Selling a leasehold flat without cladding comes with a whole heap of hurdles to jump through when you’re selling, from ground rent that exceeds £250 per year, to onerous service charges. But selling a flat with cladding really is no joke.
After the Grenfell tragedy in 2017, safety fears over cladding on apartment blocks has resulted in these types of properties becoming virtually unsellable as no mortgage lenders will touch them, and buyers aren’t interested in inheriting the obvious problem, and huge costs to rectify any fire safety issues.
In this article, we explore the issues with selling a flat with cladding, and areas to look at when trying to sell a flat with cladding.
Selling A Flat With Cladding
Selling a flat with cladding comes with all of the usual leasehold issues such as ground rent, and adds further fuel to the fire.
Flats with cladding (and even those without that are high rise blocks) has made thousands of peoples homes across England virtually unsellable because of the cladding, and the huge remedial costs that are being charged to the leaseholders.
Let’s have a look at what the process looks like with selling a flat with cladding today.
EWS1 Form Completion (External Wall System Fire Review)
According to RICS, : “EWS1 was designed as a means of ensuring that a suitable assessment has been carried out by a competent fire expert to provide information about whether remedial works are likely to be required for a building”.
The government extended the original requirement of an EWS1 form in 2020 to also include blocks under 18m. You may find that a surveyor might even request an EWS1 form when cladding isn’t even on the property. It can also include surveying things like insulation, balconies, window frames, all of these elements have to be assessed for flammability too.
A completed EWS1 form is not mandatory when selling a flat with cladding, however, most buyers and mortgage lenders will require one to release mortgage funds, and for the sale to go through smoothly.
An EWS1 gives the mortgage lender, and buyer assurance that the fire resistance of the building has been assessed by a professional.
If an EWS1 form is required, your solicitors, or yourself will need to contact the managing agent/ freeholder for this to be completed. However, this is slowly being replaced with a PAS9980. It might be that a PAS assessment will be required instead as it’s the FRA, this can come at some cost to the seller though.
One thing to note here is that there is very few professionals in England that are qualified to conduct an EWS1 survey which means there can be huge delays in even getting to this point when selling a flat with cladding.
Once the EWS1 has been successfully completed (stage 1), this may have then brought up remedial work for the building to bring it to the standard it needs to be to meet fire standards. If it hasn’t, then you’re one of the lucky ones, and hopefully the completed form alone is enough for the buyer and mortgage lender.
If the building doesn’t pass the EWS1, the rectifying cost could be recharged to residents and you could face a massive bill. This is often then issued as a section 20 notice to residents which is served in addition to service charges and are usually to cover huge works with a hefty cost.
The issue with this is that a section 20 notice will raise alarm bills with the solicitor and mortgage lender as they will not want the buyer to inherit these costs. The ideal situation for a buyer will be for the current leaseholder to pay it upfront, if they want the sale to go though. Or, they could ask to renegotiate the price based on the costings for the section 20 notice. When we look at an example of some EWS1 costs though, this is more often than not, not even an option.
Remedial costs can run into the thousands, hundreds of thousands to millions of pounds and can be charged back to the leaseholders.
There has been some funding under the government building safety funding scheme, but only on those buildings where cladding has been present.
For high rise blocks without cladding that still need fire safety remedial actions, this is being charged to the leaseholders.
As an example I stumbled across online, this leaseholder lives in a block of 68 flats and the building work has been costed at £10 million, this is a whopping average of £150,000 per flat. This is unfortunately not an anomaly.
Leaseholders are being requested to pay for remedial works that have got nothing to do with them. Having this face over many leaseholders is what is making selling a flat with cladding almost an impossible task. Many are virtually unsellable.
Selling To Cash Buyers Below Market Value
For those who are desperate to get out of this unseeingly dead end, selling the flat to cash buyers at a below market value price can seem like the only option.
Selling a flat with cladding issues that need remedial work is considered a defected property, likely to warrant a lot of funds to rectify which is why it needs to be listed below market value in order for it to be attractive to a buyer.
This isn’t the answer for everyone, many cash buyers are still put off by the unknown that comes with cladding and any additional costs they may have to incur in the future. But it is one avenue that can be considered.
Agents Specialising In Problem Properties
There are also a number of agents on the market that specialise in problem properties, i.e they will buy any properties, regardless of the baggage that comes with it, at a below market price.
I have found a number of agents online that will even purchase those with cladding issues, but they do still request that there is an EWS1 form completed. So, this part really is the most important part in the puzzle, as unfortunately there’s just not anything you can realistically do without one, apart from just staying put.
The leasehold scandal in England is a true abomination of the country and thousands of people have been affected by cladded homes, deemed virtually unsellable in todays climate whilst the government will not step in and make significant measures to protect leaseholders.
If you are in the process of or wanting to start selling your flat with cladding, always consult a solicitor for legal advice, the National Leasehold Campaign Facebook group is also a wealth of real, personal experience with those owning and buying leasehold property.
If you are also facing issues surrounding Ground Rent, I have a whole host of articles on this topic to help you navigate selling your leasehold property. If you have any questions or comments please feel free to leave a comment below or reach out via email.