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More Questions Than Answers

By Denise McKenzie.

I am sure many people will now be aware of the “cladding” issue which is stalling many sales and purchases at present, at a time the market can ill afford it.

Following on from the devastating fire at Grenfell, the UK Government has issued guidance around the use of cladding on high-rise buildings. As a consequence of this, Lenders are now asking for evidence that any high-rise residential building above 18m (about 6 storeys – from mean floor level as far as we understand it) does not pose a fire risk. Residential Surveyors who produce a Home Report prior to a property going on the market will place a £0 value on the property until evidence is produced to confirm it poses no risk.

The required evidence to confirm whether there is a risk or not is an EWS1 Certificate (External Wall System), which would state that the property either has cladding which passes regulation or it does not. The EWS1 form requires to be completed by a qualified professional who would carry out an inspection with a view to completing the EWS1 form and the Certificate. The seller instructing should check the cost and also ensure that the surveyor has sufficient professional indemnity insurance cover. The cost of the inspection is usually taken upfront and can be a considerable amount.

The guidance remains unclear but so far as we can ascertain the position is as below. However, this is all still very uncertain.

The process for inspection involves the surveyor gaining access to the flat in question and also the top floor flat. Because the surveyor cannot cause any damage to any fabric of the building during the inspection, they will use amongst other things an infrared camera to establish the type of cladding on the building. This obviously has an impact on when they can carry out the inspection in terms of daylight etc.

If the surveyor passes the property, then the Certificate and evidence of relevant insurance are granted to the seller to allow a sale to proceed. If the property is subsequently sold, then the insurance company who covered the certificate must also give permission for this to be used by a buyer/buyer’s lender.

The inspection may take about 6 weeks to complete and the Certificate is valid for 5 years. Of course, a Certificate does not guarantee a sale! Each owner is responsible for obtaining their own Certificate.

The implications of these changes may well be far reaching. Landlords may find that tenants will insist on seeing such certification when renting in a high-rise building. Couples divorcing may find it has an impact on any agreement in terms of the splitting of assets if they find their property is affected. Insurance companies may insist a Certificate is obtained before granting block Buildings Insurance. 

It is not just property sales this is affecting. It has unfortunately also had some impact on purchase transaction where clients have bought before selling, therefore incurring the Additional Dwelling Supplement (ADS – payable at a rate of 4% of the purchase price). This is a tax payable when someone buys a second property and doesn’t replace their main residence. However, some have found that because of the cladding issues they cannot sell and are either now getting very close to the 18 months period and risk losing the option of reclaiming the ADS.

  • Currently affects properties above 18m or about 6 storeys (measured from lowest point)
  • Certificate takes about 6 weeks to complete
  • Check the Building Surveyor has suitable professional indemnity insurance
  • Cost varies but some saying up to £3500 + VAT per property
  • Certificate lasts 5 years
  • Obtain before marketing
  • Need consent if to be passed on to a buyer

To summarise, it sadly appears there is no quick fix to this and it is essential that any sellers and buyers seek professional advice on any cladding issue.

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