completed by the end of June).

Recently, a new fund worth £30m was made available for residents whose properties must be patrolled by fire wardens – so called “waking watches” – and for extra fire alarms. There has been some evidence that blocks have been overcharging on the cost of these “waking watches”.

So, it is a tough situation for flat owners – but an opportunity for buyers.

Cladding Issue Is Big Business for Insurers

The other people making money out of all this are indemnity insurers. They are charging the Fire Engineers, (who are often ex Fire Officers), much bigger premiums now. I heard of one whose premiums have gone from £60,000 to £130,000 per annum.

Part of the rise in these premiums is due to the risk premium being enhanced because no one quite trusts the materials being used – so the certifiers’ premiums have gone up.

Plus, companies who actually do the replacement work are also charging premiums prices to do the work. Possibly, they know it is the government who is covering this and possibly they also have a worry about reputation risk, should there be some come-back in years to come, if the new materials prove to be dangerous too.

Basically it is a mess with a lot of nervousness around – very much like the CoronaPanic which also continues to roll on, seemingly without end.

Personally, as someone who has always preferred houses to flats and who has never bought a flat that was over one story high, I’m not affected. I’m very glad about that.

That said, flats without gardens are in less demand than they were following the “Covid Plague” – but their time will come again – and the discounts offered by some to sell their “Cladding Plagued” flats will be tempting to some and may make good investments over time.

Update 14th Jan

The Royal Institution of Chartered Surveyors (RICS) has proposed a plan to allow some sales to proceed without an EWSI. They propose that blocks over 6 storeys be exempt if they have no cladding and those over 6 storeys to be exempt if less than 25% of the external walls are clad, unless highly inflammable aluminium or composite material, as used at Grenfell, is present. Buildings of 4 or less storeys will be exempt unless they have the most dangerous type of cladding.

A public consultation has just closed and RICS would like to implement new rules before late Spring.

Meanwhile an amendment to the Fire Safety Bill from two Conservative MPs, Stephen McPartland and Royston Smith, would prevent costs being passed onto leaseholders.

Nevertheless, the government is looking into how cladding repairs should be funded, including a plan to set up 30 year loans for block owners to be charged back to leaseholders in service charges over time.

But leaseholders are appalled. They did not build the flats or choose the materials to build them, so why should they pay, they ask.

I agree and I like the idea of the setting up of a special bond better. This is the brainchild of the Leasehold Knowledge Partnership. The bond would fund repair work with the payments back on the bond to be made by developers and extra taxes on foreign buyers over time.

After all, all the big house builders – flush with big profits from years of Help to Buy – have done pretty well from government largesse and the crack cocaine of Help to Buy (House Builder Director’s Yachts). Maybe they now need to put something back!

More Fire Issues Uncovered

When doing the assessments, a whole host of other problems relating to the way buildings were built are being found.

The Fire Industry Association has said that in more than half of safety assessments they found cavity wall defects. These on their own are enough to cause buildings to fail safety checks. It seems that cladding is not the only problem – there are many other problems underneath.

Apart from cavity wall issues, there are problems with fire breaks, insulation, fire doors and the structural paint used on steel.

One wonders, what the heck the buildings control officers were doing – an issue we have highlighted here before. It really is time the big house builders and the insurers of new builds paid out from some of the big profits they have made in recent years – much of it from government largess such as Help to Buy – which was ultimately paid for by taxpayers.

Now pay up!

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