In a joint statement responding to the Royal Institution of Chartered Surveyors’ final guidance 'Valuation of properties in multi-storey, multi occupation residential buildings with cladding', UK Finance and the Building Societies Association said:
“UK Finance and the Building Societies Association, representing the UK’s mortgage lenders welcome the publication by RICS of the final guidance for valuers which adopts a risk-based approach to the use of the EWS1.
“Government confirmation that they support the guidance produced by RICS as an appropriate, risk-based and proportionate basis on which to proceed with valuation assessments, in line with the building safety Consolidated Advice Note published in January 2020 is also a welcome and necessary step for lenders.
“We anticipate that many lenders will implement this guidance, which should see the number of EWS1 requests fall. However, this is a decision for each lender to make based on their own risk appetite.
“Those buying a flat should understand that a decision made by a valuer 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.”
Notes to editors:
- While the revised risk-based approach when implemented by lenders and valuers will remove the requirement for an EWS1 on buildings which can reasonably be assumed to be low-risk, it does not change the building owners’ responsibilities outlined in the Government’s Consolidated Advice Note.
- The Institution of Fire Engineers has said: “IFE welcomes the RICS guidance to support valuers in adopting a risk-based approach for valuation assessments. IFE will continue to engage with RICS, the Government and lenders to help refine the guidance to ensure ongoing compatibility with other fire safety guidance and legislation.”
- In the Government press release of 10 February 2021 entitled - Government to bring an end to unsafe cladding with multi-billion pound intervention it stated the following further information:
the guidance produced by RICS as an appropriate, risk-based and proportionate basis on which to proceed with valuation assessments, in line with the building safety Consolidated Advice Note published in January 2020.
In addition, government will work with industry to ensure consistency between the RICS guidance, the forthcoming BSI Publicly Available Specification 9980 for cladding fire risk assessment, the imminent guidance on conducting Fire Risk Assessments as part of the clarified Fire Safety Order and the regulatory requirements flowing from the forthcoming Building Safety Bill.”
- Lenders will decide whether to implement the RICS guidance based on their own risk appetite in this market and whether they believe that the conditions placed on acceptance in the UKF/BSA consultation response - for both MHCLG and the IFE to endorse the new RICS valuer guidance - have been met.
- On 10 February, the Government announced additional grant funding for cladding remediation of buildings over 18 metres. A leaseholder loan scheme was also announced for lower-rise 11m – 18m buildings with monthly repayments capped at £50. We recognise these as a positive step forward, but lenders await further details on both schemes in order to assess any affordability or valuation implications for leaseholders.
- Both grant and loan funding is, as far as we know, only intended to cover cladding remediation costs. Other remediation work related to external wall systems such as that required for defective or missing fire breaks and internal compartmentalisation can be just as, if not more costly than cladding works. New Fire Risk Assessments (FRA) anticipated when the Fire Safety Bill is passed into law are expected to require competent authorities/fire services to direct building owners to address both cladding and other fire safety failures. The cost of these works could impact leaseholders quickly once the FRAs are underway hence the pressing need for government to provide clarity on its grant and loan schemes as well as how non-cladding works will be funded.
- The new RICS guidance and the Government’s cladding remediation funding announcements do not, in themselves, mean an EWS assessment is no longer required. The matter is not clear cut, as the content of the guidance shows. Early clarity on how non-cladding related remediation is to be funded and on how the leaseholder loan scheme will work is still needed to give certainty.