An external wall system (EWS) is that which forms the outside wall of a building for example cladding, insulation and firebreak systems. Some EWS composite materials have been recognized as being more combustible, more likely to catch fire and burn easier. The 2017 fatal fire at Grenfell Tower brought EWS’s under the spotlight as the building’s new cladding and external insulation is attributed with causing the deadly, rapid spread of the fire from the fourth floor to all floors.
Since 2019, mortgage lenders have made the safety of external walls a prerequisite of some lending approvals. In response to this the Royal Institution of Chartered Surveyors (RICS) launched the first version of the EWS1 form in December 2019. The intention was to provide homeowners, buyers, and lenders a recognisable, consistent, and universal record of the EWS materials, with the guidance being for residential buildings of 18 metres (seven storeys) or higher.
Despite the height guidance, some lenders continued to request EWS1 for buildings below. Add into the equation the uncertainty over whether Leaseholders would be liable for building safety remediation costs, the possibility that external additions e.g. balconies, might pose a greater fire risk, some properties were rendered unsellable or un-mortgageable (or re-mortgageable).
On 8 March 2021, RICS published guidance (updated in March 2022) on the criteria that should be used to determine whether a building needs an EWS1 form and the Government, on the basis of expert advice, published guidance in July 2021 stating that they did not believe an EWS1s was necessary on any blocks of flats below 18 metres in height. This guidance was aimed to ensure lending and valuation policies would be proportionate to real risk.
An EWS1 assessment must be undertaken by a qualified professional and herein lay the next hurdle. Those professionals and companies providing such services require Professional Indemnity Insurance (PII) but the insurance market hardened. PII premiums rocketed along with building insurance premiums. For example, in Alexandre Boyes case, our PII premium increased by 103% for 2021-2022 having seen increases year on year. Claim excesses increased by thousands for certain insured perils particularly water escape and fire, and PII claim excesses. Again, in Alexandre Boyes case in 2020 the PII excess increased from 2k to 10K and there it remains. The pool of PII providers dwindled and whilst the demand for EWS1 forms was high, the supply of qualified and fully insured assessors was low.
Consequently the Department for Levelling Up, Housing and Communities (DLUHC) announced proposals for a government-backed professional indemnity insurance scheme for EWS1 assessors. Working with the Government Actuary Department (GAD) a scheme has been designed. Project lead in GAD is actuary Jacqui Draper, she said: “This was a complex and significant piece of work from GAD. We have estimated that claim costs will be £100 million, although there is no theoretical cap on the total size of claims that could be made” “We also advised DLUHC on the level of premiums needed to recoup the expected claims and operating costs.”
The scheme is set to launch in September 2022. The UK Government has entered commercial arrangements with an unnamed insurer who will be administering insurance policies to qualified professionals. This, along with more clarity on how building safety remediation costs will be paid since the Building Safety Act came into force on the 28th June 2022 (seeing many leaseholders legally protected from unfair bills to make their homes safe) will hopefully enable the sale of flats in high-rise buildings, see lenders move away from asking for EWS1 forms on residential properties that fall outside the recommended guidance, speed up Leaseholder Property Enquiries (LPE1 form) and conveyancing. You can read more about Leaseholder Protection in our blog here.
As with all our blogs, they are intended as a useful guide only and are not exhaustive. Posted 19/7/2022
