Cladding – The Valuation Trap

By Stuart Wickham

Strategic Development Partner

21 January 2020

Article Insights

It won’t be lost on anyone that building regulations dealing with cladding safety became under review and in need of change.  Homeowners and buyers are concerned about construction methods on new and existing flat developments.

The difficulty that any homeowner or buyer may face is the work that is undertaken through the Building Regulations purports to offer the comfort that a certain limit of safety has been met in the course of the construction of a  building and in particular to external cladding.

Understandably the Grenfell Tragedy has led to investigations that have revealed certain cladding is not acceptable despite building regulations being signed off.

The problem with a number of developments including new blocks is that cladding which was deemed compliant under Building Regulations at the time of construction may need to be updated as a result of changes to regulations issued in December 2018 which covers external walls.

Of course, where you live in a building which now has “unsafe cladding” this will affect you and in particular if you are trying to sell or remortgage.  The cost of replacing what was once deemed safe cladding will now need to be replaced which can take time and of course be expensive.

So what do you do?

A number of Landlords have undertaken replacement cladding without cost.  It will be worth liaising with your freeholder and managing agent over proposals to review cladding arrangements in light of changes to regulations and work out a suitable cost agenda.  This may allow work to be undertaken with costs spread over a period of time and shared between the tenants and freeholder which may assist parties with selling the flats and give the comfort to flat owners that difficulties with mortgaging the flats can be avoided.

As a buyer you may well wish to agree with your Seller to set aside a pool of money, a retention to cover works of this nature that may be undertaking in the future, thus making it easier for a mortgage lender to agree to lend against property where cladding might not be deemed sufficient against today’s regulations.

At first glance, a flat that has fallen into a valuation trap, not adequate security for mortgage lenders may well be pulled out of it as a result of practical thinking on the parts of homeowner and buyer.  Of course, regulations do change rapidly over time so it is important to give any purchase consideration with surveyors to enable you to make the right decisions when it comes to selling or buying, given the extent of requirements for buildings at the time of a sale.

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