Cladding - consumer Q&A


What is an EWS1 form and why is it necessary?

The EWS1 form is a cross-industry initiative from Building Societies Association (BSA), the Royal Institution of Chartered Surveyors (RICS) and UK Finance to enable a fire safety assessment to be carried out on properties clad with potentially combustible materials.

In line with government guidance, the EWS1 form was designed for mortgage valuation purposes to provide the information necessary for surveyors to assess the value of flats and apartments, facilitating lenders to lend. The EWS assessment is not and never has been a life / fire safety assessment.  Lenders and mortgage valuers are not fire safety experts, and must defer to the judgement of fire engineers and other professionally qualified specialists on these issues. 

In January 2020, the Government advice note for the owners of multi-storey, multi-occupied buildings was updated, making it clear that buildings of any height should include an assessment of cladding as part of their Fire Risk Assessment.

Following the new guidance from RICS which is supported by the Government, valuers will adopt a risk-based proportionate approach, which will see more consistency in when EWS assessments are called for. We anticipate many lenders will implement this guidance which could see the number of EWS1 requests fall. However, this is a decision for each lender to make based on their own risk appetite. 

What part does the EWS1 form play in a lenders’ decision to lend?

In order to make a mortgage offer to the buyer of any property, lenders must fulfil a number of regulatory responsibilities:

  • Through a valuation for mortgage purposes a lender must ensure that the amount of the mortgage is at or below the market value of the property. In practical terms the acceptable loan to value ratio is likely to be 90 per cent or less of the valuation, although there may be exceptions to this ratio, for example when borrowing is supported by a government-backed scheme.
  • To ensure that the property is structurally sound and safe for habitation, and
  • To ascertain that the mortgage requested is affordable for the borrower, taking into account any factors known at the time of application. The potential cost of cladding remediation is such a factor.

The EWS1 form currently provides the most consistent and reliable way for valuers and lenders to assess if a property with cladding might need remediation work which would affect its value, and that it is safe for habitation.

What happens if there is unsafe cladding on a building? Who pays for remedial works?

The EWS1 form contains various options. The fire professional will carry out a risk assessment of the building and if the risk is low they may recommend no remedial works. However, higher risk buildings are likely to need to have the cladding replaced.

The Government announced that it will pay for the removal of unsafe cladding for all leaseholders in high-rise buildings (over 18 metres or six storeys). Lower-rise buildings (11 to 18 metres) will be offered a new scheme to pay for cladding removal, through a long-term, low interest, government-backed financing arrangement. It is proposed that repayments will be capped at £50 per month. We are awaiting further details of these schemes from the Government.

Recently a number of builders have announced that they have set aside funds for remediation works on buildings they constructed.  

My flat is in a block which is eligible for a government grant or loan scheme to remove cladding from my building, do I still need an EWS1 form?

Following the new valuer guidance from RICS which is supported by the Government, valuers will adopt a risk-based approach to the use of EWS1 forms. We anticipate many lenders will implement this guidance which could see the number of EWS1 requests fall. However, this is a decision for each lender to make based on their own risk appetite. 

My building does not have cladding, do I need an EWS1 form?

No. Generally, buildings which have neither cladding nor a combustible timber balcony do not, and have never, required an EWS1. However, there are some buildings which externally look to be brick or stone built, but in fact have a brick or stone slip external wall system which constitutes cladding.  Some buildings also have decorative panels between windows/ floors which might mean assessment is still needed. 

My flat is in a building under 18 metres and qualifies for a government loan to remove its cladding. Will that affect the value of my property?

We are yet to see the full details of the loan and grant schemes, so there is no clarity currently on the impacts on flats or leaseholders. There will continue to be a need for valuers to understand the extent of remediation that might affect value, despite the loan scheme announcements.

My lender has valued the flat I want to buy and agreed to give me a mortgage without an EWS1 form. Does that mean my building does not need remediation work?

Those buying a flat should understand that a decision made by a valuer or lender not to require an EWS1 inspection under the new guidance is no guarantee that fire safety remediation works will not be required in the future.

What will lenders do to ensure that mortgage prisoners are not created?

We have yet to see the full detail behind the Government’s statement but have welcomed it as a positive step forward which will help many leaseholders who have been facing substantial costs. When we have seen the full details, we will be able to examine the implications for all leaseholders affected by cladding issues and also mortgage lenders.

Lenders need to ensure that the properties they provide mortgages against are valued accurately and that they are structurally sound and safe for habitation. At the same time, lenders are keen to ensure a normally functioning housing market exists and we will continue to work with government, the RICS and others in pursuit of the best solution for affected homeowners.

Borrowers living in flats affected by the cladding issue whose mortgage deal comes to an end can switch to a new mortgage product with their existing lender, provided that they are not looking to borrow any more than their current mortgage and their repayments are up to date. This situation is covered under the voluntary industry product switching agreement reached in relation to mortgage prisoners.

Why can’t borrowers remortgage without an EWS1?

Anyone coming to the end of their current fixed rate mortgage will be able to remortgage with their current provider, provided that they are not looking to borrow any more than their current mortgage and their repayments are up to date regardless of whether an EWS1 is available. Borrowers should not have to move onto their lender’s SVR rate.  It is true that switching mortgage lender or getting a further advance may be difficult as these are treated as new loans and so require a valuation which could trigger a need for EWS assessment.

Will the new RICS guidance get the housing market moving again?

We welcome the updated RICS final guidance for valuers, which adopts a risk-based approach to the use of the EWS1 forms.  We anticipate that many lenders will implement this guidance, which could see the number of EWS1 requests fall, and in turn should have a positive impact on the housing market. However, individual lenders will make a decision on whether to implement the RICS guidance based on their own risk appetite.

Contact

Simon Rex

Information Services Manager

Tel: 0207 520 5914 simon.rex@bsa.org.uk