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Leaseholders of unsafe flats thrown mortgage lifeline – everything you need to know

Written by: Samantha Partington and Sarah Davidson
Owners of flats with unsafe cladding could be weeks away from being offered mortgage finance once again, after being shunned by banks and building societies for five years.

According to a report by the the Daily Mail, from 9 January six major mortgage lenders will consider applications from leaseholders living in medium to high rise homes which are considered to pose a fire safety risk.

Barclays, HSBC, Nationwide, Santander, NatWest and Lloyds have changed their lending policies following guidance from the Royal Institition of Chartered Surveyors (RICS). Lenders will consider applications for mortgages on buildings in England that are more than 11 metres tall.

The change means that hundreds of thousands leaseholders who have been trapped on high rates will have the chance to remortgage to a better deal.

The breakthrough comes more than five years after 72 people lost their lives in the Grenfell Tower fire in June 2017 when the tower block went up in flames, fuelled by highly flammable cladding on the outside of the building. The tradegy triggered a building safety crisis.

Since then, leaseholders have feared that not only had they been left in unsafe, unmortgageable properties, but they would be forced to pay for the remediation work themselves.

But earlier this year secretary of state for the Department of Levelling Up, Housing and Communities Michael Gove vowed to “guarantee that no leaseholder living in their own flat will pay a penny to fix dangerous cladding”.

Government finally passed the Building Safety Act at the end of June, allowing it to enforce rules designed to protect leaseholders.

Here’s a recap of the protections leaseholders can expect to receive from the act.

What does the act mean?

Developers, building owners and any other company associated with the developer responsible for installing cladding or failing to ensure buildings met basic fire safety standards must now cover remediation costs themselves.

It also went further, forcing developers to cover non-cladding related remediation costs, including the replacement of inadequate fire doors or fixing missing compartmentation.
It should mark an end to what some see as unethical developers refusing to pay to make good buildings where leaseholders bought flats in good faith.

Who does it apply to?

The Act applies to leaseholders with flats in buildings over 11 metres and to all leaseholders where their building owner is – or is associated with – the developer who is responsible for that safety defect.

Some leaseholders will still have to pay

Where leaseholders live in low rise blocks up to 11 metres and the developer responsible for any non-cladding safety defect has sold the building and is no longer in any way commercially connected to it, flat owners will still be liable for bills which could add up to tens of thousands of pounds.

Costs are repayable over 10 years and take into account money leaseholders have already paid towards building safety costs, including interim measures such as a waking watch – where a fire marshal is on site.

Charges are typically added to leaseholders’ annual service charge up to a fixed cap and freeholders are prohibited from charging interest while repayments are made.
If leaseholders are subject to the cap and are unable to pay, Your Money understands government is of the view they will be able to spread costs over a longer period by adding what they owe to an existing or new mortgage.

However, Your Money also understands that mortgage lenders are uncomfortable with this, particularly as leaseholders would then be charged interest on remediation costs, and have raised concerns with DLUHC.

Both the mortgage lender trade body UK Finance and DLUHC declined to comment.

There is currently no public data available to show how many leaseholders in England are still liable to pay remediation building costs, though DLUHC has created an online Leaseholder Protections Checker tool to help leaseholders work out what costs they are eligible for.

If you are worried you cannot afford to meet these costs, speak to your freeholder in the first instance to see if a repayment plan can be agreed and seek advice from bodies such as LEASE or Citizens’ Advice Bureau.

Leaseholders have been warned not to pay any invoices relating to relevant historical remediation costs until these approvals have been formally signed off.

What do the leaseholder protections mean?

If you qualify, you will no longer pay to fix or remove unsafe cladding systems on your building.

Where a developer or a linked company still owns a building with an unsafe cladding system, it cannot pass on any costs and must pay for the removal itself.

If your developer or building owner is one of the 48 builders listed below which have pledged to take responsibility for all necessary work to address life-critical fire safety defects on buildings over 11 metres that they had a role in developing or refurbishing over the past 30 years, even where they no longer own them, you won’t pay anything.

How much will leaseholders who don’t qualify have to pay?

If you or your building doesn’t qualify, government will cap how much you pay to fix non-cladding fire safety defects. These capped costs will be payable over 10 years, so you cannot be asked to pay them all at once.

Costs you have already paid for interim safety measures in the past five years, such as a waking watch, can be included in the cap.

Building owners and landlords will be liable to meet any remaining costs once the capped leaseholder contributions have been reached.

How much can I be forced to pay for building safety works?

The cap is calculated using a simple sum based on the average change in your home’s value over the years since you bought the property.

If your property is worth less than £175,000 or £325,000 in London, your cap is set at zero and cannot be asked to share any costs. For most properties above that value, the cap will be £10,000 or £15,000 in London.

If your property is worth over £1m the cap limit is £50,000. If is worth over £2m, the cap is £100,000.

I’m shared ownership – how much do I have to pay in cladding removal costs?

Government has said that the cladding cost cap will be proportionate to your equity stake in the property. For example, if you are a 50% shared owner outside of London you could pay £5,000 over 10 years.

What does the Build Safety Act mean for developers?

The rules mean developers and building owners are now required by law to pay in full to fix historical building safety issues where they own the building they built or refurbished or where the landlord or building owner are linked to the original developer.

Where developers or their company owners have net wealth of more than £2m per building they own, they cannot pass on the cost of remedying unsafe cladding and fire controls.

Even if the developer no longer owns your building, the government still “expects them to do the right thing” and put right defective properties they have developed and are bringing forward measures to hold those that refuse to account.

Developers can contest the rules in some circumstances but permission to pass on any costs to leaseholders must pass strict disclosures agreed by Parliament.

What if the developer of my building refuses to pay to fix unsafe cladding?

Where a developer cannot be identified or has not yet agreed to pay for its own buildings, the government has confirmed funding will be made available directly to pay for unsafe cladding system repairs for all buildings above 11 metres.

For buildings between 11 and 18 metres in height, a new scheme funded by developers through the Building Safety Levy will pay for eligible work to fix unsafe cladding systems.

Where buildings are over 18 metres with unsafe cladding systems the building owner must apply to the government’s Building Safety Fund directly.

The full list of developers signed up to the Building Safety Pledge agreeing to remediate buildings over 11 metres with life critical fire safety defects they developed or refurbished over the last 30 years can be found below.

• Allison Homes
• Anthology Group Ltd
• Avant
• Ballymore
• Barratt
• Bellway
• Berkeley
• Bewley
• Bloor
• Cala
• CG Fry
• Churchill Retirement
• Countryside
• Crest Nicholson
• Croudace
• Davidsons
• Fairview
• Galliard Homes
• Gleeson
• Hill Group
• Hopkins Homes
• Inland Homes
• Jelson
• Keepmoat Homes
• Landsec
• Lifestory Group Ltd
• Lioncourt Homes
• London Square
• Lovell
• Mactaggart & Mickel
• McCarthy Stone
• Miller Homes
• Morris Homes
• Persimmon
• Redrow
• Robertson
• Rowland Homes
• Shanly Homes
• St Modwen
• Story Homes
• Strata
• Taylor Wimpey
• Telford homes
• Tilia
• Vistry Group
• Wainhomes
• Weston Homes
• William Davis


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