External Wall Fire Review.
In December 2019, RICS introduced a new industry-wide initiative with the aim of helping people living in high-rise property who had been left in limbo as a result of the fall-out from the Grenfell Tower tragedy. The intention of the new certificate is to help buyers, sellers and re-mortgagers of homes in buildings above 18 metres (six storeys), where there has been uncertainty about the cladding, and get the market moving again.
In this article we look at the development of the new certificate and how it will work in practice.
The problem
Since Grenfell, the Government has published a number of advice notes on the building safety website https://www.gov.uk/guidance/building-safety-programme#advice-notes. These guidance documents, intended to “…make sure that residents of high-rise buildings are safe – and feel safe – now, and in the future”, bring together the results of materials testing and industry enquiry on existing properties. They cover everything from combustible insulation, remediation of metal composite and aluminium composite material (ACM), urgent life safety interventions and smoke ventilation.
Specifically, the Government has banned the use of combustible material on some newly built property with effect from 21 December 2018. It has also directed that aluminium composite material (ACM) external wall systems, in certain circumstances, are to be removed from tall, residential buildings. They introduced guidance (MHCLG Advice Note 14) covering circumstances where there are other potentially combustible materials on existing tall buildings, including but not limited to; metal composite materials (MCM) faced with other metals such as zinc, copper, and stainless steel; high pressure laminates (HPL); and rendered insulation systems.
The problem was that, following the introduction of this guidance, in the instances where valuers did not know if the cladding on high-rise buildings met the new guidance, they were returning £0 valuations. This left leaseholders ‘trapped’ in properties they were unable to sell or re-mortgage.
The solution
Fire safety is one of the key considerations a valuer must take into account, and their valuation must meet the requirements of the RICS Valuation Standards. The External Wall Fire Review process, introduced by RICS, is a new standardised process to be used by valuers, lenders, building owners and fire safety experts in the valuation of high-rise properties, with actual or potential combustible materials used in the external wall systems and balconies.
This new process has been endorsed by RICS, UK Finance, the Building Societies Association, IRPM (Institute of Residential Property Management) and ARMA (Association of Residential Managing Agents). It is also supported by the Ministry of Housing, Communities and Local Government (MHCLG). The process requires a fire safety assessment to be conducted by a suitably qualified and competent professional. One assessment will be needed for each building and this will be valid for five years.
This applies to tall, residential buildings over 18m, which is consistent with MHCLG advice. RICS members must still consider each property individually and reflect in value and report accordingly if fire safety issues exist in buildings below 18m.
A new EWS form has been created to be completed by a fire expert, on behalf of the building owner, which will advise whether works are required. A valuer should obtain the EWS form where the building components appear to or do comprise combustible materials to the external wall system or balcony. If an EWS form is not available, the valuer should refer to lender guidance and consider withholding the valuation figure or condition advice until one is made available.
It is likely lenders will provide standard paragraphs for valuers to use when they either request or have sight of an EWS form. However, RICS has produced some wording for use where such wording is not provided:
“In arriving at the valuation for mortgage purposes, your mortgage lender and the mortgage lender’s appointed valuer (where applicable) we have relied on the EWS1 form in good faith by a professionally qualified third party. There is, however, no liability to the lender, the valuer or to you, the borrower for any losses or potential losses arising directly and solely from the valuation being provided in reliance upon the EWS1 form. If you require further information, then please seek independent advice prior to legal commitment to purchase.”
It is important that a disclaimer is used in all reports, that the valuer always checks that the person who has completed the form has completed the information set out in Notes 2 and 3, and that the information in the EWS1 form is complete and makes sense.
There is more information on this on the RICS website.
Bringing the EWS form and process to the market has truly been a collaborative approach. RICS started developing a solution in early 2019; during this time MHCLG’s advice continued to evolve, including an additional Advice Note about balconies. This led to further work to the initially agreed solution. Simultaneously, however, Fiona Haggett from Barclays had developed her own pro-forma and the genesis of having a standard form started there. Industry came together to drive the concept forward, culminating in implementation of EWS on December 16th 2019. It was particularly pleasing to lead a group of 50+ people and a working group to deliver something so important to so many in the housing chain.
John Baguley BSc (Hons) MRICS is Tangible Assets Valuation Director at RICS. He is a Chartered Surveyor, Accredited Mediator and qualified Ombudsman. He was previously a Senior Surveying Quality Manager with Esurv.
