Brokers warn of buy-to-let issues with new fire safety law

Brokers warn of buy-to-let issues with new fire safety law
Credit: ANDY RAIN/EPA-EFE/Shutterstock

Mortgage brokers have warned of difficulties for buy-to-let landlords in selling and remortgaging flats, after a majority in the House of Lords voted against an amendment to the new Fire Safety Act.

The amendment sought to prohibit tenants and leaseholders from being liable for the remedial costs of meeting fire safety requirements if they exceeded £500, until a statutory scheme is implemented.

MPs disagreed to four versions of the amendment, as the issue of remediation costs was “too complex to be dealt with in the manner proposed” by the Lords.

The act, which clarifies where responsibility for fire safety lies in multi-occupied buildings in England and Wales, became law last week.

Amid a ban on evictions, which is currently due to end on May 31, brokers have warned that without this amendment, the act will prevent buy-to-let landlords from refinancing - particularly if they are leaseholders in a block of flats.

Hiten Ganatra, managing director at Visionary Finance, said this was particularly due to the fact many lenders now insist on an EWS1 form, which is an industry-agreed way for a building owner to confirm that an external wall system on residential buildings has been assessed for safety by a suitable expert.

Ganatra said: “This is an incredibly delicate situation, which will negatively impact many buy-to-let landlords who have invested in flats, especially if these landlords are already facing financial challenges from non-paying tenants as a result of the Covid eviction ban.”

He added: “Their investments could become unsellable and the problem could be exacerbated even further with tenants being worried about moving into flats in the absence of having confirmation that remedial works have been completed.

“This could also severely hinder buy-to-let landlords’ ability to refinance, as most buy-to-let lenders are insisting on EWS1 forms giving the building a clean bill of health, before allowing the mortgage to go through.”

Dominik Lipnicki, director at Your Mortgage Decisions, questioned the fairness of buy-to-let landlords potentially being required to cover remedial costs of any affected leasehold properties.

Lipnicki said: “How can it be right that innocent buy-to-let landlords who have invested in leasehold properties will now be responsible for a huge potential liability to correct fire and safety issues that they were simply unaware of, rendering many of these properties unsellable and impossible to remortgage?”

In February the government announced it would fully fund the cost of replacing unsafe cladding for all leaseholders in residential buildings in England that are at least 18m high.

Meanwhile, a scheme was announced to enable leaseholders of lower-rise buildings (between 11m and 18m) to pay for any necessary cladding removal through a long-term, low interest, government-backed financing arrangement.

But in a report published last week (April 29) the Housing, Communities and Local Government Committee said proposals to fund cladding remediation on buildings below 18m through a loan scheme should be “abandoned”.

It called for an “enhanced” fund open to all buildings with existing fire safety issues, without barriers based on height, types of tenure or the nature of fire safety defects.