Written evidence submitted by Mrs Dominique Walker-Wright [BSB 384]
I write to submit evidence to the Committee as a shared ownership leaseholder with Peabody Housing Association. My husband and I have owned a 50% share in my home since 2018. Our building is under 11m to the top finished floor. It is three storeys, with the upper duplexes having timber frame, and with cladding that is A2 rated. We were assured the cladding was safe before we purchased the property, which was after the Grenfell tragedy.
Whilst post-Grenfell safety of residents in all multiple occupancy buildings is essential - and I was sorely disappointed to see the Government vote down the Grenfell recommendations in the amendment to the draft Safety Bill on 7th September - the collateral damage caused by the Government’s approach to this issue so far is having a devastating affect on many. I do not believe that the draft Bill will achieve its aims or resolve my problem (as I will outline), one that is reportedly shared with up to 3m leaseholders. I have drawn on UKCAG’s conclusions about the Bill and explained here how they affect me personally.
I will start with the personal. I would like the Government to understand fully the impact that vague wording and ill considered drafts have had, my husband and I are now incredibly distressed that we may be unable to afford to pay the potential costs that are proposed to be passed onto leaseholders, this will lead us to default on out current mortgage, of which we are still tied into another three years causing further debt to be incurred. If this is not resolved within our mortgage terms, we will find ourselves, like most leaseholders unable to remortgage or sell our home. The uncertainty and stress of which is causing us to reevaluate our family plans, which at this stage in our lives is frankly devastating.
Our neighbour, on enquiring to Peabody to sell, relayed the horrified letter received saying any buyer ‘may have difficulties finding a lender’ due to EWS1 and that this was all at our own expense and risk. Since then, we feel asthough we have opened Pandora’s Box - the more we learn about the cladding scandal and EWS1 the more we despair about being able to move on with our lives. I can see that the responsibility lies ultimately with the Government to provide clear legislation that takes into consideration the confusion and issues caused by the guidance to date.
Government guidance to date has said that buildings ‘of any height’ may fall in scope where there are ‘specific concerns’. No surveyor or lender will take the risk that they have not duly checked any building with cladding or balconies and its wall structure to know what those specific concerns could be. It is clear that the only way the lenders have seen to do this is via the blanket approach to EWS1 they have adopted - it is frustrating to read again and again that the Government does not approve of the blanket approach when it is within this Government’s powers to make the guidance and forthcoming legislation clear. The new Bill, whilst currently stating that it will apply to buildings over 18m, also states that this scope can be changed at any point by the Secretary of State to include other buildings. This creates continuing uncertainty for leaseholders and lenders. If my building could at any point come back into scope where does that leave lender risk? It seems the deadlock will continue or quickly re-emerge. The primary legislation does not point to how the current impasse will be solved. Secondary legislation should be kept to a minimum to release us and our housing stock from this situation quickly. Lessons need to be learned from EWS1 by involving leaseholders, residents, management companies, property owners, insurers etc. to understand the effect of legislation and any changes.
Peabody have confirmed that they do not intend to conduct an EWS1 on our building. They cite the Government and RICS guidance that buildings under 18M and with non-combustable cladding mean that our building does not fall in scope. We have been told it will be ‘several years’ before they ‘get around to’ us, and in the same breath that they have no reason or obligation to do so. And yet the reality is that lenders are insisting on EWS1 or assurance from Peabody that our building and wall system is safe means that we are stuck in a deadlock. A recent sale for a neighbour in an identical flat fell through as only one lender was available, and no EWS1 or assurance that the building is safe (also refused) from Peabody.
This gradual roll-out to existing buildings will take years to a decade, by the government’s own calculations. This will leave those of us in these buildings in limbo; deprioritised by our housing associations we still need to insure, sell and re-mortgage. These issues disproportionately affects those of us in buildings between 11-18m in heights which are neither the highest nor lowest risk.
I was proud to be able to buy this share in my home, reassured that it was a way to get on the housing ladder, an achievement disproportionately prized in this country against a backdrop of unaffordable escalating rents. I thought this was my ticket to being able to have a secure normal life and family. I have put everything I have into this flat. I read with terror the idea presented in the draft Bill that we could be faced with life-changing sums of money for remediation, with bankruptcy or losing our homes mooted by many affected as the only way out.
In recent years myself and neighbours have found our service charge has escalated to increasingly unaffordable levels. These compromise our development’s affordable homes remit and put off future buyers who are losing trust over future costs. I have serious concerns on the implications of the Bill on service charges as a result of remediation, improvements, accountable person schemes, and insurance premiums, as follows below.
We have no idea yet what an EWS1 report would recommend for our building, and many buildings thought to be safe are uncovering significant safety issues during the EWS1 process. Table 36 of the Impact Assessment states a potential cost per leaseholder of £78,000, which excludes the costs of moving to the new regulatory regime. This preposterous amount will leave almost all leaseholders financially insolvent. Even the weighted average cost of £9,000 will be too much, and is an anathema to the fact I live in affordable housing managed by a housing association. The arbitrary timeline of 28 days for payment must be removed.
This also overwrites current terms of lease agreements and protections which say that any charges over £250 must be subject to a Section 20 consultation. The Building Safety Charge bypasses the S20 process, making it easy for building owners to bill huge extra charges to leaseholders without due process, under the guise of building safety. Many first tier tribunal decisions already made show that any challenges to the Building Safety Charge by leaseholders are unlikely to be favourably considered by first tier tribunals, and leaseholders have no effective recourse to challenge these charges which the government has previously said should be the responsibility of the building owner. Overriding the terms of a lease has been highlighted as a human rights issue in relation to freeholders charging ground rents, but this is being allowed in the case of leaseholders.
Similarly to the ‘one off’ service charges I have previously queried, the Bill fails to draw a distinction between ‘safety measures’ and ‘improvements’. Changes that would usually be considered an improvement (e.g. sprinkler systems) are given as an example of a building safety measure. My lease states that building improvements are the responsibility of the building owner and the Bill could override these terms and allow costs to be passed to me through the new regime. The Bill should clearly define ‘building safety measures’ which should be as narrow as reasonably possible to ensure improvements aren’t charged to leaseholders. Improvements must also be clearly described as such, and the costs for which must be legislated to rest either with the freeholder, developer or government, not the leaseholder.
It is grossly inappropriate that housing associations are currently unable to apply for the Government Building Safety fund. The additional costs associated with moving to and maintaining the new regulatory regime must be subject to the same protections as all other service charges and subject to Section 20 consultations for amounts above £250.
The Bill does not recognise the distinction between leaseholders and residents (who may not be leaseholders and therefore not liable for costs). In the eventuality of remediation costs on the building the housing association would need to be able to access funds to cover its social housing residents, or there is a risk that certain leaseholders are paying an unfair proportion.
Also of concern is the cost implication of all buildings having an accountable person. The onerous duties of this role will inevitably lead to increased building safety costs for demonstrating compliance in a building that I am confident is in fact safe and simply needs a clear and accessible system for demonstrating this. It is clear that the accountable person system would result in another unaffordable hike to my service charge.
Before introducing legislation, the government should consult with insurance companies to ensure that buildings and professional indemnity insurance will be readily available, at affordable and reasonable rates. There is a high risk that premiums will also escalate services charges to unaffordable levels.
The huge sums thrown at the stamp duty holiday are nonsense with so many unable to move and release the first-time buyer properties needed. Why would the Government invest to ‘build build build’ when thousands of flats that may be perfectly safe, or need urgent remediation, could be released or made safe and available? How does thousands of families stuck in their homes, facing losing them or bankruptcy, aid economic recovery? It is at odds with the government policy focused on providing affordable homes. How does this translate into responsible economic, social, environmental or housing policy?
The answer is that it does not, and yet the Government seems to continue to pass the buck to lenders, the insurance industry, developers, builders, housing associations, social housing providers and alarmingly leaseholders on an issue that needs strong leadership, investment, and clarity in the form of concrete legislation from Government. This Bill does nothing to provide a clear, fair, proposal for a way out of this absolute mess. In order to achieve its aims, I believe that the focus of the Bill should be on ensuring the safety of buildings through practical and proportionate measures and appropriate cost-sharing between building owners, developers and leaseholders.
The Government had tried to push this responsibility onto the lenders, but it is clear the lenders and insurance industry are responding to the uncertainty created by this Government’s guidance. Many lenders issued statements in July/August adopting insistence on EWS1 as their policy even AFTER a round table was held by Christopher Pincher in June with lenders, RICS, insurance industry to resolve a way forward. The uncertainty in the mortgage market, caused by this and the wider economic picture, means that almost no lenders are offering first time buyers anything fairer than 60% LTV. Even if I could obtain an EWS1 for my building upon the end of my mortgage term, and assuming my property remained at the value this was when purchased this in 2018, this means a potential buyer would need a minimum of £100,0000 to secure a 60% LTV mortgage for the 50% share of our £500,000 home. This affordability is an unrealistic scenario for someone meeting shared ownership criteria.
We have no idea yet what an EWS1 report would recommend for our building, and many buildings thought to be safe are uncovering significant safety issues during the EWS1 process. .
My building is still under warranty and was approved by the NHBC as well as meeting Environmental Standards and BREEAM. It was considered safe at the time of completion only 7 years ago. I have been assured by Peabody that the cladding is safe. There are fire breaks detailed in the plans. The only breach I can foresee is if the plans were not followed. There is nothing in the Bill to protect leaseholders from the costs of remedial works where there has been a failure by others (e.g. lack of clarity in government regulation/failures in building control or developers breaching regulations). Liability for historic costs and failure on the part of others should be explicitly excluded from the Bill. Any costs associated with rectifying historic safety defects on my building from the time of construction, such as insulation, render, timber, compartmentation issues and lack of fire breaks, must not form a part of the building safety charge. If safety measures such as sprinklers and alarms arise because the buildings were constructed in an unsafe manner they should not be charged to leaseholders.
In addition the rectification of any further defects discovered or brought in scope associated with the retrospective application of new, amended or newly clarified building regulations in future by MHCLG or the Secretary of State must be defined as an improvement, and out of scope of the building safety charge. There should be clear responsibilities drawn about who pays – not leaseholders, as these are improvements to buildings after construction. The draft bill must be amended to clearly identify what is included and what is excluded from any building safety charge. The Bill should introduce a developer bond/levy which should be used to pay towards historic remediation costs.
It seems that the Bill permits excessive charges to be passed to leaseholders and there are no clear mechanisms to prevent that. A proportionate approach should be taken to demonstrating building safety which will not come at significant additional costs to leaseholders. Careful consultation with housing associations should be undertaken to ensure that those of us in affordable homes are treated accordingly, and that our properties remain affordable home for current and future owners. The potential costs which could be passed to me as a result of the Bill will likely affect both the value and ongoing affordability of my leasehold property, making it less saleable.
This Bill does not even begin to address what I could reasonably expect the future to hold in terms of moving home, and has only brought new fears of unaffordable costs, financial insolvency, and losing my home. I am heartbroken that instead of planning to start a family, and enjoying our time as a married couple, I spend my time researching EWS1, worrying, writing letters, fighting. The Government has the responsibility and the power to use this Bill and primary legislation to allow people like me, and thousands possibly millions of others, to move on with our lives. The Bill should include interim measures and protections to ensure leaseholders are not trapped in buildings whilst they are waiting for the new regulatory regime to be rolled out. Our buildings must not be subject to increased insurance costs or lack of access to the finance and mortgage market simply because they are deemed lower risk and therefore not at priority for moving to the new regulatory regime.
The Bill must also ensure that there is enough supply of qualified assessors, fire engineers, surveyors in the UK to complete these checks that will be necessary for obtaining these new documents that the Accountable Person and Building Safety Manager need to procure. The government must also ensure that these assessors, engineers and surveyors have adequate Professional Indemnity cover to provide the documents necessary, before any draft bill passes into law.