Savills : How valuation guidelines on cladding may help ease delays for buyers and sellers of flats

Buyers and sellers of flats have been facing significant delays due to a lack of clarity surrounding the assessment of cladding for mortgage purposes, coupled with a shortage of qualified personnel to carry out the work.

Much-needed guidance issued by the RICS in the spring, in the form of the 'Guidance Note for the valuation of multi-storey, multi-occupancy buildings with cladding' offers some hope by providing clarity for valuers who need to decide whether or not to request an EWS1 check - EWS standing for external wall system or cladding.

The EWS1 form was introduced at the end of 2019 in an attempt to ease the stalemate created when buyers were advised they couldn't get a mortgage because the flat they wanted to purchase was in a high-rise building. The situation was made worse however when buildings 'of any height' were caught by the Government's consolidated advice note (CAN) published in January 2020 thereby widening the scope for the requirement of an EWS1 form.

The EWS1 form confirms the cladding has been suitably assessed for fire safety and any remedial action identified that could potentially affect the value of the property. However, ambiguity about when and if an EWS1 was actually needed led to a plethora of requests from valuers and, with too few experts to do the checks, a serious backlog.

The purpose of the RICS guidance is to help both valuers and lenders understand and weigh up the risk associated with premises where cladding may need remediation, and is one of many reforms that have taken place following the Grenfell Tower disaster.

In some cases an EWS1 form will not be necessary, for example if there is no cladding at all, or a low risk of remediation. Indeed, Secretary of State for Housing, Communities and Local Government Robert Jenrick announced on 21 July that lenders should no longer ask for EWS1 forms on blocks below 18m whereas previously features such as timber balconies or Metal Composite Materials (MCM) or Aluminium Composite Material (ACM) cladding on lower rise buildings meant that an EWS1 form was required.

The latest advice from the RICS following this announcement is that while the CAN is still in place, valuers have to follow the Guidance Note. We expect further updates from the RICS in the next few weeks but, in the meantime, the RICS guidance requests that valuers should not ask for an EWS1 without good reason.

It is worth adding here that certification of the existing cladding is not a replacement for the obligations placed on owners or those responsible for protecting life and keeping occupants safe from the risk of fire. It is likely that in the not-so-distant future, all fire risk assessments will require checks to external wall systems.

Once the risk has been assessed, the valuation process is relatively simple, and if remediation is not required, the valuer can value as normal. If action is identified in an EWS1 form and there is enough information on the extent of the work required, the valuer can value to the market in the usual way but making allowances for the known costs.

However, if a form is deemed necessary and not provided, or details of the remediation costs are unknown, the valuer may need to report a nil value until such time as the necessary information is provided by the building owner.

Valuers are now under a duty of care to identify and comment on the risks associated with clad residential buildings. Be prepared, and if in doubt seek early advice to make sure that you don't have unforeseen delays when you are buying, selling or mortgaging a property.

Further information

Contact Ian Fowler or Sarah MacGregor

Contact Savills Valuation