Fire safety in residential buildings: where are we now?

New RICS guidance to help unfreeze the housing market

From 5 April 2021, valuers undertaking valuations for lenders on residential blocks of flats in the UK will need to adhere to the new RICS guidance note Valuation of properties in multi-storey, multi-occupancy residential buildings with cladding. The guidance seeks to clarify the types of properties which will (or will not) require additional inspections as a result of concerns about fire safety.

The guidance has been prepared following nationwide concerns that lenders are requiring 'clear' External Wall Fire Review (EWS1) forms for all lending on flats and, in some cases, houses before they are agreeing to lend. This means that leaseholders are unable to sell or remortgage and are ultimately trapped until either an inspection has been carried out and a form prepared that does not flag up any issues, or the remedial steps identified have been completed, which can be costly and challenging to procure.

The new guidance sets out the circumstances under which an EWS1 form should be required:

Obligations met

Where a valuer or lender has been able to establish that the building owner has met the obligations of the government's Advice for Building Owners of Multi-storey, Multi-occupied Residential Buildings, or that a building over 18 metres has been signed off in accordance with The Building (Amendment) Regulations 2018, an EWS1 form should not be required.

Where this is not the case, there are different requirements for buildings of different heights.

Buildings over six storeys

An EWS1 form should be required where:

• there is cladding or curtain wall glazing on the building; or
• there are balconies that stack vertically above each other and either: both the balustrades and decking are constructed with combustible materials (such as timber); or the decking is constructed with combustible materials and the balconies are directly linked by combustible materials.

Buildings of five or six storeys

An EWS1 form should be required where:

• there is a significant amount of cladding on the building (for these purposes, a "significant amount" is approximately one quarter of the whole elevation estimated from what is visible standing at ground level); or
• there are Aluminium Composite Material (ACM), Metal Composite Material (MCM) or High Pressure Laminate (HPL) panels on the building; or
• there are balconies that stack vertically above each other and either: both the balustrades and decking are constructed with combustible materials (such as timber); or the decking is constructed with combustible materials and the balconies are directly linked by combustible materials.

Buildings of four storeys or fewer

An EWS1 form should only be required where there are ACM/MCM/HPL panels on the building. The guidance does, however, emphasise that metal cladding and ACM/MCM/HPL are visually very similar. Thus, if metal panel cladding is present, the valuer should confirm with the building owner/managing agent in writing that it is not ACM/MCM/HPL. If such confirmation cannot be obtained, an EWS1 inspection should be requested.

State-backed indemnity scheme

The government has also committed to providing a targeted, state-backed indemnity scheme for qualified professionals unable to obtain professional indemnity insurance for the completion of EWS1 forms. The inability to obtain such insurance has been widely publicised as contributing to delay and stagnation in the housing market. Details of the scheme, including eligibility and the claims process, are yet to be announced.

Building Safety Fund

The government has announced more money for cladding remediation on residential buildings, but what is available to leaseholders depends on the heights of the buildings they live in.

18 metres and over

In February 2021, the government announced a £3.5bn grant scheme, to be used to fix dangerous cladding on high rise buildings in England. This is in addition to an existing £1.6bn fund, bringing the total amount pledged for cladding remediation to £5.1bn.

The intention is for the monies to fund the cost of replacing cladding for all leaseholders in residential buildings of 18 metres (six storeys) and over in England without tenants having to pay towards the removal of unsafe cladding. Applications must be made by 30 June 2021.

The monies will not (as it stands) fund other aspects of fire safety work (such as missing firebreaks or issues with combustible balconies) and covers England only. It is therefore possible that the cost of other fire safety works will be passed on to residents via the service charge.

Many commentators have said that the extra £3.5bn package falls significantly short of the highest estimated costs for the removal of unsafe cladding, which some experts have placed at £15bn.

Between 11 and 18 metres

Buildings between 11 and 18 metres high are viewed as posing a lower risk to the safety of occupants. Consequently, government intervention has been less direct. Instead, leaseholders living in these buildings and who are liable to contribute towards the costs of remedial works will be offered a long-term, low interest loan to pay for the cladding removal.

This loan is not expected to fund other aspects of fire safety work and covers England only. It is therefore possible that the costs of other fire safety works will be passed on to residents.

These loans have been described as a long-term, low interest, government backed financing arrangement , with a £50 cap on monthly repayments towards the removal of cladding. No further details have as yet been released, so it is unclear whether the freeholder or leaseholder would apply for the loan, what the interest rate will be and how long leaseholders will be allowed to repay the loans.

Below 11 metres

The government announcements make no provision for those living in residential buildings below 11 metres. As it stands, the cost of any remedial action may ultimately fall to the leaseholders.

Funding the Building Safety Fund

The government has announced that it will fund the increase to the Building Safety Fund predominantly by introducing a "Gateway 2" developer levy. The proposed levy will apply when developers seek permission to develop certain high rise buildings in England. It will sit alongside a new tax on the residential property sector which is expected in 2022.

Legislative changes

The Fire Safety Bill

The Fire Safety Order will amend the Regulatory Reform (Fire Safety) Order 2005 to clarify that the responsible person or duty-holder for multi-occupied, residential buildings must manage and reduce the risk of fire for:

• the structure and external walls of the building, including cladding, balconies and windows; and
• entrance doors to individual flats that open into common parts.

These changes close a perceived gap in the existing legislation to make the scope of responsibility clear: duty-holders will need to revisit their existing fire risk.

The Bill is subject to change as it passes through Parliament. A challenge against the government to prohibit fire safety costs being passed on to leaseholders was voted down, but other questions remain, including when intrusive surveys of internal structures will be required and how these will be undertaken.

The Bill also provides a platform for secondary legislation which may be prompted by the findings of the Grenfell Inquiry. We can expect fire safety legislation to be subject to significant change over the next few years.

The Building Safety Bill

The Building Safety Bill is far more substantive than the Fire Safety Bill. It aims to make wholesale reforms to the regulatory framework surrounding residential building safety.

A new regime for multi-occupancy residential buildings over 18 metres is proposed, alongside other changes applicable to all buildings.

The Bill also creates new roles: a Building Safety Regulator, to sit within the Health and Safety Executive, and a New Homes Ombudsman, who will be responsible for handling complaints about new-builds.

In November 2020, the Housing, Communities and Local Government Committee published a report on the draft Bill. It made over 40 recommendations for improvement. The government's response is expected in the coming weeks.

Osborne Clarke comment

The pace of reform is not likely to slow down, given the importance of the subject matter for all stakeholders and the political impetus to deal with the issues identified as quickly as possible and in as fair a manner as achievable. Developers and building owners would be wise to get up to speed with the changes proposed by the fire safety and building safety bills now, rather than waiting until the legislation comes into force.

Ultimately, there is no easy answer as to who will be responsible for paying for the remedial works: the taxpayer who is already under incredible strain following the pandemic; the developer who may have long since handed over the development and who believed they complied with Building Regulations at the time; the current building owner who may not have sufficient funds themselves or leaseholders who bought properties in good faith but who may be contractually liable to pay for the works by the nature of the leases they had little or no input into drafting. The question of who pays for fire safety remediation works will be a recurrent issue throughout the legislation's passage through Parliament.

This article was produced with the assistance of Zoe Hughes-Nind, trainee solicitor.