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Guest Blog: Mortgage Lenders Must be Flexible after Grenfell

By Joseph Gurvits, founder and managing director of Y&Y Management

Four years on from the Grenfell Tragedy the UK housing market is still suffering through the cladding crisis. The new EWS1 certificate introduced as a method of assessing properties fire risk and determining if they were affected by the same types of cladding that were implicated in the Grenfell Fire.

The Government’s intention was good, to find those high-risk properties affected by ACM and other dangerous cladding and remedy the situation as quickly as possible. But as time went on, the surveys conducted for an EWS1 certificate quickly brought up other fire safety considerations. Therefore, in January of 2020 the Government expanded the requirements to all properties that had external wall systems to conduct a fire safety assessment.

Very quickly, mortgage lenders refused to accept applications without the full EWS1 certificate. Rather than simply accepting the existing fire safety measures, many of which were above and beyond the necessary requirements. These didn’t matter to mortgage lenders, without an EWS1 you wouldn’t be getting finance.

The campaign group End Our Cladding Scandal estimates that almost 2m homeowners are impacted by these new requirements but for many it is an avoidable situation.

Two years ago, as these new regulations were being introduced, this blanket approach has understandably been justified. There was a great deal of uncertainty in the market but as we sit today the landscape is very different.

Property managers acted quickly on these new regulations and conducted extensive internal surveys. For our properties that received a poor rating on the EWS1 form we have made significant efforts to resolve the issues. Where appropriate we have introduced a round-the-clock waking watch, installed new fire safety provisions all at great cost.

Following these surveys and risk assessments, we received recommendations and have acted quickly, in the middle of a pandemic, to commission architects and planning consultants, prepare tender processes with contractors and applied to the various Government relief schemes. In some simpler cases we have even started the remediation work. Yet even as the roadmap out of this crisis is becoming more certain for these properties, mortgage lenders are refusing to acknowledge this change in circumstances.

As we have taken significant measures to reduce the fire risk, the new source of stress for tenants and leaseholders is the inability to get a mortgage on their property. Mortgage lender’s insistence that properties have an EWS1 form, particularly for those properties where the form is not required, is at best adding additional bureaucracy to the house buying process and at worst effectively renders a property valueless. In such a situation, leaseholders are unable to sell their properties and have no clear sign of relief from their situation other than waiting until the remediation works are complete. With the huge demand for contactors capable of making these repairs, it is unlikely that we will see these works completed and the new EWS1 surveys issued for years to come.

Landlords, developers and property managers are working hard with the government to try and resolve the issues with the buildings as quickly as possible, but insurers and mortgage lenders are proving reluctant to be flexible and help work around the situation for the sake of leaseholders.

Two years into the crisis the blanket approach by lenders is no longer appropriate to every case and failing to adapt their criteria will only do lasting damage to the property market.

With over 1.3 million properties affected across the country, many of which were purchased by first time buyers, are now either valueless or are being sold at huge discounts to cash buyers. Without a pragmatic approach, the distress put on these sales will have a significant and lasting impact on the housing market.