Ministerial Working Group on Mortgage Lending and Cladding: report - March 2021

Report and recommendations of the Ministerial Working Group on Mortgage Lending and Cladding.

Conclusions – recommendations for resolution

A summary graphic of the Group’s recommended approach is included in this Report. Having considered the various solutions available, in conclusion the Group –

1. Commends the RICS guidance for valuers as an important step forward in defining where an EWS1 will be needed for the benefit of professionals, homeowners and lenders.

2. Supports the position of the Minister for Local Government, Housing and Planning that the publication of the Scottish Advice Note on External Wall Systems, although intended for a different purpose, should complement this work and help address current issues faced by homeowners in buying, selling or remortgaging property.

3. Accepts that there are no current legislative provisions that could be used by the Scottish Government to support, require or enforce a single EWS1 assessment report being provided for a building in multiple ownership.

4. Welcomes the commitment of the UK Government to take action to intervene in the professional indemnity insurance market, and notes that while the resolution of issues being experienced by professionals and powers for intervention are at UK level, the solution put forward by the UK Government should meet the needs of those in Scotland.

5. Recommends that ultimately the aim in Scotland should be that an EWS1 assessment is no longer required to support a valuation for buying, selling or remortgaging flatted property and that the need fulfilled by EWS1 should be met through a new approach of a single building assessment, launched with Scottish Government funding. It is expected that the single building assessment will be broader in scope than the EWS1 but, where applicable, also provide equivalent information.

6. Recognises that uncertainty around the buildings affected has been challenging and recognises that both the RICS guidance and Scottish Advice Note together with advice from appropriate professionals should provide a solid basis from which affected buildings can be identified and the risks and remediation need assessed.

7. Is clear that solutions to buying, selling and remortgaging flatted properties with cladding should not be developed in isolation from the wider need for confidence in the safety of people and buildings and a clear path to remediation of affected buildings.

8. Supports an approach to assessing the risk of affected buildings, undertaken by a suitably competent, qualified and insured person against a common and robust set of criteria, to achieve a reliable and comprehensive basis for understanding the remediation needed.

9. Recognises that providing Scottish Government funding for an assessment of an entire building, could cut through some challenges to homeowners and property managers in securing agreement of co-owners.

10. Recommends that better information is made publicly available, for example through a database or portal, on the safety profile of domestic properties with cladding, if this can be done in a way that does not present risks to people from malicious behaviour.

11. Welcomes the development of the High Rise Inventory as an important step in establishing a picture of buildings across Scotland but notes its limitations as a tool to be relied upon for the purposes of assessing risk and establishing remediation need. For these purposes, and depending on the particular circumstances of a building, assessments would be needed that include physical inspection and testing.

12. Recognises that Scottish Government funded single building assessments present an opportunity to build on the information in the High Rise Inventory and that the outcomes from this investment should be made available for multiple purposes.

13. Supports that the information from single building assessments could be used to triage the buildings red/amber/green, green lighting those where the assessment is acceptable to release owners and residents from fire safety, valuation and mortgage lending concerns, replacing the need for an individual EWS1 per flat. In the case of those assessed as red or amber risks, the assessments will form the basis of assessing remediation need, costs and funding gap to support bespoke solutions. In all cases, assessments will consistently support informed valuation opinions on remediation costs thereby enabling mortgage lending decisions, subject to lender appetite and particular circumstances.

14. Notes that these single building assessments would be for a broader purpose than the EWS1 but should be developed with the aim that they also meet the need that the EWS1 approach fulfils and in a way that is straightforward for valuers and lenders to utilise.

15. Recognises that while the intention should be to phase out the need for EWS1 there will be a period where EWS1 remains active in parallel. All interested parties should work together to minimise duplication in limited resource, including in circumstances where whole building surveys have already been completed to an acceptable alignment with the specification of Scottish Government funded single building assessments. This should also apply where existing EWS1 reports provide acceptable information for an entire building.

16. Recommends that where acceptable whole building surveys already undertaken are in line with or exceed the specification for Scottish Government funded single building assessments, options to provide refunded support to homeowners for these surveys should be explored. Where further work is needed to ‘top up’ the work already done to meet the specification of Scottish Government funded single building assessments, supporting this ‘top up’ rather than an entirely new assessment should be considered.

17. Understands that buying and selling a home can be a stressful experience. Since generating information on the safety of a building at the point of sale can add to this anxiety, the Group recommends that the single building assessments are used to build a reliable source of information that can be made available at any time through a database or portal, to avoid a point-of-sale trigger for assessment of these buildings in the future.

18. Recognises that, while it has focused on privately owned properties, on the grounds of safety, public interest and fairness the Scottish Government’s approach to assessments may be tenure neutral and include social housing and rental tenures should assessments be required of building stock in those sectors.

19. Notes that the availability of suitably qualified and insured professionals active in this market is a limitation to the pace of assessments. We recommend the Scottish Government implements a phased approach, coupled with clear public messaging, that aligns available resource to properties most at risk at each stage.

20. Notes that pending detail on the intervention in the professional indemnity insurance market from the UK Government, insurance costs could impact the overall cost of assessments to the Scottish Government. The Group recommends as part of design of the assessment programme issues such as liability are carefully considered and clear from the outset.

21. Recognises that the specification of single building assessments will be very important and recommends that in planning an assessment programme the Scottish Government continues to work with others including industry, local authorities, valuers, lenders, insurers, property managers and owner and resident representatives on practical implementation and considers testing the specification before rolling out.

22. Recommends that alongside the programme of Scottish Government funded single building assessments, there is clear and concise information available for homeowners, setting out how these will work and for how long they are valid. Information should also be available on the steps that should be taken on the outcome of the assessments, including if any building is considered by a local authority to present a danger, and the routes to enforcement of necessary work. The Group recognises the potential implications for home and buildings insurance costs and that upfront information needs to be available to homeowners as part of the programme.

23. Acknowledges the important role of local authority verifiers in the delivery of buildings as well as inspections by warranty providers. The Group has not seen evidence that homes currently under construction are of ongoing concern, in part due to reported action by housing developers. The Group recommends that this should continue to be monitored by the new homes industry, local authorities and the Scottish Government. To ensure we avoid legacy issues and to provide clear information for all new homes, clear standards and a confirmation process for new homes with recording of detailed information about construction and fire safety for homeowners or on a public database or portal should be considered.

24. Recommends that funding for remediation should come from a variety of sources, including public funds, and welcomes the view of the Minister for Local Government, Housing and Planning that he does not want to see homeowners faced with paying unfair remediation costs.

25. Recognises that while some developers have taken action on remediation and others have set money aside for this purpose, there remains a need for the house building sector to play their part in remediation. Solutions should be developed in partnership with that sector once the scale of the remediation funding gap, and the extent of any wider concerns about construction (as has been seen from experience in England) are known. Detail of the tax and levy announced by the UK Government to pay for cladding remediation is not yet known, and the implications of this for Scotland need to be considered alongside any other solutions.

26. Notes that some homeowners are already in a situation where they know of issues in their buildings and that remediation is needed, causing uncertainty, anxiety and distress to individuals and their families. While some owners and developers will continue to take action, we recommend that there is an urgent need for the Scottish Government to provide clear timescales for affected owners on decisions for future funding support.

27. Notes that options for remediation funding in Scotland do not mirror those in England due to the differing tenure system and borrowing limits on the Scottish Government.

28. Recommends that, in line with the published guidance from RICS, the forthcoming Scottish Government advice and any updated guidance from the Institution of Fire Engineers, the need for remediation will not only be for properties of 18m height and above, although recognises that in overall consideration of risk these may be the first properties targeted for a single building assessment.

29. Recognises that the remediation required could vary dramatically, from relatively low-cost interventions, to work required at prohibitive cost to homeowners. This should be established through single building assessments and any triggers for action/support should be developed in accordance with the evidence including what would maximise progress in improving the safety profile of buildings.

30. Recommends that the Scottish Government should keep an open mind about what forms part of funding for remediation and that this responds to the need identified through the single building assessments, for example any other fire safety construction defects identified as part of the assessment.

31. Recommends that in tailoring solutions to remediation the Scottish Government ensures that any remediation is delivered with certainty and clarity on standards (including for example under a recognised accreditation scheme) so that in future years industry and homeowners can proceed in confidence without exception.

32. Notes that where remediation is already taking place, this is a complex and time consuming process and recommends that the Scottish Government take forward work to assess the skills and materials needed to meet the remediation required.

33. Notes that while discussions have focused on remediation, in some cases the most appropriate course of action will be mitigation of the risk through other measures.

34. Recommends that although the incentivised approach should be taken as a practical way forward, the Scottish Parliament will ultimately need to consider primary legislation to address the challenges of multiple owner agreement through creating a responsible person or duty holder and notes that this will not be straightforward, with potential unforeseen consequences for the role of property managers.

35. Notes that, in responding to the Grenfell Tower Inquiry Phase 1 recommendations, the Scottish Government has said that longer-term work on tenement reform may provide a solution to the question of creating a responsible person for fire safety in a building of multiple owners. The Group recommends that this work is accelerated in relation to fire safety, should the evidence from single building assessments and remediation show that there is an urgent safety need that cannot be met through the existing framework.

36. Recommends that the Scottish Government considers on an ongoing basis any further changes to systems, processes or enforcement that might be needed following evaluation of the incentivised approach to assessments.

37. Notes that the Grenfell Tower Inquiry Phase 2 will make recommendations that are relevant to the Scottish Government and that the real-world data from the single building assessment programme will provide useful evidence to inform consideration of those recommendations.



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