RICS Proposes Guidance Note in relation to Form EWS1
March 2021RICS has proposed a new guidance note on “Valuation of properties in multi-storey, multi-occupancy residential buildings with cladding”.
Background
The Government had announced on 21 November 2020 that “owners of flats in buildings without cladding will no longer need an EWS1 form to sell or re-mortgage their property”, however these forms continue to be requested for almost all units in buildings in multiple occupancy. The RICS Guidance note is now intended to set out the position for professionals carrying out property valuations and when EWS1 (External Wall Fire Review) forms should be requested for buildings with cladding. It will have important ramifications for stakeholders including, construction professionals, and consultants who are being asked to sign such Forms.
The EWS1 form was originally launched in December 2019, and was developed in response to Government advice to check all potentially unsafe cladding systems for buildings over 18m following the Grenfell tragedy. It was intended to record in a consistent and universal manner what assessments have been carried out on the external wall construction of residential apartment buildings. However, it contains serious liability concerns and potential PI insurance issues for consultants – our article discussing the ramifications of using the Form can be found here.
The Proposed Criteria
RICS recently completed its consultation, which seeks to form a consensus on when EWS1 forms should and should not be required. It should be noted however that the Guidance will not act as a substitute for a life safety fire risk assessment, or advice on how to complete the Form.
The proposed Guidance currently contains criteria which represents “reasonable circumstances where an assumption can be made that remediation work materially affecting the value of the property is unlikely to be needed, and an EWS1 should therefore not be required”.
These criteria are as follows.
Buildings over six stories
For buildings that are over six stories, the Guidance proposes that forms EWS1 should not be required where:
(i) there is no cladding or curtain wall glazing; and
(ii) if there are balconies where the balustrades and decking are constructed of combustible materials (i.e. timber), they are not stacked vertically above each other.
This is consistent with existing Government advice.
Buildings of five or six storeys
For buildings that are either five or six storeys, the Guidance also proposes that form EWS1 should not be required where:
(i) there is not a significant amount of cladding on the building (i.e. less than a quarter of the surface façade);
(ii) there are no ACM or MCM[1] panels on the building; and
(iii) if there are balconies where the balustrades and decking are constructed with combustible materials, they are not stacked vertically above each other.
For buildings that are under five storeys, only (ii) above applies.
It should be noted that metal cladding and ACM/MCM are visually very similar. This means, if metal cladding is present, RICS has advised that it should either be confirmed with the building owner or managing agent in writing that they are not ACM/MCM. Otherwise, form EWS1 should be requested.
Commentary
Whilst there were good intentions behind the EWS1 Form, in practice there have been serious issues. The Housing, Communities and Local Government (“HCLG”) Select Committee suggested in June 2020 that the EWS1 process is reformed by: (i) relaxing the rules on who can undertake the assessments; (ii) being more specific on which buildings need to be tested; and (iii) giving guidance as to which blocks should be prioritised.
The latest proposed criteria defines the buildings in which it is less likely that expensive remediation work affecting value will be required. This would allow valuers to make a reasonable assumption about valuing properties in these buildings without requesting an EWS1 Form from the building owners. The latest proposed criteria also goes some way in discouraging lenders and buyers from taking a universal approach of requesting Form EWS1 for all buildings with multiple occupancy. However, it does not go far enough in many aspects. For example, the latest proposed criteria does not directly address the shortage of qualified professionals who can undertake the building assessments, or provide a more specific criteria as to which blocks require prioritisation. Therefore, the backlog of properties that are not selling due to Form EWS1 is unlikely to be alleviated in the near future, unless more is done.
Furthermore, the latest proposed criteria doesn’t alleviate our previous concerns regarding issues such as the expansion of original contractual scope of services and increased / unlimited liability. Therefore, it is also likely that many consultants will still be reluctant to sign them and insurers will continue to be reluctant to offer PI insurance to professionals completing EWS1 forms.
It is however positive news that RICS recently carried out a consultation in relation to its latest proposed criteria. However, it is yet to be seen what changes may be made to the new Guidance note, which is currently due to be published by Spring 2021.
