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Mortgages: EWS1 Form

Volume 813: debated on Tuesday 29 June 2021


Asked by

To ask Her Majesty’s Government what steps they intend to take to help leaseholders who are unable to sell their flats due to mortgage providers insisting on an EWS1 form despite the guidance from the Royal Institution of Chartered Surveyors.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I refer the House to my relevant interests as set out in the register.

We will continue to challenge industry on inappropriate use of EWS1 forms. We have asked lenders to publish data, so that home owners can see how the guidance is being applied, as well as the impact of the process on mortgage applications. Data from one major lender suggests that an EWS1 form already exists for 50% of mortgage applications where one is requested. We are working with industry to ensure this picture improves.

My Lords, the problem is that mortgage providers are insisting on a form that is not necessary, against the guidance from the Royal Institution of Chartered Surveyors. People cannot sell their homes because of the actions of overzealous financial institutions, and buyers cannot get mortgages. Can the Minister say more? Has he spoken to UK Finance to sort this issue out? Sadly, for me, this is another example of woeful failure by the Government—all promise and no delivery. Again and again, home buyers have been let down. Issues of fire safety, building safety, poor construction and financial failure are not going away. The Minister will be brought back here, again and again, until the Government finally take some action.

My Lords, we have had repeated engagement with both UK Finance and also the Building Societies Association on this matter. We are seeing a picture that is troublesome but is continuing to improve, bit by bit. We have taken a number of measures to ensure that we encourage lenders to take a more proportionate approach.

Has my noble friend read Inside Housing for April? It reports that buildings are being issued with a succession of different EWS ratings after a sale has taken place. How can inspectors sign off forms, expressed to be valid for five years, but change them later to the disadvantage of the purchaser?

My noble friend raises an important issue about the inconsistency of the application of EWS1 forms by professionals. I point out that we are working with the British Standards Institution to produce a publicly available specification, known as PAS 9980, which is a code of practice designed to ensure greater consistency in these assessments.

What discussions have the Minister or his officials had with the Financial Conduct Authority regarding lenders’ obligations to treat customers fairly in relation to cladding? In particular, what steps have the Government taken to ensure that leaseholders confronted with an adverse EWS1 rating, emerging during the time of a fixed-rate mortgage, are able to roll over to a new fixed rate, rather than being forced into a standard variable rate at the end of their fixed term?

My Lords, I point out that the EWS1 form is not a safety certificate and nor is it a statutory or government document; it has been developed by the Royal Institution of Chartered Surveyors along with others. But we continue to have dialogue with the banks and building societies to ensure that they act in a proportionate and sensible way, and we continue to raise issues from time to time, as needed, with the Financial Conduct Authority.

I declare an interest as a former councillor in Southwark. The Minister is using lots of words such as “challenging this”, “working with so and so” and “taking a number of measures”, but have the Government actually made a simple statement, saying to the mortgage or finance companies that this is not necessary before giving money to people who want to move house?

My Lords, we have been working very hard to ensure that there is clear guidance about when such a form is necessary. In certain instances, there is deemed to be sufficient life-safety risk that an EWS1 form is required. The issue at hand is to ensure that lenders take a proportionate approach, and that is best achieved through dialogue.

My Lords, this whole issue is an appalling scandal affecting several million innocent victims, for which developers, building owners and government are responsible, not them. More than 600,000 people in England are currently living in high-rise buildings with dangerous cladding, and there are more than 2 million mortgage prisoners, unable to move because of cladding issues. Why are the Government continuing to inflict massive distress and anxiety through the financially crippling costs of remediation works, which these leaseholders should not have to pay? Why are the Government refusing to offer up-front funding for those leaseholders, off-setting it by future recovery from those who are actually at fault?

My Lords, I think we are straying a little away from the original Question, which was about external wall systems and the need for a certificate to ensure that lenders have the information they need to lend. As I said in answer to the previous question, for 50% of those who make mortgage applications, an EWS1 form is in place, and we continue to take a number of measures and steps to make the provision of an EWS1 form easier.

My Lords, EWS1 requirements have become an overreaction to the Grenfell Tower tragedy, particularly their application to multi-occupancy blocks and buildings below 18 metres. Fear of being sued has limited the availability of required professional assessors, the amount of insurance the insurance industry is willing to provide to the professionals involved, and financial organisations’ willingness to lend. It has ultimately killed the market in leases. Will the Government consider effectively reducing and rationalising the requirements of EWS1 and providing insurance cover for the professionals involved?

My noble friend will be pleased to know that we have announced our intention to provide a scheme that enables professionals who carry out EWS1 to have sufficient professional indemnity insurance cover. We are also engaging with the Building Societies Association, UK Finance and the major banks so that they look at other forms: for instance, an updated fire risk assessment or, for buildings constructed after 2018—post Grenfell—sign-off from a building control inspector. There are lenders that have led the way on this by taking a more proportionate approach in not always requiring an EWS1 certificate.

My Lords, the Minister keeps saying that updated guidance from the Royal Institution of Chartered Surveyors means that leaseholders will no longer need a form to sell their homes, but they do. He says that the EWS1 is not a government formal legal requirement, but mortgage lenders continue to insist on the form. In the end, the only reason all this has happened is because of government policies. When will the Government take responsibility for the leaseholders trapped in homes they cannot sell or remortgage? Has the Minister noticed that the media are now running with this story? Because of grassroots cladding and leaseholders’ groups, there is huge public interest: beyond Inside Housing, we have had Radio 4 and Channel 4, and all sorts of newspapers. We even had Rebecca Long Bailey on GB News—

My Lords, we recognise that there is a problem and we are taking the steps required to ensure that where an EWS1 form is requested, it is easier to get the professional to carry it out, but also encouraging the banks to look at other documentation as an alternative—a proxy—to show that the buildings are safe. It is important that we go ahead and identify those buildings whose external wall systems require remediation.

In November last year, the Government issued a statement recognising that the number of fire engineers qualified to provide these certificates, at 300 people, was woefully inadequate. They said that they would provide finance to fund 2,000 further qualified people within six months and ensure adequate sources of professional indemnity insurance. How many additional people have been funded by the Government to provide the certificate required, and precisely what further insurance has now been, or will be, made available in the market or elsewhere for these other people?

My Lords, that is quite right: we have committed to a £700,000 funding scheme to train up to 2,000 surveyors. That has already begun, and I will write to the noble Lord with the precise number that have been trained up to this point. We have also announced a bespoke insurance model to ensure that professionals have access to professional indemnity insurance cover. Details will be published in due course.

At the heart of this is a very simple question, which I do not believe the Minster has actually answered: what action do the Government intend to take in the event that mortgage lenders continue to insist on this form being obtained for buildings that do not actually need one, according to the RICS criteria, with sellers finding themselves in a classic Catch-22 situation?

My Lords, we recognise that there may still be an outstanding problem. Where the building is outside the scope of the RICS guidelines and lenders are still insisting on the form, we ask that sellers take that up with RICS in the first instance. But I point out that 80% of lenders have adopted the RICS guidance formally, so people who are purchasing properties have a choice in the market to go to lenders that will follow that guidance.