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How to sell a property affected by the cladding crisis

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How to sell a property affected by the cladding crisis
Cladding on tower blocks needs to be inspected for fire safety before banks will lend on flats

Four years after the dreadful fire that led to the loss of 72 lives in the Grenfell Tower in west London, combustible cladding continues to cast a shadow over Britain’s housing. Industry estimates suggest that more than half a million people in the UK live in buildings with potentially dangerous cladding materials – and many more could be affected indirectly. Quite apart from the danger to life, the cladding crisis has made many flats almost impossible to sell, as lenders refuse to provide mortgages on them unless their cladding is officially certified as safe, via a form called EWS1. New government advice should mean an improvement in the situation for many types of building, but cladding is certainly still a major factor to bear in mind when selling a flat. Here’s what you need to know.

What is the issue with cladding?

Following the Grenfell Tower fire in June 2017, attention focused on the aluminium composite material (ACM) cladding which had been fitted to the building, and which contributed to the spread of flames between floors. The government quickly began testing similar cladding materials for fire safety, and required landlords of residential towers taller than 18 metres with ACM cladding to submit samples for testing. 

Why is this a problem when it comes to selling?

The onus is on the building owner to demonstrate fire safety, but the required testing (to BS8414) is costly and time-consuming: according to the Association of Residential Managing Agents (ARMA), the tests can take 12-18 months and cost as much as £45,000. Without proof of fire safety, mortgage lenders can refuse to lend on properties within the building, as their valuers ascribe a zero value to them.

What if my building doesn’t have ACM cladding?

While the initial post-Grenfell focus was on ACM, in December 2018, along with passing regulations banning combustible cladding in high-rise residential buildings, the government issued an “advice note” for building owners. This new guidance was not limited to cladding but applied to the entire “external wall system” (EWS), which also includes insulation, fire-break systems, balconies etc, and covered the use of not just ACM but other common types of cladding, such as wood and high-pressure laminate (HPL).

The latest advice from RICS sets out the cases where an EWS1 certification form is required. In short, even buildings with no cladding require certification if they are at least five stories tall and have balconies stacked vertically above each other and constructed of combustible materials.

What is the EWS1 form?

The EWS1 form was introduced at the end of 2019 by the Royal Institution of Chartered Surveyors (RICS) along with the two main UK mortgage lending bodies. It is not an official government document, and is not required by law, but it does provide standardised evidence that the external wall system of a building has been inspected and approved by a professional surveyor, and in practice lenders are unlikely to approve a mortgage on an affected flat without one.

The form contains two options:

A: for buildings where the materials used in the external wall would be unlikely to support combustion, in which case the surveyor must certify whether any attachments (eg balconies) are also of safe construction. In this case the surveyor must select one of three certifications:

  • A1:  There are no attachments whose construction includes significant quantities of combustible materials
  • A2:  There is an appropriate risk assessment of the attachments confirming that no remedial works are required
  • A3: Where neither of the above two options apply, there may be potential costs of remedial works to attachments

B: for buildings where combustible materials are present in the external wall. In this case the surveyor must select one of two certifications:

  • B1: The fire risk is sufficiently low that no remedial works are required
  • B2: An adequate standard of safety is not achieved, and remedial measures are required (these are to be detailed separately).

Categories A3 and B2 indicate that the building does not meet adequate safety standards, so lenders will not approve loans on properties within it.

How do I obtain an EWS1 and who pays for it?

The EWS1 form needs to be obtained by the landlord of the building: typically the freeholder, or the management company where the block is run by leaseholders. The cost is not fixed and will depend on the size, type and location of the building, but will typically be tens of thousands of pounds, which landlords will often seek to reclaim from leaseholders, either through the service charge or by charging for copies of the form. 

An EWS1 applies to the entire building and is valid for five years. However, anecdotally some flat owners have encountered problems with lenders where, for example, different parts of the building have different postcodes

Does this only apply to high-rise buildings?

When it was introduced, the EWS1 form was intended for buildings more than 18 metres high. However, shortly afterwards, the government’s safety panel subsequently altered its advice to say: “The need to assess and manage the risk of external fire spread applies to buildings of any height.” This meant that lenders then refused to approve loans on flats in many low-rise buildings without an EWS1, increasing the number of affected buildings tenfold, from about 10,000 to 100,000.

As of March 2021, RICS guidance is as follows:

  1. Buildings four storeys and under will not need an EWS1 unless they contain certain materials
  2. Buildings of five and six storeys will not need an EWS1 if cladding covers less than one quarter of the building and is not ACM, MCM or HPL. An EWS1 will be required if the balconies stack vertically above each other and either both the balustrades and decking are constructed with combustible materials (eg timber), or the decking is constructed with combustible materials and the balconies are directly linked by combustible materials.
  3. Most buildings above six storeys with any form of cladding will need an EWS1 before they can be sold.

However, in July 2021, the housing secretary, Robert Jenrick, announced that “there is no need for surveyors or lenders to request EWS1 forms for buildings below 18 metres”. At the time of writing, neither the government nor RICS has updated its official advice, and lenders say they will not change their approach until this happens. Once this advice changes, mortgage availability on low-rise buildings and those without cladding will improve.

Can I sell my property without an EWS1?

As mentioned above, there is no legal requirement to have an EWS1 form. However, in practice lenders are unwilling to take the risk of lending on a property without one. It is still possible to market a property without an EWS1, or with a form indicating that work is required, but you will be reliant on cash buyers. Because there are fewer cash buyers, and they will be taking on the risk themselves which they will price into their offers, you can expect to achieve a considerably lower asking price.

What if the EWS1 form shows that action is needed?

An EWS1 with an A3 or B2 rating means that the building does not meet adequate safety standards. The government has announced that it will pay for cladding to be removed from buildings over 18 metres high, and proposed offering low-interest loans to leaseholders to pay for cladding on lower-rise buildings. However, the latter plan faced opposition and is likely to be revised in favour of wider funding to pay for remediation on lower buildings.

What if I rent my property out?

There is no requirement to have an EWS1 form in order to rent out a property. However, letting agents have a legal obligation not to withhold material information about the property to prospective tenants, so the lack of an EWS1 should be disclosed when advertising it.

What’s the situation in Scotland?

EWS1 forms are used in all four nations of the UK; however, in Scotland, unlike England, Wales and Northern Ireland, lenders have required a separate EWS1 for individual flats within a building. The Scottish Government announced in March 2021 that it would fund a Single Building Assessment to provide the fire safety evidence required by lenders, removing the need for EWS1 forms. It also pledged public funding for any remedial work required. The first cladding inspections began in August.

What should I do if I want to sell?

So what’s the advice if you want to sell a property in a block that doesn’t currently have an EWS1 form but is likely to require one? It depends on how urgently you need to sell.

We would not recommend trying to market a property without an EWS1 form unless there are exceptional circumstances that mean a quick sale is essential even at a greatly reduced price. 

This leaves two options: staying put until the EWS1 form (and schedule of work if needed) is in place, or, if it is essential that you move, renting out the property. You can still do this without an EWS1 form, but be aware that demand from tenants may be lower for properties that could be perceived as less safe.

The process of obtaining an EWS1 inspection can take several months - or longer - but that doesn’t mean you should wait before taking action. We recommend talking to local agents in advance to discuss your plans. They will be able to advise whether similar properties have sold to cash buyers and how much prices have been discounted. Agents may also be able to press for more information on the progress of EWS1 inspections from management companies. 

Another reason to talk to agents in advance of securing an EWS1 form is so that you can be quick off the mark when the inspection is completed. By being ready to list, you can be first in line to attract a buyer who has been waiting. A good agent will have a list of potential buyers and will be able to let them know about your property to generate interest in advance of EWS1 approval.

Movewise can identify the best agents to sell any property nationwide, by analysing millions of points of sales data. Choosing the right agent means you will have access to the widest selection of potential buyers and have the best chance of completing a sale rapidly once the EWS1 is in place. 

Complete our simple online form for a no-obligation best agent report, or for more information speak to one of our experienced sales advisors. 

For further information on cladding and EWS1 forms, see the FAQ section of the RICS website.

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