What is cladding?
Cladding is an external material used to insulate and improve the appearance of buildings. It can also help to protect buildings from weather. Cladding can be found on all types of buildings but is usually associated with high-rise buildings.
Why is it so important?
The Grenfell Tower fire in 2017 raised awareness about cladding and its impact on fire safety issues. Despite building regulation sign off, it was clear that cladding in the building was unsafe and increased the risk of fire spreading. Investigations following the tragedy revealed that the Grenfell Tower fire was facilitated by combustible plastic cladding. In a bid to prevent another tragedy occurring, the government have introduced new legislation.
How have the rules changed?
In January 2020, the government advised that owners of all multi-storey residential buildings should investigate the risk of cladding that is combustible. A Fire Safety Bill is currently in the process of being debated, and has been returned to the House of Commons for amendments to be considered. This bill re-iterates the responsibility of building owners and management agencies to remedy cladding issues.
In December last year, a certificate of compliance called External Wall System 1 (form ESW1) was introduced to ensure building regulations requirements are met.
To the relief of many, the Government has announced that owners of flats and buildings without cladding will no longer require an EWS1 form (an external wall fire review process) when selling or re-mortgaging their property. This will provide significant relief to the owners of such properties for whom the requirement for EWS1 has caused problems, delay and (in the words of the Government announcement) "unnecessary anxiety".
This move follows an agreement reached on 21 November 2020 between the government, the Royal Institute of Chartered Surveyors (RICS), UK Finance and the Building Societies Association (BSA).
In terms of the process for home-owners of building that do have cladding, the Government has committed to spend nearly £700,000 for the training of 2000 more building assessors to speed up the process where EWS1 forms are required. This will hopefully assist the huge back log which has built up.
Looking ahead, the Government is continuing to explore further ways in which they can address concerns relating to the availability of professional indemnity insurance. Good news within the industry is that steps are being taken to develop a portal where lenders, valuers and leaseholders can check if a building has an existing EWS1, thereby reducing the need for duplicate forms.
Who do these changes affect?
In many leases, it will be the landlord’s responsibility to repair and maintain the external and structural parts of the building. The landlord is also required to carry out necessary risk assessments and must comply with health and fire safety regulations.
If cladding does need to be replaced, then, unless the building contains social housing or is owned by the local authority, it is likely that landlords will seek to recover the costs of remediation through the service charge and, as such, means that many leaseholders could be faced with a hefty bill.
In most cases this will be the subject of mandatory statutory consultation with the Leaseholders, through the 3 stage section 20 consultation procedure. If a leaseholder has received a section 20 notice, specific legal advice should be sought.
In line with government advice to building owners, obtaining funding through service charges should be seen as a last resort, and insurers and/or developers could be approached regards funding.
The Government have also put aside £1 million, under the Building Safety Fund, in 2020-2021 to support the remediation of unsafe non-ACM (alluminium composite material) cladding system on residential buildings 18 metres and over, both in the private and social housing sectors. This could be seen as an alternative funding source. This will be explored further below.
In any event, leaseholders should liaise with freeholders and management companies to clarify the cost arrangements.
Aside from the potential cost implications, it has also become more challenging to obtain mortgages for high-rise properties. Valuations from mortgage lenders establish whether there is cladding present in the building.
If the cladding does not meet the necessary requirements, this could significantly impact valuations.
As a seller, if you live in a building which has unsafe cladding, this may affect the saleability of your property or your ability to re-mortgage. Your solicitor will be able to establish the existence of cladding during the enquiries stage of a conveyancing transaction. When purchasing a property with cladding, a copy of the BR 135 fire safety certificate should be supplied as well as a Fire Risk Assessment.
If there is not an existing Fire Risk Assessment, then your solicitor should ensure that confirmation is obtained from the freeholder that there are active plans for this to be carried out.
As set out above, the government have pledged to provide £1 billion in 2020-21 to fund the removal/replacement of unsafe cladding systems, in addition to the £600 million which the government has already made available to ensure the remediation of the highest risk cladding.
Whilst this seems like a good initiative, in reality it seems unlikely that this funding will be anywhere near enough to cover the remedial costs for every affected property.
The deadline for building owners to apply for the Building Safety Fund has just been extended; building owners now have until 30 June 2021 to make an application. If an application has not yet been made, building owners must ensure that this application is made quickly to ensure that the deadline is not missed.
Leaseholders should be applying pressure to building owners to make this application, or else try to obtain confirmation from the building owner that funding will be sourced elsewhere.
Whilst the requirement for ESW1 forms has finally been clarified, it remains to be seen what long-term impact form ESW1 has on lenders for properties which still require these, and how funds will be allocated by the government.
Hopefully, the government will act upon their current advice to property owners to consider other funding options before seeking to fund these works through the provision of service charges.
However, until then, it is likely to be the case that building owners will seek to recover any costs at the detriment of leaseholders.
For any leaseholders in this unfortunate situation, it is advised that they seek specific legal advice.
If you would like to discuss anything further or you are concerned about the impact cladding may have on your property, please do not hesitate to contact Sian Meredith on 01489 864 152 or email at email@example.com.