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Combustible Cladding: What Leaseholders and Home Buyers Need to be Aware of

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Nearly three years on from the tragic Grenfell Tower fire in which 72 people died, hundreds of thousands of leaseholders continue to live in buildings that potentially contain combustible cladding. Although the Government has introduced new fire safety guidelines, many argue that more serious legal reforms are needed.

The Government now recommends that all multi-storey, multi-occupied residential buildings should be assessed for fire safety, including any cladding to the external walls. Where combustible materials have been used, all steps should be taken to mitigate the risks, such as completely removing the cladding.

But who is responsible for footing the bill for this expensive work? The Ministry of Housing has stated that, “there is no excuse for building owners not ensuring that residents are safe in their homes”.

However, with some building owners simply failing to act, and others actively pushing costs onto the leaseholders (leaving some with bills of up to £100,000), it is clear that gentle nudges are nowhere near enough to convince them to remedy the issue.

This has ultimately left around half a million leaseholders in limbo. Not only are the flats within these buildings at risk of fire, most mortgage lenders are refusing to lend until all fire risks have been assessed and remedied (where needed), preventing leaseholders from remortgaging or selling.

So what are the current laws and guidelines on fire safety and why are they failing leaseholders? Here, we examine:

  • The impact of the cladding crisis on leaseholders
  • The impact on people looking to buy flats in multi-storey, multi-occupied buildings
  • Mortgage lenders’ approach to cladding

The law and guidelines on fire safety and cladding

Although there are laws and regulations that specify what makes a building fire safe in the UK, many of the rules are contained in guidelines and Government Advice Notes, making it difficult to ensure compliance.

The Building Regulations

Fire safety is broadly regulated by Part B of the Building Regulations. Part B4 of Schedule 1 to the Regulations states:

“the external walls of the building shall adequately resist the spread of fire over the walls from one building to another, having regard to the height, use and position of the building”

This requirement applies to buildings of any height but the use of combustible materials is only expressly banned on the external walls and specified attachments (such as balconies) of buildings taller than 18 metres.

Part B4 is supported by Approved Document B which includes guidance on fulfilling fire safety requirements. However, these guidelines are not mandatory and the document itself states, “there may be other ways to comply with the requirements [of the Building Regulations] other than the methods described in an approved document”. This adds an extra layer of confusion over whether a building is “fire safe” in line with the Regulations.

The Regulatory Reform (Fire Safety) Order

The Regulatory Reform (Fire Safety) Order (RFFO) requires that all purpose-built blocks of flats should have necessary fire precautions and an up to date fire risk assessment in place, regardless of height. The duty to meet these requirements falls to anyone who controls the premises or has a “degree of control” – referred to as a “responsible person”. In the case of flat buildings, this duty is usually held by the owner and/or their management company.

After Grenfell, the Government also introduced Advice Note 14 (AN14) that set out guidance for owners of tall buildings (buildings over 18 metres high) on how to satisfy the requirements of the RFFO.

Latest Advice Note and the Fire Safety Bill

On 22 January 2020, the Government published a further Advice Note that supersedes AN14 and all other previous Advice Notes. This latest advice states that the owners of all multi-storey, multi-occupied residential buildings (not just those over 18 metres tall) should investigate and remedy the risks of combustible cladding. While AN14 drew from the RFFO, the new Advice Note focuses on complying with Part B4 of the Building Regulations.

The Government also intends to introduce a Fire Safety Bill to clarify that the responsibility to consider and mitigate the risks of cladding falls upon building owners and managers. Building owners are expected to take immediate action to mitigate the risk of fire from dangerous external wall cladding rather than waiting for the new law to come into effect. However, whether building owners take the Government’s recommendations to heart remains to be seen.

Impact on leaseholders

For leaseholders of flats in buildings that may or may not have combustible cladding, the recent changes in Government guidance and planned changes in the law cannot come soon enough. However, many building owners have yet to be persuaded to undertake the required investigations and remediations.

The cost of replacing dangerous materials on all private blocks in the UK is estimated to cost upwards of £2 billion. Despite calls by leaseholders for Government help, until March 2020 Government had only committed £600 million to fund work on high-rise buildings, and only for those clad in Aluminium Composite Material (ACM) – the same material that caused the rapid spread of the fire at Grenfell.

As part of the March 2020 Budget, the Chancellor, Rishi Sunak, announced a £1 billion fund to strip combustible cladding from all buildings over 18 metres tall, not just those clad in ACM. However, it is suggested that this is still not nearly enough to tackle the issue, with Sunak insisting that building owners and developers still need to pay “their fair share”.

Building owners themselves have been slow and apparently reluctant to carry out assessments or have encountered difficulties finding someone qualified to do the work.

With mortgage lenders unwilling to lend without evidence that the building has had a fire safety assessment and received a certificate of compliance (called an ESW1), numerous leaseholders have reported sales falling through. This has left thousands effectively trapped in their dangerous and potentially worthless flats.

Many leaseholders are also facing escalating costs in insurance, legal fees, mortgage rates (as they are unable to remortgage once their fixed terms end) and service charges (with many buildings introducing a 24-hour fire marshal watch).

The fear that another Grenfell could happen at any moment has left many leaseholders living in fear. The Government has been criticised for responding to such a dangerous issue with guidelines rather than regulations. For example, the Building Regulations only expressly forbid the use of combustible cladding on buildings over 18 metres high.

The dangerousness of this rule came to light in November 2019 when a student block in Bolton was seriously damaged in a fire. Its cladding – a particularly hazardous form called High-Pressure Laminate (HPL) – had not been removed because the building fell just a few centimetres short of the 18 metre height requirement.

Since this event, the Government has stated it plans to drop the legal height limit to 11 metres, but this has yet to come into effect. The Government has also not committed to fund any remediation work for building lower than 18 metres.

Impact on buyers

For those looking to buy a new home, the cladding issue has limited the available housing stock. For some, particularly first time buyers looking in London and the South East, buying a leasehold flat (either outright or through a scheme such as Shared Ownership) may be their only affordable option.

However, the new focus on building fire safety means there are many factors buyers should be aware of before attempting to purchase a flat in a multi-storey, multi-occupied building, including:

Mortgages

After Grenfell, the building must have a signed EWS1 (a certificate of safety) in place. Without an EWS1, lenders may refuse to provide a mortgage. However, this could take several months to obtain and many purchases have fallen through because of delays caused by the building owner or by an inability to find someone to undertake a fire safety assessment (there has been a concerning shortage of experts qualified to undertake the EWS1 process).

Changing fire safety rules

With the Fire Safety Bill on the horizon, buyers should be aware that there could be further changes to the way building owners are required to ensure buildings are fire safe and how mortgage lenders assess fire safety. It is essential to obtain expert legal advice at all stages of the transaction to avoid any pitfalls and to take all possible steps to ensure the flat retains its value after the reforms.

Mortgage lenders’ views on cladding

Since Grenfell, changes to the Building Regulations and Government advice have caused the housing market to stall.

Somewhat understandably, mortgage lenders do not want to lend money on properties containing materials that are both a risk to life and to value of the property. To combat this issue, the External Wall System 1 (EWS1) form was introduced to reassure lenders concerned about combustible cladding.

EWS1 is a way to confirm that a particular building meets the requirements of the Building Regulations. Until a building has an EWS1 form and certificate of compliance, most mortgage lenders will value its flats at £0 and refuse to lend.

Some lenders are still reluctant to lend even where an EWS1 has been provided, demonstrating that the solution has not been entirely successful. With the introduction of the new Government Advice Note drawing even more buildings into the cladding crisis, it is clear that lenders will need further assurances. One solution could be to introduce a Government insurance policy, paid for by the buyer, to pay for any works if needed.

Do you need advice about buying, selling or remortgaging a flat in a multi-occupied building?

At Harold Benjamin, our specialist residential property solicitors can provide advice about all aspects of buying, selling or remortgaging property.

We have worked closely with numerous leaseholders and home buyers on conveyancing transactions involving cladding, and we are able to provide detailed advice about the challenges you may need to overcome. We will take all possible steps to progress your matter as swiftly and efficiently as possible, minimising costs wherever possible.

For expert advice, get in touch with Ric Mapp and our residential property team by giving us a call at your local branch in Harrow or the West End. Alternatively, please fill out our online enquiry form and a member of our team will be in touch shortly.

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