Concerns expressed over Safety and Saleability of Purpose Built High Rise Flats

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    Concerns expressed over Safety and Saleability of Purpose Built High Rise Flats

    I thought I would provide an article which appeared in this months leading mortgage publication, I am sure applies to many relatively new High Rise Blocks of flats, this is coincidental on my receiving a call from a director of a Residents Management Company regarding the fact that flats within a complex in London where I have an interest in a Top Floor flat which have either been declined for mortgage purposes for purchase or even for raising capital by Further Advances. According to the director , lenders are indeed seeking for such property a certificate that the cladding/insulation fully complies with regulations and furthermore have undergone fire testing. The problem with this dictum from lenders is that it is also being applied for those blocks where there are no more than 5 floors.

    I intend to raise this matter with all lenders at a forthcoming conference and exhibition to establish whether all lenders are indeed subscribing to this requirement.

    High-rise leaseholders inlimbo

    Legislation changes following the Grenfell Tower fire mean the value of homes in high-rise buildings has effectively fallen to zero, and lenders are refusing finance

    Owners of flats in high-rise buildings are facing legislation changes regarding cladding, leading to them becoming trapped in their homes.

    The legislation changes, stemming from the Grenfell Tower fire in 2017, have meant that the value of people's homes has effectively declined to zero. This has resulted in banks and building societies refusing to lend on this property type.

    This in turn is leaving residents of high-rise buildings stuck on very high rates as they are forced onto their lender's SVR due to being unable to remortgage.

    Furthermore, some leaseholders of flats are

    He adds that the government needs to set out revised safety requirements urgently because until then valuers and lenders are "in limbo".

    Barclays has developed a cladding certifi­ cate that seeks to categorise high-rise properties as either those that are able to be sold or those in need of new cladding.

    Barclays Mortgages head of valuations Fiona Haggett, the author of the certificate, says it aims to reduce the pressure on both residents of high-rise properties and the government. Bar­ clays also intends to simplify the process for underwriters and advisers by creating a single document for reference on the topic.

    Haggett says the current system is overly There will not be a one-size-fits­ all solution.

    The uncertainty goes on well had given notice on his existing tenancy. As a result, he is paying for his belongings to sit in a lock-up storage unit while he lives in a ser­ viced apartment. He adds that feedback regarding the cladding complications was said to take 12 weeks, during which time he could decide whether to con- tinue with the purchase or pull out.

    facing bills of up to .£20,000 in order to have the old cladding removed and replaced with safer materials.

    Former Ries residential chairman and north London estate agent Jeremy Leaf says: "The gov­ ernment needs to update its advice to surveyors and lenders on the safety of cladding and insula­ tion, but it clearly does not want to over- or underestimate the risk in view of recent events." Leaf adds that present uncertainty and downgraded valuations are creating a "new generation of potentially unsaleable and unlet­

    table properties".

    John Charcol senior mortgage technical manager Ray Boulger stresses the importance of speed in adjusting regulations following the Grenfell Tower fire.

    Boulger says: "Addressing a life-threatening situation such as highlighted by Grenfell is so urgent the_government should have consulted all interested parties and required an initial response in no more than six months."

    LEAF 'Government needs to update its advice to surveyors and lenders on the safety of cladding'

    complicated. She adds: "There are so many doc­ uments being used, which is overwhelming for underwriters and residents."

    Boulger believes the proposed document is a step in the right direction. He says: "The draft proposal Barclays has been working on will help some residents, especially if other lenders adopt it. But clearly, until a value can be put on proper­ ties, lenders cannot lend."

    bClear Communications account director Mark Stockwell has encountered the issue from the perspective of a borrower. He explains that, from his own experience when moving to a new city, after bidding for a property "considerably below the asking price, it was accepted".

    He adds thatthe property was the last plot in the development and "they were evidently keen to shift it".

    Stockwell explains that, as the transaction was seemingly proceeding normally, an issue with the property's cladding was uncovered. However, the discovery was made after Stock-

    BOULGER 'Government should have required an initial response in no more than six months'

    Leaf highlights the importance of individu­ ality in assessing high-rise properties, saying each case needs to be " judged on its own merits so that decision making at the time can be considered".

    He adds: "What advice was followed? How long ago was the decision made? Who made it? Are there developers involved with the freehold­ ers? What is the contents of the lease as far as responsibility is concerned?

    "There will not be a one-size-fits-all solution. The uncertainty goes on."

    Boulger provides one further point, saying that, with such a large number of properties blighted until this problem is resolved, "there will be a significant impact on the valuation of lenders' existing books".

    He continues: "This adds yet another reason for the authorities to set out clear guidelines on what types of cladding are acceptable, or perhaps more specifically what is not acceptable."

    Originally posted by loanarranger View Post
    "there will be a significant impact on the valuation of lenders' existing books"
    I think this little sentence might be the most devastating of all, mightn't it? No wonder banks are concerned.


      JKO This is exactly why I need to get further information from lenders because assumed valuations might need to be radically assessed.


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