All because we now have a robust system to save lives. The secret is to understand why the government is doing this; they’re not preventing people from re-mortgaging – this is essentially a perfect system.
Let’s first understand it all so we can explain to clients.
We all remember the scenes of heartache, utter helplessness and the destruction of life from the Grenfell disaster in 2017. Fundamentally fire caused the debacle accentuated by external cladding on the walls of the tower block. We don’t need reminding of this.
The government were determined to do something about the problem, and with typical Civil Servant’s enthusiasm came up with a solution where some people and properties slip through the cracks of common sense.
The rules now require that all blocks must have a signed certificate – called an EWS form – External Wall System – which confirms that the building has no inherent fire risk from any external features. Since 2020, blocks below 18 metres have also been captured by the rules and lenders are including virtually every block of flats however tall they are. It includes flats, apartments, student accommodation, HMOs (Houses of Multiple Occupation, care homes.
It was the lending industry that was consulted with these rules – RICS, the BSA and UK Finance – so that people could buy and sell the property and obtain mortgages on them.
It’s a process, like all rules. It needs a qualified person – think RICS surveyor – to assess the block and issue the form, valid for five years. Signing the form brings smiles to lender’s faces as they know that the block is mortgageable. Without the form, the property is mortgageable. Surveyors will return a nil mortgage valuation in these situations. This further explains why the mortgage valuation is very different from the market value. A nil valuation means that the property is not suitable security for a mortgage; it doesn’t reflect the value.
The freeholder owner of the block must commission the EWS process which often leads individual leaseholders to rue this omission since there’s very little they can do. This causes newspaper outrage “flat owner left in the lurch”. Some freeholders are reluctant to commission the report because of the cost of any remedial works. Unfortunately, these works often fall upon the individual leaseholders to foot the bill via their maintenance charges. It’s always good advice to check the accounts of the maintenance association when buying a leasehold flat to see if there is money in the bank to pay for expensive works such as re-roofing and cladding removal.
Another nail in the coffin for leasehold properties in England and Wales maybe. It’s about time lenders, developers et al. embraced commonhold – it’s far superior.