How do you solve a problem like cladding?

Since the Grenfell tragedy the question of fire safety and cladding has been a big issue in leasehold conveyancing. There are now legal requirements in place to ensure thorough assessments are carried out and any required remedial action is completed on cladded buildings, to avoid another tragedy happening, but there are still questions around who will cover the cost. And for properties that don’t require any changes, there is still a challenge faced by tenants trying to get insurance. Read on to find out more….

EWS1 certificate – when is it required and what do the ratings mean?

When buying a flat in a building which is more than 18 metres tall it is now standard practice that an EWS1 Certificate is supplied as part of the leasehold management sales pack and this is likely to be insisted upon by most lenders. The EWS1 Certificate is an assessment of whether there are any combustible materials present in the outside wall of the building.

Options A1 – A3 generally mean that the materials used are of a limited combustible nature (although works to balconies may be recommended). Whereas option B covers the situation that combustible materials are present. There are two categories within option B – B1 is where there are combustible materials present but the risk is low enough that no remedial action is required and B2 is where there are combustible materials present and remedial action is needed.

Who will cover the cost?

A B2 rating is unfortunately the position that many flat owners find themselves in. However it is still not entirely clear how this remedial action is going to be funded. Whilst it is certainly unfair to expect leaseholders to meet the repair costs, is it fair to make developers pay if they met the building regulations and safety standards that were in force at the time?

The government has recently announced that leaseholders of buildings more than 11m high will not be made to pay, which is welcome news. However they have stated that they expect the developers to foot the bill. It is unclear what will happen to buildings below this 11m height threshold, how this is to be enforced against developers (other than threats to prevent that developer from building and selling homes in the future) and what is to happen in the case that the developer no longer exists, does not have the funds or means to undertake repairs, or simply refuses.

A Building Safety Levy has been proposed as a tax on developers to raise £2 billion over the next 10 years and which can be used to help with the repairs to such buildings. However this could leave tenants unable to buy, sell or refinance, and living in a potentially unsafe buildings for many years before anything can be done to remedy their situation.

Unfortunately yet further negative results of receiving a B rating are coming to light. Most notably insurability of the building. Many insurers are refusing to insure buildings that are found to have combustible materials present, or will only do so by charging incredibly high premiums.

Challenges insuring B1 rated buildings

For buildings with B1 ratings it would have been fair to assume that, as no remedial works are needed, there would be no further issues. Unfortunately this is not the case. We are becoming aware of buildings that have been given B1 ratings and yet have recently been faced with an inability to insure, limited insurance options or premiums that have risen by over 500%. Despite the B1 rating, insurers are leaving the tenants of the building unable to deal with their properties and facing the prospect of having to undertake works to the building, even though this is not the official recommendation. Due to the B1 rating, they may also not be eligible for any funding or assistance that is put in place. The government has ordered an FCA investigation into the crippling costs of insuring leasehold buildings, but it is not yet known what the outcome of this investigation will be.