Almost four years have passed since the Grenfell tragedy in London. Sadly, however, the ramifications are still being felt today. An inquiry is ongoing, emotions are still running high, and the disaster remains a political football. Meanwhile, the decision-makers that nonsensically attached flammable plastic and aluminium panels to a 24-storey block continue to pass the buck. Sigh.
Initially we hoped the disaster would inspire a much-needed debate about the safety of high-rise buildings. But even this has proved problematic. Widespread checks have unearthed a smorgasbord of safety shortcomings in thousands of buildings. And because the cost of remedial work runs into millions of pounds, nobody wants to pay for it.
The impact on property owners
Leaseholders have therefore been left in a pickle. Nobody will touch their properties until they’re signed off as safe. Yet many have found their freeholder unwilling or unable to foot the bill. So what’s the solution? Nobody seems to know.
Unfortunately, many leaseholders have been forced to cover the costs themselves – even when it’s meant shelling out tens of thousands of pounds per flat. Life savings have been wiped out and precious pension pots depleted as a result. Meanwhile, others have taken out second mortgages or simply declared themselves bankrupt.
The problems don’t end there either. Insurance premiums have rocketed, and leaseholders have been asked to pay for ‘waking watch’ patrols until necessary repairs have been made. The result? Thousands have seen their monthly outgoings rise by hundreds of pounds.
Many leaseholders have also been trapped in negative equity as the value of their property plummets. And yet the easy way out – selling up – simply isn’t an option.
The effect on the market
Millions of people have been caught up in this building safety emergency because mortgage lenders won’t have a bar of individual flats until whole buildings have been declared safe. Consequently, sections of the property market have ground to a standstill.
If you’re a landlord or leaseholder caught up in the chaos then a cash buyer is often the only option to secure a sale. And knowing they hold all the leverage in negotiations, seasoned property investors are insisting on big price reductions.
To make the situation worse, affected blocks can only be declared safe by specialist surveyors – of which there are fewer than 300 in the entire UK. Therefore, it’s taking some buildings years to reach the front of the queue.
Can the law help?
Unfortunately not. The government has bailed out social sector buildings taller than 18 metres but freeholders are expected pay for private complexes. Low interest loans are available but these don’t cover other defects like faulty fire doors.
Hundreds of thousands of leaseholders therefore remain in limbo – unable to afford the repairs, yet unable to sell. Although the government has asked freeholders to replace dangerous cladding without passing on the cost to leaseholders, they’re not legally required to do so. Unscrupulous freeholders, or those without the necessary funds, have therefore whacked up service charges to raise the money.
Naturally, the government’s political opponents want Rishi Sunak to shake the money tree and cover the costs for everyone. However, thus far The Commons has refused to budge: MPs have rejected attempts to cover leaseholders for bills of up to £100,000 five times.
Sadly agents have felt the aftershocks of Grenfell too. After all, they’ve been unable to move swathes of housing stock while the safety surveyors slowly get round to issuing the necessary certificates.
What’s more, a prominent agent was actually fined £30,000 after failing to inform a buyer that their new property was wrapped in Grenfell-style cladding. The agent also had to pay costs of over £2,500 plus a victim surcharge.
This fine served as a warning that agents must reveal if properties have any safety issues up front. They must also disclose whether the freeholder has enough money to pay for necessary remedial work. Failing to do so is a breach of Consumer Protection because it could lead to higher service fees and problems securing mortgages in the future.
Agents also have a moral duty to disclose potential problems, especially as the status of cladding isn’t normally revealed during conveyancing. Indeed, local newspapers have actually named and shamed agencies that haven’t disclosed potential safety issues.
Avoiding the traps
Although there are little agents can do to help existing landlords and leaseholders affected by Grenfell, they can at least warn prospective buyers to steer clear of problem properties if they require a mortgage. Agents can also ensure that they steer clear of any legal wrangles themselves.
In the meantime, we just hope that a solution can be found. Leaseholders don’t own their building; they simply have a licence to occupy it until this reverts back to the freeholder in several years’ time. It therefore seems unfair that they’re being forced to pay huge bills to solve a problem they didn’t cause.
We’ll watch this space with interest.