In the latest in our Protecting Surveyors series, we look at the new RICS Guidance Note on the Valuation of Properties in Multi-Storey, Multi-Occupancy Residential Buildings with Cladding which was published on 8 March 2021 and is effective from 5 April 2021.
What is the aim of the Guidance?
The Guidance Note aims to assist valuers in deciding whether a building requires an EWS1 Form.
An EWS1 Form is a way for a qualified professional to confirm that external wall systems on multi-storey, multi-occupancy residential buildings have been assessed for safety by a suitable expert, in line with government guidance and it delivers assurance for lenders, valuers, residents, buyers and sellers.
The Guidance Note will be of use to valuers undertaking valuations for (i) secured lending purposes (ii) on domestic residential blocks of flats in the UK only, by providing a criteria that can be used by valuers during inspections.
The criteria represents a set of reasonable circumstances where remediation work to cladding or balconies that may materially affect the value of the property is likely to be needed.
Why has the Guidance been produced now?
As the post Grenfell climate continues to loom large the increasing number of requests for EWS1 forms has caused problems. There have been delays to the buying, selling and re-mortgaging of properties where EWS1 forms have been requested for buildings where there is no visible cladding or remediation is unlikely to be needed. There has also been concern that unnecessary requests for an EWS1 form prevents the limited pool of suitable experts from focussing on properties where there is a significant risk to the occupants’ safety.
The new Guidance Note advises that EWS1 Forms should now only be required where:
Building over six storeys
There is cladding or curtain wall glazing on the building or
there are balconies which stack vertically above each other and either both the balustrades and decking are constructed with combustible materials (e.g. timber) or the decking is constructed with combustible materials and the balconies are directly linked by combustible material.
Buildings of five or six storeys
There is a significant amount of cladding on the building (for the purpose of this guidance, approximately one quarter of the whole elevation estimated from what is visible standing at ground level is a significant amount) or
there are ACM, MCM or HPL panels on the building or
there are balconies which stack vertically above each other and either both the balustrades and decking are constructed with combustible materials (e.g. timber), or the decking is constructed with combustible materials and the balconies are directly linked by combustible materials.
Buildings of four storeys or fewer
- There are ACM, MCM or HPL panels on the building.
What should valuers be aware of from a legal perspective?
By following the Guidance Note when making a decision as to whether to request an EWS1 form, valuers will have a reference point when faced with any criticism.
Valuers should be mindful that remediation work (affecting value) may still be required for buildings which are outside the scope of the guidance. It does not apply to individual terraced, semi-detached or detached houses, bungalows or developments considered to be non-domestic. To ensure clarity around this, the guidance has provided wording for valuers to notify clients that a change in guidance, or the production of a fire risk assessment in future, might reveal the need for works that have not been considered in this valuation. The guidance covers suggested wording for:
Valuation reports where an EWS1 form is not being requested
Valuation reports where one is being requested
RICS-regulated firm and lender client to be included in the valuation report and terms and conditions.
It is also still important that a valuer’s report provides clarity and transparency about which liabilities are assumed by the valuer and which are not. The lender and borrower need to understand the valuer’s role and responsibilities. If the valuation report is not disclosed to borrowers, the lender should make these limits clear in the lending documents.