External wall systems update September 2020
Brian Smith, a member of the Law Society of Scotland Property Law Committee, sits on a Ministerial Working Group (MWG) set up to consider the issues with External Wall Systems (EWS)
Following Law Society of Scotland ‘Cladding update’ issued in December 2019, there are a few updates which should be read in conjunction with that.
The issue is commonly referred to as relating to external “cladding”. It is clear however that the issue is a wider one which relates to external wall systems (EWS) generally, including, for instance, wooden balconies.
UK Government issued updated guidance on 20 January 2020 which consolidated all the previous guidance but specifically indicated that this should not be seen as only affecting buildings over 18 metres and that risks around lower buildings should be assessed too. A chartered building surveyor, has commented that even on higher blocks it is often the sections below 18 metres which are the problematical ones as different materials have been used on different parts of buildings.
Lenders may well be looking for an EWS1 on lower buildings and, from a risk perspective, buyers should be seeking them anyway.
The EWS1 (external wall fire review) certificate system has become established and this certificate is applicable to buildings both below and above 18 metres.
Increasingly it seems that housebuilders and developers are coming to understand the need for these certificates in the case of new build flats in respect of which increasing numbers are being issued. In the case of new build flats, it is possible that a single EWS1 can cover the whole block if it remains in the single ownership of the developer. The restriction on a certificate being issued to multiple co-owners is a Professional Indemnity(PI) insurance one and not for any other reason.
Kevin Stewart MSP, Minister for Local Government, Housing and Planning, set up a Ministerial Working Group (MWG) in April comprising representatives of interested groups, including the Law Society of Scotland, to consider the issues with EWS and to make recommendations as to how they, so far as relating to the housing and mortgage markets, may be addressed. The work of the MWG has been interrupted as a result of the Covid-19 outbreak as the Scottish Government’s resources have had to be applied to that. However, four sub-groups have been formed to address specific aspects. These will meet and report recommendations to the MWG by 16 September. A full meeting of the MWG will be convened before the end of September to agree proposals and recommendations to the Minister for his consideration.
Anecdotally it seems that that fail rate for buildings inspected may be about 30%. In excess of 1000 buildings have now had inspections carried out.
Apparent remaining issues
It seems clear that there is inconsistency between surveyors as to how they are reporting and the extent to which they are identifying EWS. Clarification is being sought from the Royal Institution of Chartered Surveyors (RICS) as to their recommendations to members on how they should report in the Home Report. Solicitors for buyers and sellers should be aware that there appear to be current instances of buildings with an EWS which are not being identified as such or at least no clear flag or 3 rating given . This is a risk to consider. Solicitors may have to decide whether to query further the terms of a home report in instances of doubt until further clarity is provided by RICS and implemented by surveyors.
We are seeking clarification on this from RICS but it is understood that where there is an EWS1, surveyors are instructed simply to comment that they understand there to be one but not to confirm that they have seen it, which we understand is for PI reasons.
There is a question as to who is not only qualified, but has the necessary experience and knowledge, to carry out the tests and issue an EWS1 and the extent to which PI cover is in place for the carrying out of these reports. Currently, there seem to be only a small number of firms carrying the tests out. Solicitors are having to make that value judgement in the very early days and weeks of this new system.
It is hoped that a means can be found to establish a list of suitable professionals with confirmation that they carry appropriate PI insurance. Given the very limited number of firms carrying out this work and seeking PI cover for it, this should not be a very onerous task.
Meantime solicitors should at least check that the firm or individual issuing the EWS1 is a member of the professional body they purport to be and that they have current and adequate PI cover, perhaps with confirmation from the PI provider that it extends to the specific EWS1 in question.
It appears that in a small, but significant, percentage of cases, some blocks may not have been built using the materials approved in the building warrant. Currently there seems to be no specified methodology to certification.
Solicitors should be aware that fraudulent EWS1 certificates may be presented and should not be accepted at face value. It is recommended that solicitors call the party purporting to have issued the certificate and seek a letter of provenance as to its authenticity.
There is discussion around the establishment of a publicly available EWS1 register. The UK Government is looking into this idea and it is hoped it could be available on a UK wide basis. It is hoped that this could be the basis of a ’traffic light’ system to identify blocks which are and are not at issue.
Currently these need to be instructed by each individual owner in the building. There is no current legal obligation on co-owners to have a fire risk assessment for a building. It is considered that such a legal obligation would then allow factors to instruct an EWS1 on behalf of all the co-owners without having to seek an appropriate decision by a meeting of the co-owners. The nature of the legal changes required is currently being considered by the MWG.
However, PI is not currently available to professionals to accept instructions from all the co-owners for a report. These two barriers result in multiple certificates being required for a single building with duplication of cost to reflect the PI cover.
Solicitors for a buyer should continue to ensure that they seek an assignation of the report provider’s duty of care to the flat owner, to their buying client and lender if applicable.
Solicitors are reminded that they do not hold the technical knowledge to advise on building construction. They can merely confirm to a client whether or not an EWS1 is in place and covered by indemnity and seek to have the duty of care extended by the provider to client, solicitor and any lender. Any advice the client may require beyond that, must be sought from the provider of the EWS1. Whether they proceed with a purchase is a decision the client must make based on advice from that professional and advice from their solicitor on aspects of the purchase on which the solicitor is qualified to advise.
Buildings insurance is likely to be an increasingly significant issue now, as some insurers are already asking questions ahead of renewals. It will be sensible to enquire as to any known issues with insurance renewal on any potentially affected developments.
Risks of which solicitors should be particularly aware
- Establishing whether or not the party who has granted an EWS1 is competent, experienced and insured to provide the EWS1. Following that, ensuring the provenance of that EWS1 and that the duty of care is extended, or can be transferred, to the buyer/lender. We are aware that for reasons of PI cover the certifier may be unable to provide a duty of care to anyone other than the Seller at the time of completion of the report and therefore the most appropriate way to arrange for the duty of care to be extended to the buyer/lender is to ask the certifier to reissue an EWS1 in favour of the buyer/lender. Members should however check the UK Finance Handbook as to whether the lender requires this.
- Being able to ascertain whether the home report surveyor is identifying potential EWS issues in the single survey in the absence of an agreed RICS approach to reporting. The whole home report should be scrutinised. This issue has been raised with RICS and the MWG.
Cladding update
Following Grenfell, the Ministry of Housing, Communities and Local Government (MHCLG) issued guidance, earlier this year, on the use of cladding on high rise buildings in England & Wales. Although not applicable in Scotland the information contained within it is relevant in Scotland and the Scottish Government references the guidance on its own website.
Additional
