UK Finance and the Building Societies Association (BSA) have responded individually to the Royal Institution of Chartered Surveyors (RICS) consultation entitled Valuation of properties in multi-storey, multi occupation residential buildings with cladding.
We anticipate that RICS will receive multiple responses from a wide range of interested parties and therefore we cannot pre-judge the content of the final valuer guidance. However, the key comments we have made in our consultation responses follow:
Many, but not all, lenders were supportive of the guidance proposed by RICS and the principle of a risk matrix approach to the use of the EWS1 form. However, those who were supportive would need to see the following actions before they could be in a position to rely on such guidance:
- Clear support and public endorsement of the RICS Valuer guidance from the Institution of Fire Engineers (IFE). Ultimately the decision on whether a building requires remediation is down to the professional judgement of qualified and experienced fire engineers, so the IFE’s support for the guidance on reasonable assumptions for building criteria / heights, and definition of “significant amount” of cladding on a façade is particularly important.
- The main source requiring risk assessment of buildings with cladding is the Government’s Consolidated Advice note, which currently states that buildings of any height should include an assessment of cladding as part of their Fire Risk Assessment. Lenders require clear support and endorsement of the RICS Valuer guidance from the Government which includes written confirmation from MHCLG or their expert panel that the proposed guidance is consistent with the January 2020 Consolidated Advice Note and the November 2020 supplementary note.
Government should release the Feedback Statement on its Risk Prioritisation of Existing Buildings Call for Evidence. It has been almost a year since this call for evidence closed, and if the evidence government has collected presents a picture that is materially different to the proposed RICS guidance all parties need to know this.
- We would like more information provided to customers during the home buying process so that they are clear about the potential risks, for example that at some future point the cladding may need to be removed and replaced. This information could include highlighting the limited scope and purpose of the mortgage valuation and the opportunity for buyers to do more due diligence through other products such as a Homebuyer Report.
- The proposed guidance will require valuers to estimate the extent of cladding coverage and to identify some types of cladding. Clarity is needed from valuers that under the light-touch ‘valuation for mortgage purposes’ which lenders require, they will have the time to do this. We are concerned that not only will the additional estimation of coverage and identification of cladding type impact on their time, but that professional indemnity insurers will be uncomfortable with valuers providing a report that is beyond the expectations of a mortgage valuation, and which could later be challenged with ramifications if found to be inaccurate.
- Decisive resolution of issues around the availability and affordability of professional indemnity insurance for valuers and EWS1 assessors, if necessary, through government intervention as the insurer of last resort.