Cladding repairs needed to remortgage?

Cladding repairs needed to remortgage?

11:36 AM, 25th July 2022, About 3 weeks ago 5

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Has any leaseholder, coming to the end of their mortgage term, been able to re-mortgage with a B2 defective fire risk assessment applied to their building?

Further, the landlord is still holding out ‘waiting’ for Government clarification as to who will pick up the bill on a building over 11m tall, but also over 30 years old?

What happens in this scenario if a lender is not prepared to extend the mortgage term or offer a new product?

Perhaps can the repair clause of the lease force the landlord to carry out repairs which is what the lenders are insisting upon?

The building has, after all, been declared defective/dangerous with a B2 rating, should the Councils impose an Enforcement Notice?

How does a leaseholder in this position stand legally to get the necessary work started, what remedies does the leaseholder have?

Wendy

Government guidance >> https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/441669/BR_PDF_AD_B2_2013.pdf

In the Secretary of State’s view, the Requirements of B2 will be met if the spread of flame over the internal linings of the building is restricted by making provision for them to have low rates of surface spread of flame and, in some cases, to have a low rate of heat release, so as to limit the contribution that the fabric of the building makes to fire growth.

“In relation to the European fire tests and classification system, the requirements of B2 will be met if the heat released from the internal linings is restricted by making provision for them to have a resistance to ignition and a rate of fire growth which are reasonable in the circumstances.

“The extent to which this is necessary is dependent on the location of the lining.”



Comments

Shining Wit

13:32 PM, 26th July 2022, About 3 weeks ago

Strangely very few 118 readers comment on the cladding scandal...

It is a tricky one - we all want the buildings to be made safe. It is a pity they weren't actually safe when built ! Until remediation is completed, it is going to be very difficult to remortgage or sell.

Of course, if you are an 'Industrial Scale' BTL Landlord (having a share in - or with someone who has - three or more properties) your costs won't be capped and you could be billed (in advance - with 'immediate payment') for the Works. There isn't any affordability basis for 'Qualification' (merely the number of properties), good luck sourcing any funds if the costs aren't capped... If your lease does fall into the not-protected category, it will remain 'non-qualifying' FOREVER and so will become - and remain - completely unmortgageable, I doubt you'd be able to give it away!
In turn this will have a knock on-effect on the LTV ratios of your portfolio, perhaps preventing re-mortgages there as well.

Joe Robertson

14:56 PM, 26th July 2022, About 3 weeks ago

hi Wendy,

As @Shining Wit has said, it is surprising how few are speaking about this on here. if the leaseholder bought a property that passed building regs, british standards etc how on earth arent we winning legal battles!? I'm suprised 118 didnt jump all over this.
ion another note Ihave managed to sell a few for clients (mainly in the mcr region) due to finding themselves in the same sitation as yourselves. To prewarn you - they sell very cheap and only to be done on a last resort basis but if you are interested feel free to contact me on here or find me at hiddengeminvestments (social and website).

DALE ROBERTS View Profile

16:43 PM, 26th July 2022, About 3 weeks ago

It will be illegal for freeholders to pass on the cost of historical building repair works or the removal of cladding to any of their leaseholders, including non-qualifying leaseholders, if they are or are linked to the building's developer.
See : https://www.gov.uk/government/news/leaseholders-protected-from-unfair-cladding-costs-as-governments-building-safety-reforms-come-into-force#:~:text=Leaseholder%20protections&text=It%20will%20be%20illegal%20for,linked%20to%20the%20building's%20developer.
Further, banks have committed to now lending on buildings with cladding. See : https://www.dailymail.co.uk/property/article-11017883/Lenders-lend-cladding-hit-flats-repair-costs-covered.html and https://www.mortgagesolutions.co.uk/news/2022/07/18/banks-agree-to-lend-on-properties-with-updated-cladding/
This legislation is 5 years overdue but finally here. As a BTL seller of my last unit in the UK I missed this opportunity a few months back by having a buyer declined over his GBP500 000 offer as the new legislation was not in place. I will now begin the process of selling again and happily depart this industry when successful. The cladding issue has been a shameful scandal and scant attention has been paid to it. Yet another example of how property rights are nullified and sullied by the UK government.

CMS View Profile

1:56 AM, 30th July 2022, About 2 weeks ago

Wendy, when you say you are at the end of your mortgage term I assume, as you are looking to get another mortgage, there is still money owing on the existing mortgage so you will need to refinance to pay that off.

If that is the position then, although it may not be ideal, but your best option for now may be to try and refinance with your existing lender. They are already committed to the property even if it has failed as you say so what are their options? They could repossess but they will not want to do that as they will know they will struggle to sell until the issue is resolved. I think they may take the view that, provided their exposure isnt increased, they are better off having you pay the mortgage and hope that the issue is resolved if they ever have to repossess.

I have recommended this approach to a couple of my clients and its worked for them. Good luck, Charles

Laura Delow

8:19 AM, 30th July 2022, About 2 weeks ago

On RICS site it mirrors what Dale Roberts states "Lenders and RICS will continue to work with Government and key industry stakeholders to develop a proportionate approach to addressing this situation for leaseholders. This will include a further review of lending and valuation policies in relation to lending on properties rated EWS A3 or B2, once the Building Safety Bill becomes law [The Building Safety Bill received Royal Assent and became an Act of Parliament on 28 April 2022] and enshrines the statutory protections for leaseholders and details the operation of the Remediation Order regime.
Lenders will work with the Government, RICS, the Building Societies Association (BSA), and UK Finance to establish a framework to enable verification of these key requirements, to ensure transparency for leaseholders, and prospective purchasers.
Lenders supporting this statement are:
Barclays Bank, HSBC, Lloyds Banking Group, Nationwide Building Society, NatWest, Santander

https://www.rics.org/uk/news-insight/latest-news/news-opinion/lenders-update-ews1-assessments-and-mortgage-lending/

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